Written By: Matt Stringfellow, CPA
Family–owned businesses have been around probably for as long as there have been businesses. From the produce stand down the road to larger corporations that got their start as a family–owned business like Wal-Mart, they are abundant. If you have never worked for such a business or owned one yourself, you probably would not have to look very far within your community or among your friends and acquaintances to find one. And, like families in general, family-owned businesses can face very unique challenges, one of which is in the area of corporate governance.
Corporate governance can be tricky in a family-owned business. For example, do you want to continue to run the business like it has always been run? This is a prudent question, especially in a second or third generation business where patriarchs or matriarchs have continued to pass down technical skill and ability as well as perhaps a dictatorial management style. Or, do you prefer to become a more professional company with a clear vision for the future to drive strategy and marketing efforts, particularly in light of the constantly changing economy and business environment that exists today?
If you answered the latter, then perhaps it is time for your family owned business to consider implementing or changing your board of directors in order to be better prepared for the future.
But what would that look like?
Below are some questions to consider when restructuring your family –owned business’ board of directors:
1. Do we need directors outside of the family?
2. Are there skills are expertise that do not exist currently within the family or board that would be beneficial to add to the board (e.g. IT, marketing, strategic planning, financial, etc.)?
3. What family members get a seat at the table and which do not (e.g. minority shareholders, family members outside of the business with minority stakes, or others with no desire to serve on the board)?
4. Are their advisors out there that could add value or expertise and an outside perspective without being on the board itself?
These are just a few considerations to promote insight into family-owned business governance.
TJS Deemer Dana LLP’s team is experienced with family owned businesses. Feel free to reach us with any questions.