Family–Owned Businesses

A family-owned business may be defined as any business in

which two or more family members are involved and the
majority of ownership or control lies within a family. Family-
owned businesses may be the oldest form of business
organization. 
ISSUES IN FAMILY BUSINESSES
Family versus Non-Family Employees

There are a number of common issues that most family

businesses face at one time or another. Attracting and retaining
non-family employees can be problematic because such
employees may find it difficult to deal with family conflicts on
the job, limited opportunities for advancement, and the special
treatment sometimes accorded family members.
Employment Qualifications

Many family businesses also have trouble determining guidelines

and qualifications for family members hoping to participate in
the business. Some companies try to limit the participation of
people with certain relationships to the family, such as in-laws, in
order to minimize the potential for conflicts.
 Compensation
s
Salarie

Salaries and Compensation

Another challenge frequently encountered by family businesses involves paying salaries to and
dividing the profits among the family members who participate in the firm. In order to grow, a
small business must be able to use a relatively large percentage of profits for expansion.
Succession
Another important issue relating to family businesses is
succession—determining who will take over leadership and/or
ownership of the company when the current generation
retires or dies.
Forms of Ownership
of Small Businesses
 Proprietorship

A proprietorship also known as a sole-proprietorship, is a business that

is owned by one person. The vast majority of small businesses start
out as sole proprietorships. These firms are owned by one person,
usually the individual who has day-to-day responsibility for running the
business. Sole proprietors own all the assets of the business and the
profits generated by it. They also assume complete responsibility for
any of its liabilities or debts.
Advantages and Disadvantages of a Proprietorship
 Partnership

A partnership is a business owned by two or more

persons who have unlimited liability for its debts and
obligations.
Advantages and Disadvantages of a Partnership
 Corporation

is a business formed and owned by a group of people,

called stockholders, given special rights, privileges, and
limited liabilities by law.
 Public
corporation ?
Is a regular corporation that provides the
protection of limited liability for shareholders,
but its earnings are taxed at both the corporate
and shareholder levels.
Is often more attractive to small-business owners than a standard
(or C) corporation. That's because an S corporation has some
appealing tax benefits and still provides business owners with the
liability protection of a corporation. With an S corporation,
income and losses are passed through to shareholders and
included on their individual tax returns. 
A Limited Liability Company combines some of the features of a
corporation and some of the features of a partnership. Like a
corporation, it protects ownership from liability for debts or other
obligations, such as judgments, incurred by the business entity. The
LLC has the tax advantages of a partnership. Corporations pay taxes
on profits before distributing those profits to stockholders, creating a
double tax burden. An LLC does not pay taxes on profits; instead,
owners receive distributions of profits, and pay taxes on those
profits at their individual rate.
 Public A public company, publicly traded company, publicly held
corporation company, publicly listed company, or public limited company
‫ــــــــــــــــ‬ is a corporation whose ownership is dispersed among the
general public in many shares of stock which are freely
‫ــــــــــــــــ‬
traded on a stock exchange or in over the counter markets.
ADVANTAGES OF A PUBLIC COMPANY INCLUDE THAT:
Liability for shareholders is limited
It's easy to transfer ownership by selling shares to another party
Shareholders (often family members) can be employed by the company
The company can trade anywhere
Taxation rates can be more favorable
You'll have access to a wider capital and skills base
DISADVANTAGES OF A PUBLIC COMPANY INCLUDE THAT:
The company can be expensive to establish, maintain and wind up
The reporting requirements can be complex
Your financial affairs are public
 m e e t
fa i l to
ir e c tors a ti o n s,
If d l o b lig
ir le ga h e ld
the y be
y m a
fo r t he
the li a b le
r s o n al ly s
pe d e bt
p a n y's
com
Profits distributed to shareholders are taxable.
Advantages and Disadvantages of a Corporation
Thank You