A family business is a business where a family is involved, based on three criteria. It is necessary that it owns more than 50% of the property rights, that it has at least one member in management and that it has the idea of allowing the company to survive several generations.

These companies are part of a family's history. Combining aspects of the family with those of the business can generate positive and negative effects depending on the state of mind and the strategies adopted. So what are the strengths and weaknesses of a family business ? We're taking stock.

What are the advantages of a family business?

One of the main assets of a family business is the commitment and motivation of its members. Indeed, since the business is part of the family heritage, the family members who work there want to see their business grow and prosper in a sustainable way.

In a family business, capital and management enjoy significant stability because the partners have no intention of leaving the business. The family business is characterized by its ability to be passed on to children, grandchildren, etc.

Certain tax arrangements such as the Dutreil pact even facilitate this transmission, offering significant discounts on inheritance fees under certain conditions.

Subsequently, because of this desire to transmit, in-house training represents a real advantage for the younger generations of the family business.

The youngest members of the family benefit from the experience of their elders and are directly trained to manage this business with its particularities.

In addition, in a family business, it is common for there to be very strong trust between family members, which makes decision-making considerably easier.

In addition, collaborating with your family allows you to save money. It is possible to distribute tasks among family members, which reduces labor and management costs.

In addition, family businesses often have a good reputation among their customers. This is mainly due to the strong values shared within this type of business.

Because of generational legacies, these businesses have a strong territorial presence. For their part, their managers are frequently involved in a Chamber of Commerce, in interaction with elected officials and other business leaders in the territory.

This network, both official and informal, allows them to obtain information, funds, etc.

It is also observed that family companies have greater resilience, resulting in a significant ability to reorganize their operations.

Also, since the major challenge of the business is family transmission, they tend to save on their margins to maintain their jobs.

Finally, the turnover rate is lower in this type of business because there is greater loyalty and trust.

Relationships are not limited to contractual obligations; they can easily go slightly beyond the scope of work.

What are the values of a family business?

Family businesses all focus on a few themes that unite them, such as loyalty, loyalty, a sense of effort, commitment, solidarity, a sense of duty, courage, pride in the name, ethics, respect for others.

In addition to the formulation of values, it is generally behaviors within the family that influence the level of success and sustainability of the company.

Family members are affectionate, which allows differences to be accepted. Accepting professional relationships with a hierarchy different from family relationships is the fruit of respect.

Moreover, it is the commitment and quality of each individual, whether collaborator, manager, shareholder or director, that contributes to the prevention of conflicts.

Mutual support is also present, which makes it possible to overcome difficult moments in life, whether within the company or in the family.

Second, flexibility, both professionally and personally, allows the company to adjust and progress more quickly.

What is a family SME?

Most family SMEs have a lower figure than large well-known family businesses such as Hermès, Auchan, Decaux, Bolloré, whose capital is mostly owned by the founder and his family or his descendants.

A family SME is a business whose manager is a family member, as well as relatives, such as children, cousins and spouses, who frequently occupy management positions within the company.

What is the best status for a family business?

Two options are proposed for the legal status of a family business. There is the SAS and the family SARL.

However, in the field of family business, the family SARL is the most used. The SARL family group is a Limited Liability Company that has a real tax regime.

Setting up a family SARL is not very different from the SARL of before. It is a similar legal status, except that the partners are members of the same family.

The members are directly or indirectly linked to a family by marriage. Without being very different from the legal basis, the status has more advantages for family members.

It is therefore interesting to choose the legal status of a family SARL, which is the most advisable for family businesses.

The legal status of the family business is greatly influenced by the tax regime. The classic SARL must pay a synthetic tax, or opt for income tax.

The next choice proves to be the most appropriate and the most advantageous. The family SARL does not suffer from synthetics, it pays income tax, a more attractive tax regime.

There are many benefits to choosing a family SARL to start a family business.

This legal form allows you to sell your shares, while being exempt from an increase in value by selling all of them.

It is in fact possible to decide whether or not to distribute to an associate.

What are the pros and cons of sole proprietorship?

The creation of a sole proprietorship offers benefits. Being the sole boss is one of them. In a sole proprietorship, the boss is not accountable to others.

He remains the absolute manager of the company and makes all decisions on his behalf.

Freedom in a sole proprietorship is limited because the articles of association distribute powers between managers and partners or shareholders.

In addition, setting up a sole proprietorship is extremely easy. It is not necessary to release share capital, to draw up a legal status, and all that is needed is to file a simple constitution file with the CFE.

This simplicity is also evident throughout the life of the company, where the law does not impose any specific legal formalities.

In other words, the simplest and least expensive legal form is a sole proprietorship.

If the manager of a sole proprietorship chooses EIRL, he is not required to separate his personal and professional assets.

The main disadvantage of sole proprietorship lies in the fact that it limits the possibilities for the development of the business. Establishing a sole proprietorship does not create a new legal entity.

While this distinction affects the preservation of the manager's assets, it hampers a possible association that is often essential for the expansion of the company.

In the absence of social capital, the company cannot open it up to other entrepreneurs who could contribute ideas, equipment, network, skills, or cash flow.

This aspect can be a major obstacle for the evolution of the company. It will be possible to get around it by transforming the sole proprietorship into a business, which, however, involves a considerable expense.

Thus, it is easier to design this operation when the company is in good financial health.

On the other hand, it becomes more complicated when cash flow is insufficient, which does not allow the manager to take a position of strength when negotiating with potential partners.

How does a family business work?

A family business operates in the same way as any other business. The only distinction is that there is a direct family relationship between the partners and the managers.

The partners make the most important decisions together, while the manager is responsible for the daily management of the company.

However, not all family businesses operate in the same way. Family involvement in business life can be more or less significant.

What are the goals of the family company?

Family businesses face numerous long-term challenges, such as maintaining the business within the family, transmitting it to the next generation, protecting it while developing it, valuing family capital and maintaining cultural heritage.

However, short-term challenges also arise and are increasingly present in the concerns of the new generation.

As far as governance is concerned, cybersecurity is now included on the agenda of many boards of directors of family companies.

Some large family businesses are addressing information security risks by including IT preparation in their business strategy.

In order to overcome cyber threats, family businesses need to be aware of the risks and accept the idea that malicious actors can launch attacks against them.

Also, the new generations present in family businesses are bringing change with new approaches focused on corporate social responsibility.

The successors do not yet have the power, but they want to support everything that has an impact and meaning on CSR.

Finally, among the goals of family businesses is the need to strengthen skills and talents, whether this is achieved through internal training or through the inclusion of talent from outside the family.

How to manage a family business well?

It is crucial to have a solid governance structure in place in order to effectively manage a family business.

This makes it possible to find a balance between the interests of all members, to reduce conflicts and to ensure the sustainability of the company.

It is essential to create a board of directors that includes family members and, if necessary, external professionals with a wide range of skills, such as legal, financial, operational, and strategic skills.

Overall, transparency plays a key role in running a family business, but this is even more true when it comes to finances.

This means that all financial data is available to all shareholders. The presence of subsidiaries in the family business requires the signing of a cash flow agreement between the various entities.

The conditions for setting up financial flows between the parent company and its subsidiaries are clearly defined in this contract.

Defining the areas of expertise of each family member is also an essential step. Indeed, it is crucial to identify and develop specific skills in various fields in order to guarantee the growth and competitiveness of the company.

On the one hand, when a company has in-depth expertise in specific sectors, it is more likely to develop new products and services, which in turn encourages innovation.

Moreover, areas of expertise can also form a foundation for staff training and development, by allowing employees to acquire skills and knowledge in specific areas.

It is crucial to distinguish personal life from professional life in order to maintain family ties. If this difference is not noted, it can lead to family or professional tensions.

It is important to separate roles between work and family in a family business to avoid conflicts of interest and confusion. It is essential that family members have a clear understanding of their roles and responsibilities in each area.

By maintaining a balance between work and private life, people are more likely to maintain high professional performance in the long term.

To manage a family business well, it is also essential to focus on profitability in order to guarantee the long-term sustainability of the business.

It ensures the production of the funds necessary to cover operating expenses, repay debts, reinvest in the business and anticipate the unexpected.

Profitability and growth play a critical role in generating income and ensuring the financial security of family members in the context of a family business.

Another essential aspect of management is communication. Transparency and trust between family members are fostered through open and regular communication. It avoids confusions, misinterpretations and possible conflicts.

In addition, it provides the information needed to meet goals and make informed decisions.

Obviously, it is essential to communicate regularly and to reassess the long-term vision based on new opportunities, challenges or market developments.

Finally, the gradual transfer of responsibilities and assets from the current generation to future generations is essential to ensure the continuity of a family business.

It is essential to plan for and be well prepared for this, by establishing a selection process based on objective criteria, as well as by evaluating potential successors and their skills, especially in terms of leadership. The establishment of a program of training for future successors is also a great idea. In all cases, support via a coaching for managers is always recommended because it allows you to better manage these key stages in the life of a family business.