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Understanding the Different Types of Owners of a Family Business

Provided by the Business Families Foundation, Content Partner for SME Toolkit

We typically talk about three important sub-systems in a family enterprise system: 1) the Family, 2) the Business(es), and 3) the Ownership (reference: Tagiuri and Davis, 1982).

The ownership component is where power, control, and influence over the business(es) are generally concentrated. The owners also have significant influence over family dynamics and decisions.

Ownership can be: emotional, personal, private. In small and medium size family companies, owners may put their houses up as collateral or make other major sacrifices for their business. It might also be difficult to establish what a family asset is compared to a business asset. Ownership can also be quite centralized. It is common that an entrepreneurial business starts with only one owner. Ownership can be transferred or shared later on with siblings or more generations.

Most importantly, ownership requires stewardship: stewardship is the responsibility to manage entrusted resources in the best possible manner. It is essential to educate family members who are current or future owners to be stewards of the business family legacy and the family business(es), which includes reconciling personal needs and broader family objectives and aspirations.

There are four stages of ownership in a family business:

  1. single owner-founder, sometimes a couple (e.g., husband and wife, mother and daughter, etc.);
  2. owner-manager;
  3. sibling partnership; and
  4. cousin consortium.

© Business Families Foundation 2016. All rights reserved.

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