Your family, nuclear and extended, are permanent members of your life and history. The kind of relationship built within the blood relationship, determines the strength of the bond that will exist in reality.

When doing any form of business transaction with a family member, there is the usual tendency to “loose-guard.” This often comes with its own consequences, the gravity of which depends on the kind of business arrangement. Suffice it to say that in really low-risk transactions, there’s often no need to lose sleep. But even at that, factors that are capable of triggering legal liabilities are limitless.

Below are the two things to note before you set out with a family member on a business venture.

1. Formalise the process

Formalising the process chiefly involves documentations. You run a high risk if the essential parts of your business engagement with any person, including a family member, are not reduced into writing. In law, documentary evidence is regarded as the best evidence. This is what is known as the “Best Evidence Rule”. Although the law recognises oral contracts, written contracts are the best, because they are easier to prove. In oral agreements, you mostly rely on evidence of circumstances to support your claims. In some cases, you may be tempted to call the omnipresent and omniscient Supernatural to come to your aid. If the matter proceeds to Court, you leave the Judge with the herculean task of evaluating the oral evidence to determine where the truth lies or whose oral evidence is more believable.

Aside written understanding exchanged electronically by email or texts, ensure that hardcopy documents are duly executed when and where necessary.

Breaching oral agreements may not be necessarily fuelled by mischief. It may be as a result of honest mistake due to communication gaps which could have been avoided if the terms were written. In the same way, oral agreement makes it easy for a mischief-maker to take advantage and exploit the situation to your detriment.

Thus, avoid the urge of assuming that reducing vital details of the contract into writing amounts to an “attack” on the integrity of the family bond. You need to understand that proper documentation helps for record-keeping purposes too. More so, when third parties are involved, documents will protect the interests of all parties better. Examples abound. For instance, where a married couple both contributed significantly to the purchase of a landed property, let the names of both couples feature in the Deed of Assignment as assignees. In a partnership, ensure a proper Partnership Deed is executed. In floating a company, ensure that the necessary incorporation documents are adequately filled, executed and filed. In employment, it is not out of place to issue your family relative an employment contract with the agreed terms spelt out. Where you let your family member into possession of your property as a tenant or licensee, let there be documentary proof. If you grant a lease of property like a vehicle or equipment, whether or not on hire-purchase, let there be written proof of the basis for the lease. Where you engage your family member as your agent, you may consider issuing an express letter of instruction and a power of attorney (in deserving cases), spelling out the limits of his or her power as your agent.

From the examples identified above, it is clear that the role of solicitors are nearly indispensable. So too are other professionals as we shall see in the second notable point below.

2. Engage professionals

In appropriate cases, engage professionals and experts like accountants, financial advisers, solicitors, your business arrangement with a family member.

When you do this, you can bask in the assurance that you will not miss any essential information for successful conclusion of the contract. Furthermore, every party will promptly appreciate the seriousness of the engagement and take nothing for granted.

Again, if the stakes are too high, do not engage a family member simply for the reason of the blood ties. But let competence define the process. Otherwise, you may count your losses. In worse cases, you may become exposed to third parties in liabilities.

For purely family business

The points identified above are essential in businesses established as a purely family business. But there are more critical considerations. In explaining strategies to prevent family business heartbreaks, Robert Sher identified the importance of honouring choice and independence; insistence on performance-based pay; enviable culture “that prizes fairness and trust, and opportunities for meaningful work and career development”; employing emotional intelligence and creating clear family goals. According to Sher, 

Leaders of family businesses must manage three conflicting demands:

  • What the business needs and wants to thrive;
  • What the family needs and wants as a whole (for example, cohesiveness and closeness) and
  • What each family member needs and wants to thrive.

By this, better results are guaranteed. 


Whether in engaging a family member for a business transaction, or for businesses being run as a family business, the points highlighted above a sacrosanct. Settling cases involving family members may sometimes pose more difficulties due to the natural emotional connections that often accompany such situations. However, avoiding or untying the knots may be easier if you abide by the points noted above.

Stephen Azubuike
Author: Stephen Azubuike
Stephen is a lawyer with expertise in Commercial Dispute Resolution and Technology Law practice. He is a Partner at Infusion Lawyers. He has successfully argued cases from the High Courts of various jurisdictions to the Appellate Courts on behalf of financial institutions, other corporate bodies and multinationals. He has advised a number of both established and startup tech companies. He tweets @siazubuike.
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