Now on to some of the drawbacks. Having your spouse spend so much time with you can cause problems. You will be working and living the business together all the time. Many psychologists suggest that having spouses not work together allows for a necessary mental break that helps keep a personal relationship healthy. You should discuss the pros and cons of working together under deadlines before you actually agree to be partners or coworkers.

Hiring other relatives or - worse - letting other relatives become part owners of your business can create substantial headaches. While you may be trying to provide employment and income to help out a relative, the relative can cause hard feelings in your business. Then you will most likely find it hard to fire the relative, who usually feels that employment is an entitlement. If you go this route anyway, especially with relative investors, you should discuss the situation thoroughly (including conflict resolution ideas) in advance of agreeing to let a relative join the family firm.

For relative investors, sign a written agreement detailing how they will be cashed out, and how the payout will be calculated and when it will be paid. By laying out the details in advance, you will prevent any unrealistic expectations or hard feelings several years from now.

Passing on the business to the next generation is another family area that can often cause great problems, which is a big reason why so few companies are managed by the same family for several generations. Estate taxes can be quite onerous, although you can begin passing on ownership gradually through the use of family partnerships and use of trusts and preferred stock. The bigger problem for most small businesses is when one child is interested in working in the business, but others simply want to sell it or not be involved in running it. You may want to provide for different treatment, depending on how involved children want to be.

The biggest family problem area for entrepreneurs is balancing work and home needs, especially during the first five year startup period. During the first years of business ownership, most business owners need to put in heavy time commitments to build revenues, but the cash is not yet there to provide for home needs. In addition, family members miss the business owner, and often express that emotionally as resentment of the business taking away their loved one. This strain can be exacerbated by the unrealistic perception by most wage earners that self-employed people can come and go when they want, and do not work as hard for their money.

In reality, self-employed people have some flexibility (though not as much as most wage earners think). Yet the business owner will put in greater hours than any employee. Make a note of important anniversaries, birthdays, kids sports events and plays, etc. You have to be firm about setting aside time for family matters. It may help to find a more experienced business owner or a group of business owners to form a support group to discuss this difficult balancing act.