Selling Your Business? What to Do When Family Members Work There but Don’t Own a Piece

For many owners, the business isn’t just a business—it’s their personal legacy. That’s especially true when family members are involved. Maybe your son runs operations or your sister handles HR. They’re not owners, but for years they have been a part of the business’ day-to-day operations.

Now you’re thinking about selling and may wonder:

What happens to them? How do I handle this without creating friction—or derailing the deal?

Here’s what you need to know.

The Emotional vs. Business Balancing Act

Selling a business is one of the biggest financial decisions you’ll ever make. But family involvement can blur the lines between business judgment and personal loyalty.

You may feel a sense of responsibility for family members who’ve helped build the company. At the same time, the buyer is focused on operations, profitability, and risk—not family ties.

Striking the right balance early is key. Make decisions based on what’s best for the deal and the people involved. Waiting too long to address it often leads to conflict and confusion later.

How Buyers See Family Employees

Buyers tend to look closely at all key employees. This is especially true if key employees are related to the business owner.

Buyers may ask the following questions:

• Are these family members critical to running the business?
• Do family members have the right skills for their roles—or are they legacy hires?
• Will they stay post-sale, or will they leave (voluntarily or otherwise)?
• Is there any risk of disruption if they are not part of the future team?

The reality is that some buyers may view family employees as a risk. Others may see them as valuable team members with deep institutional knowledge. Either way, you need a plan for addressing these concerns.

Employment Isn’t Ownership

One of the biggest sources of misunderstanding is when family members working in the business assume they should have a say in the sale—or a share of the proceeds—because of their years of involvement.

Employment doesn’t automatically mean ownership.

If a family member isn’t holding a stock certificate or listed on the cap table, they’re not an owner. That can be a tough conversation, but it’s an essential one.

Plan Ahead for Roles Post-Sale

If your family members play significant roles in the company, their future may be part of the deal discussions. Some things to consider:

• Are they staying with the business? If yes, will their roles remain the same? Will they need employment agreements with the buyer? Their interests may not necessarily align with yours and they will likely need separate legal counsel to review any employment agreement the buyer wants them to sign.
• Are they transitioning out? If so, is there a need for severance, a consulting arrangement, or a smooth exit plan?
• Will they be upset about the sale? Even if they aren’t staying on, you’ll want to manage their expectations to avoid souring the deal.

Clear, early communication is essential. Don’t wait for the buyer to ask about it—be proactive.

Legal Considerations You Can’t Ignore

If your family members are employees, they’re subject to the same rights and protections as any other employee. That means:

• Documented job descriptions and responsibilities.
• Where appropriate based on their role in the business, formal employment agreements (or understanding what happens if there aren’t any).
• Consider whether severance or bonuses make sense as part of the sale or transition.

It’s also a good time to review whether any promises—formal or informal—were made. If there’s a perception of “you’ll get something someday,” now’s the time to clarify what that means (or doesn’t mean).

What About Succession? Protecting Family Relationships Through Transition

For many business owners, the plan was always to keep it in the family—until it wasn’t. Maybe the next generation isn’t interested. Maybe they’re not ready. Or maybe you’ve decided that a sale is the best move for your future and theirs. Whatever the reason, if your family members were expecting to take the reins, announcing a sale can feel like pulling the rug out from under them.

Have the Hard Conversations Early

If succession was ever on the table—even informally—you need to address it head-on. These conversations can be uncomfortable but delaying them only makes things harder.

Be honest about why you’re selling. Whether it’s the right time financially, the market conditions are ideal, or you’re ready for a new chapter, clarity can ease resentment.

The goal isn’t just to explain why you’re selling but to reinforce that this decision doesn’t diminish their contributions or your relationship.

Family First, Business Second

At the end of the day, most people sell their businesses to create better futures for themselves and their families. But the business is just one piece of that equation. Preserving personal relationships is often more important than maximizing the sale price.

Before you get deep into negotiations, ask yourself:

• How will this impact my family dynamic?
• Is there a way to involve them in the process that makes sense?
• What legacy am I leaving—not just financially, but relationally?

Sometimes, offering family members clarity on their role post-sale, whether that’s continuing employment, a consulting opportunity, or even helping them start their next venture, can go a long way toward preserving goodwill.

Setting Expectations: Ownership vs. Opportunity

It’s common for non-owner family members to feel they have a stake in the outcome, especially if they’ve worked in the business for years. Be clear about what they can expect. If they’re not owners, they won’t share in the sale proceeds—unless you choose to provide a bonus or some other voluntary recognition for their contributions. That’s a personal decision but communicating early helps avoid hurt feelings.

On the other hand, if you’ve always intended to provide for family members in other ways—trusts, estate planning, or other assets—this is a good time to reinforce that they are still part of the bigger picture.

Don’t Let the Deal Damage What Matters Most

Even the cleanest deal can leave lasting personal fallout if the process damages family ties. M&A transactions are high-stress, emotional events for owners. It’s easy to get caught up in the deal and lose sight of the relationships that last long after the ink dries.

A few tips to protect family relationships:

• Be transparent about your reasons and intentions.
• Acknowledge the contributions of family members, even if they aren’t owners.
• If possible, offer support for their next steps—whether in the business or elsewhere.
• Separate business decisions from personal ones. Don’t let the negotiations define your relationships.

Bottom Line: Preserve the Family, Not Just the Deal

You’ve spent years building the business, but you’ve spent a lifetime building your family relationships. The sale of your business can be a positive milestone for everyone if handled with care, honesty, and respect.

If you’re thinking about selling and want to protect your legacy—both financial and personal—I can help guide you through the process.

If you’re considering the sale of your business, I would be honored to help you write the next chapter of your journey. Please do not hesitate to contact me at gsimmons@norris-law.com.

About the Author – Biz Law Blog

Graham Simmons, a member of the firm’s Management Committee and Co-Chair of the Business Law Practice Group, is a business and real estate lawyer. He advises public and private sector clients on M&A transactions, credit facilities, real estate deals, leases, and land use matters. Graham’s experience spans industries including banking, financial services, health care, construction, economic development, and automobile dealerships. He is passionate about partnering with small businesses and middle-market companies, whether serving as outside general counsel or guiding exit strategies. Graham has been instrumental in regional economic development projects, notably in the Allentown Neighborhood Improvement Zone (“NIZ”) and the Bethlehem City Revitalization & Improvement Zone (“CRIZ”).