When a Family Business is a Lifeline

By Eileen AJ Connelly, AP Personal Finance Writer

Michael Kaplan had a fallback after losing his high-pressure Wall Street job: the 85-year-old family business.

It wasn't an easy choice. He even considered starting his own company. "I didn't want that feeling of getting bailed out by my parents," Kaplan said. But after some prodding from his parents, Arthur and Lynn, he returned to Palisade Furniture in Englewood, N.J., the family store where he worked during high school.

In today's difficult climate, many people who previously chose other careers might face a similar choice. Some need a lifeline after finding themselves among the country's 26.3 million unemployed or underemployed workers. Others may be hearing calls for help from family members struggling to keep a business alive.

But having a family member step in can create tension and cause difficulties if the plan isn't carefully thought through.

It's business, but also personal

Like Arthur and Lynn Kaplan, many business owners want to help their relatives — emphasizing the "family" part of the business. They brought their son into the business in 2002, as the last recession was winding down, but experiencing a "jobless recovery" similar to the one economists say we're likely entering now.

In such cases, the business is seen as "an instrument to take care of family members in tough times," said Andrew Keyt, executive director of the Loyola University Chicago Family Business Center.

But no matter how much you want to help, it's important to make sure the hiring decision makes sense on a business level. If taking on a new salary causes financial difficulties or the business is already struggling, Keyt said, it could be a source of tension, especially among other workers.

"It may be a short-term solution to put a family member on the payroll, but it may have long-term impact on others," Keyt said. "If you're laying people off left and right, and then you go and hire a family member, what message does that send to other employees?"

There are also situations in which children expect a job, or owners get pressured by other relatives to employ out-of-work offspring or other relatives.