Buying a business can be one of the most exciting moves in someone’s professional life. But when the seller is a family member, the risks become much more complicated—and often much harder to talk about.
This week, I spoke with a prospective client who was preparing to buy a pizza shop from his brother. At first glance, the deal seemed straightforward. His brother would sell him the business and provide partial seller financing. The brother also happened to own the building, so he would remain the landlord after the sale.
So far, so good—until we reviewed the documents.
Three Roles, One Relationship
When one person is the seller, the lender, and the landlord, there’s already a lot of leverage in one direction. Add family dynamics on top of that, and the legal implications become even more important to clarify upfront.
This prospective client had a long-term vision: buy the business, bring in a partner, and eventually sell to that partner or a third party. But the fine print raised some serious concerns.
The Hidden Restrictions
The financing agreement contained a clause prohibiting the transfer of any interest in the business while the loan was outstanding. That means no bringing on a partner. No selling a share. No exit strategy.
The lease also stated that no assignment of the lease was permitted. So even if he were able to bring in a new owner, the lease would prevent them from officially stepping into the tenant role without his brother’s permission.
To make matters worse, the documents kept the client on the hook as a personal guarantor—even if he later sold the business. That’s a long-term liability most buyers don’t want hanging over them after they’ve moved on.
Can You Negotiate Terms Like These?
We discussed the possibility of adding language such as, “Assent to an assignment shall not be unreasonably withheld.” But here’s the problem: if the brother refuses to give his assent, the only way to enforce that clause is through litigation.
And that’s where things get uncomfortable. Because now we’re not just talking about a business dispute—we’re talking about suing a family member.
Why Business Deals with Family Are So Tricky
Many people go into family transactions assuming trust will fill the gaps in the contract. Unfortunately, when things go wrong, all you’re left with is the legal paperwork—and if that paperwork wasn’t built to protect both sides, the fallout can be devastating.
You can’t enforce a handshake. And suing a sibling over a business deal isn’t just financially draining—it can fracture the relationship forever.
The Value of Identifying Issues Early
The good news is that this client brought in an attorney early. By reviewing the documents and understanding the implications of each clause, he gained clarity about what he was really signing up for.
In the end, he may still move forward with the deal—but he’ll do it with open eyes, and with a better sense of the negotiation points that really matter.
Final Thoughts
Buying a business from a family member might feel more comfortable than buying from a stranger, but it often requires more caution, not less.
Before you sign anything, ask:
- What roles will the family member play after the sale?
- What restrictions exist on transferring ownership or assigning leases?
- Will I remain personally liable, even after selling or stepping away?
- If there’s a disagreement, what’s my legal recourse—and do I really want to go down that road?
These aren’t just legal questions. They’re personal ones. But by addressing them early, you can avoid turning a business opportunity into a long-term liability—or a family rift.
If you’re buying or selling a business, especially within your family, I’m happy to help you navigate the process. A solid agreement up front is the best way to protect the relationship behind it.
This article is for informational purposes only and does not constitute legal advice. Every transaction is different—talk to a qualified attorney about your specific situation.
