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“You can choose your friends, but not your family,” so the saying goes. But many in the growing ranks of the unemployed who have become victims of the floundering economy are choosing their family members as their business partners. Entrepreneurship was up in 2008, with about 530,000 new businesses created each month, according to the Index of Entrepreneurial Activity by the Kauffman Foundation.1 And it’s on the rise again in 2009, according to LegalZoom, an online legal document service.2

It’s easy to see why. The advantages of starting and running a family business paint a Norman Rockwell-like picture. According to Massachusetts Mutual Life Insurance Company’s (MassMutual) research study, FamilyPreneurship: What Every Entrepreneur Should Know before Starting a Business with a Family Member, conducted by Harris Interactive between January and March 2009, they include:

Being your own boss (75 percent)
Working for yourself and family (69 percent)
Sharing a desire to succeed with others (65 percent)
Flexibility of schedule (61 percent)
But the study, conducted via focus groups and an online survey of over 500 business owners, identified downsides too, and they are significant, including more stress (44 percent), less time off (39 percent) and family disagreements (32 percent). The inability to separate the family from the business can often sabotage the enterprise. Only a bit more than 30 percent of all family-owned businesses survives into the second generation.3 Twelve percent still will be viable into the third generation, with only 3 percent of all family businesses operating at the fourth-generation level and beyond.3 How can would-be entrepreneurs make sure their family business is part of the 3 percent that survive?

“Family businesses offer a great upside, but entrepreneurs need to go into these new ventures with their eyes wide open to give themselves the best chance to succeed,” said Beth Wood, an assistance vice president of the Life Company Marketing division of MassMutual, and a former family business owner herself.

To help ensure your start-up doesn’t stall, MassMutual offers the four secrets of successful family businesses:

Effective communication
A high level of trust in partners and advisors
Good planning
Work-life balance

Source Mass Mutual Financial Group