UK Legal Advice for the Next Generation of Family Business Owners

09 Oct 2025

By Findlay Anderson Partner, Head of Corporate, at Gilson Gray.

Family businesses are the backbone of the UK economy, accounting for over 85% of all private sector firms. As the torch passes to the next generation, young family business owners face unique challenges – and opportunities. From succession planning to corporate governance and employment law, understanding the legal landscape is essential to protect and grow your legacy.

Whether you’re stepping into leadership for the first time or preparing to take over, here’s our essential legal guidance to help you future-proof your family business.

Get Your House in Order: Legal Structures Matter

Many family businesses were started informally or under outdated legal structures. As a new generation leader, it’s crucial to review whether your current business setup is fit for purpose.

• Sole trader, partnership, or limited company? Consider whether transitioning to a limited company offers more legal protection, tax efficiency, or succession flexibility.
• Shareholder Agreements: If you co-own the business with relatives, ensure a formal shareholder agreement is in place. This should cover voting rights, dividend policies, exit strategies, and conflict resolution.

A clear, up-to-date legal structure helps prevent future disputes and supports external investment or expansion plans.

Succession Planning: It’s Never Too Early

Succession is often the most emotional and legally complex part of running a family business. Unclear plans or assumptions can lead to friction – or even litigation.

• Wills and Inheritance Tax: Encourage senior family members to create or update wills. Without a will, UK intestacy laws could disrupt your plans.
• Trusts and Gifting: Consider using trusts or gradual gifting strategies for smoother intergenerational transfers but always seek tax advice first.
• Power of Attorney: Appoint lasting powers of attorney (LPA) to protect decision-making in case of incapacity.

Legal succession planning should be paired with clear communication and a family governance framework.

Employment Law: Family Doesn’t Mean Fuzzy Rules

Employing family members can blur the lines between personal and professional relationships. This makes it even more important to follow UK employment laws.

• Written contracts: All employees (including family) must have a legally compliant contract outlining duties, hours, and rights.
• Fair recruitment and promotion: Avoid discrimination and ensure transparency, especially if hiring or promoting relatives.
• Dispute resolution: Put grievance and disciplinary procedures in writing – and use them consistently.

Being family doesn’t override employment law. Treat all employees (related or not) fairly and consistently.

Protecting the Family Name: Intellectual Property (IP)

Your business name, logo, products, and even social media handles may carry generational value – make sure they’re legally protected.

• Trademarks: Register your business name and logo to stop competitors from using them.
• Copyrights and patents: Protect original content, software, or inventions developed by the family business.
• IP ownership: If a family member creates a product or design, confirm who owns the rights – this matters if they leave the business.

IP rights should sit with the business entity, not individuals, to preserve value across generations.

Modern Governance for Modern Challenges

While the founding generation may have operated informally, the next generation often needs stronger governance to scale, attract investment, or go digital.

• Board structure: Even if your board is family-only, set clear roles and responsibilities.
• External advisors: Consider appointing a non-family advisor or chair to provide perspective and prevent echo chambers.
• Data and privacy compliance: If you collect customer data, you must comply with the UK GDPR and Data Protection Act 2018.

Governance isn’t just red tape – it’s a foundation for long-term, sustainable growth.

Final Thoughts: Blend Legacy with Legal Readiness

The future of your family business depends on more than just tradition and passion—it requires solid legal foundations. As a next-gen leader, your role isn’t just to continue the legacy, but to modernise it with foresight and structure.

Partner with a solicitor who understands both the legal and emotional complexities of family businesses. And remember – planning today prevents problems tomorrow.

For more information on how Gilson Gray’s Family Business Unit can help you to transition into a next gen family business owner, contact us today.