When you’re starting out, it’s normal to lean on people you trust. A cousin offers to “keep an eye” on the bank account. Your best friend knows a bit of Excel, so now they’re your “finance person”. Your spouse wants to “help out” because, hey, why pay someone else when you have family?

It feels loyal. It feels cost-effective. It feels safe. Familiar faces. Shared trust. No awkward HR forms. But too many owners learn the hard way that trust doesn’t pay the payroll. Trust won’t file your taxes correctly. And trust won’t protect you when your well-meaning cousin can’t read a cash flow statement.

Family as Employees: Rules First, Regrets Never

Hiring family doesn’t make them special cases, it makes them employees. If you skip that mindset, you’re inviting unnecessary drama and profit leaks.

They need:

• A clear job description that includes what is expected from the position, the skills needed, and who they report to. By the way, do not allow them to step out of the chain of command just because they are family.
• A market-based salary. Not a “favor rate”. Not overpay. Fair pay keeps resentment and entitlement out.
• Regular performance reviews matter. Hold them to the same standards as everyone else.
• Up-to-date training, especially in roles like accounting where rules, tech, and best practices change fast.

The truth most owners hate to admit? The skills that help launch a business rarely match what’s needed to run it once real money is on the line. If your cousin’s skills stop at basic bookkeeping but your company is crossing the million-dollar mark, you owe it to the business, and everyone working for it, to bring in someone qualified, and put the right structure around their transition.

Ignore this, and you will see resentment, blurred lines, poor performance, and your good employees picking up the slack until they find a better place to work. And don’t tell me it is not going to happen for you because I have seen it happen in the “best families”.

The Real Cost When You Don’t

Unqualified family or friends in critical roles cost you real money, lost revenue, late vendor payments, surprise penalties, or blown growth opportunities. One missed tax payment can snowball into thousands in penalties. One set of sloppy books can kill a bank deal. One late vendor payment damages relationships and reputations.

And the worst part? The quiet cost. When good employees see you protect family over fairness, they leave, and you lose the people who actually could have helped you grow.

Family as Partners: If It’s Not in Writing, It’s Not Real

And what about when you are bringing family in as partners? When you bring family in as partners, you’re inviting them into ownership, not just a job. That means you need more than goodwill; you need a clear legal agreement that spells out:

• Who owns what percentage.
• How profits and losses are shared.
• Who decides what and how big decisions are made.
• What happens if someone wants out.
• What happens if someone needs to go.

A cheap template won’t cover this when emotions run high. A solid, custom agreement gives you options before you need them and saves relationships you actually want to keep when money tests your trust.

A Real Story, and a Real Price Tag

One client had a cousin who really was an accountant, just not the right kind for the business. They handled basic bookkeeping for tiny sole proprietors, but did no training, no updates, no real growth.

When the company jumped from $100K to $2 million, the cousin was still there. They kept the books like it was 1995 with paper folders, random spreadsheets named Final_FINAL_use_this_one.xlsx., no cash flow forecasts, no budgets, no idea how to support a bank loan or manage real tax strategy.

There was no fraud, just unqualified work. Vendors got paid late. Tax filings were wrong. A six-figure bank deal almost collapsed because the financials were a mess.

Every time I asked, Where’s the job description? Where’s the performance review? What’s the plan to backfill or upskill? The owner said, “He’s family. He’s helped me so much. I don’t want him to feel bad.”

But while everyone tiptoed around feelings, the business bled money, and good staff covered for the mess until they’d had enough.

What To Do Instead

1. Get real professionals for critical roles. If your cousin wants to stay, fine! But pair them with an experienced outside bookkeeper or CPA. Let them learn if they want to, but don’t gamble the business on loyalty alone.
2. Write clear job descriptions. Update them yearly. Be honest about the skills needed today and tomorrow.
3. Pay fairly. Undervaluing family is just as dangerous as overpaying them.
4. Treat them like everyone else. Hold them to the same performance standards. Document feedback. Act on it.
5. If they’re partners, get the right legal agreements. Not a template off the internet, one tailored for your business, drafted by a lawyer who knows what questions to ask and what protections you need.
6. Be ready to make hard decisions. Growth means change. The people who helped get you off the ground may not be the right people to help you fly.

Cafecito Takeaway

Family can be the strongest support system your business will ever have, or the weight that quietly drags it down when no one wants to have the real conversation. The difference is structure, clear expectations, fair pay, and the courage to lead like a business owner, not just a grateful relative.

Treat family employees like every other employee, with clear roles, fair pay, and accountability. Treat family partners like any other partner: put it all in writing, plan the exit before you ever need it, and protect the business before you protect anyone’s feelings.

The cost of avoiding this is always bigger than the cost of getting it right. Missed profits, wasted payroll, late payments, good people walking away, a business that stays small to keep the peace. Good paperwork, good roles, and a little courage will keep your relationships strong long after the paychecks stop.

So, if you’ve been telling yourself you’ll “get to it later”, the agreements, the reviews, the real hires, later is now. So pour that cafecito, open that dusty file, and get it in writing.

You owe it to your family. You owe it to your team. You owe it to yourself.