Starting a family bank
Starting a family bank is similar to starting any other family business. It requires forethought, clear communication and involvement from the right individuals. Here are a few steps to consider:
• Engage and educate family members. Make sure all family members know the advantages, disadvantages, benefits, limitations, opportunities and risks. Each family member should make his or her own decision about whether to invest in the bank or receive financing (or both).
• Agree on the bank's purpose and scope. What is the mission of your bank? Who or what types of activities will be financed? What are the core values that will direct investment decisions?
• Set a strategy. Determine specific performance metrics that will be used to measure success.
• Develop appropriate policies. At a minimum, outline requirements for financing and documentation, determine if earnings will be distributed or reinvested, explain how investors can cash out of the bank, define the composition of the board of directors and decide what reports investors will receive.
• Clarify roles and responsibilities. Clearly articulate who is responsible for making the key decisions.
• Engage independent board members. Objective oversight by non-family directors is essential to creating a family bank that is professional, democratized and harmonious.
• Be mindful of tax and legal considerations. Work with experienced, specialized advisers who can help you stay in compliance.
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