The "Family Constitution" vs. Corporate Bylaws: Knowing the Difference

A common mistake growing family firms make is assuming that their corporate bylaws cover everything needed to keep the peace. They don't. While bylaws govern the legal entity of the business, a Family Constitution governs the relationships of the people behind it.

Think of it as the ultimate roadmap for family harmony. While your legal bylaws dictate how a board vote is structured, your Family Constitution answers the messy, human questions:

• "What are the criteria for a cousin to apply for an internship?"

• "How does the family handle media inquiries during a crisis?"

• "What happens if a family shareholder wants to get divorced?" 

Bylaws protect your capital; a Constitution protects your culture. By drafting a family constitution before you actually need to enforce it, you establish rules of engagement during a time of calm, rather than trying to write them in the middle of a storm.

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