Just as a family strives to provide funding for opportunities, a family business should consider establishing funds as reserves for particular purposes. According to Ramez A. Baasiri, author of Interrupted Entrepreneurship, these funds will “allow you to cultivate the next generation so they can handle a broad range of interruptions in entrepreneurship and have the peace of mind and skills to enhance their business resources for others to benefit from.”

Education Fund. Establishing an education fund has two purposes. First, it is an opportunity for family business members to receive the education they need to help support their family business. Second, if the fund is targeted to educate community members in need, it is an opportunity to give back to your community and show your family business’ concern and respect for community.

Research and Development Fund. Similar to an education fund, a research and development fund provides your business with the opportunity to train employees in specific topics. These trainings will foster innovation and success by strengthening your employee’s specialized skills, contributing to the constant improvement of your business.

Medical Fund. Due to the uncertain realm of health care coverage, it is always wise for a family business to have the necessary funding to cover unforeseen medical costs. A medical fund ensures that during a health crisis a family business will not have to sacrifice funds from other important sectors.

Investment Fund. An Investment fund is a way to foster entrepreneurship and diversification of your family business. Many family members struggle with the limited entrepreneurial opportunities offered by their family business. An investment fund directly addresses these struggles by providing members the opportunity to explore their other entrepreneurial goals, which in turn, contributes to the greater business’ success.

Philanthropy Fund. Giving back to your community by donating to causes that resonate with your family business is extremely beneficial to your business’ credibility. Charitable acts are strategic for success by publicly expressing your family business’ core values and willingness to do good.

Setting money aside for special-purpose funds doesn’t mean sacrificing earnings and profits in any given year. Rather, as with personal savings, small contributions to funds on a regular periodic basis can result in consistent fund growth over the life of the business.

Keith Baldwin is a business transactions and securities lawyer with a forty year history of serving clients’ legal needs. Keith focuses his practice on business relationships, including mergers and acquisitions, agreements among owner-entrepreneurs, and best practices for corporate governance. Keith can be reached via email at keithbaldwin@dwt.com or directly at 425.646.6133.