Imagine sacking a colleague: not a pleasant experience but just part of the job. How about doing the same to somebody who is also a good friend? No doubt, it would be an uncomfortable and dreadful task. Now picture trying to fire a member of your family...

Keeping a lid on the natural expression of a normal family - squabbles, petty jealousies, huge emotional demands and ferocious loyalty - is a tough enough job in itself. Doing so when the family also happens to run a business is another matter altogether.

Mix the commercial demands and competitive pressures of running a 21 st century business with the intensely personal and often private relationships that tie families together, and the result can be explosive - and messy to clear up.

However, says Juliette Johnson, senior family business advisor at Coutts, the passion can actually work in its favour - as long as there's a common goal to which every family member has agreed.

"It's not ideal if family affairs are fractious, but those that don't get on can run very successful businesses," she says. "Success is much more about how aligned the family is towards the business's future; it's about the 'vision' for all the different members."

The most effective way for families to agree on such a goal is to draw up a family 'charter', she explains. "A charter is a 'non-legal' binding document that outlines the vision of the family's aims and how they see themselves: a moral 'statement of intent', if you like, of how the family wants to work."

It's also one of the surest means to ensure a 'road map' for the family owners to follow, stresses Grant Gordon, director general of the Institute for Family Business (IFB). "Typically, common areas to be covered by the charter include minimum education requirements for 'next generation' members of the family; a retirement policy; and an exit policy for those family members who wish to sell out."

"A family charter is one of the surest means to ensure a 'road map' for the family owners to follow."

Given the contentious nature of hierarchy and the size of salaries in regular corporate workplaces, it's always worth making pay as transparent as possible in a charter - particularly if, with regular dividend payments from the family's shareholdings, say, not every family member gets an equal payout.

It's also critical that the charter sets up regular formal meetings between family members, to make sure that there is openness and transparency between all - particularly when it comes to competitive siblings.

Although a charter can work smoothly when family businesses are small, its strength can be quickly tested if success lands the firm's owners with new problems; particularly if a once tiny and well-trained firm begins to turn over millions of pounds and grow out of control.

First, as a family business passes from one generation to the next, it needs to find the right calibre of leaders: will they come from within the family or be outsiders? Then there's the sale of family shares held in the business - a 'corporate inheritance' if you like - that can also be a very fraught affair tangled up with deep emotional attachments.

This can turn into a tricky financial tangle, if say former family business members continue to rely on income from share dividends even when they've relinquished all commercial control. "Outside intervention can be very useful [in big decisions]; for example, to make objective assessments on hiring and promotion decisions for family members," adds the IFB's Mr Gordon.

"Non-executive directors, in particular, are a valuable resource to ensure that the strategic thrust [of the firm] does not fall prey to unrealistic thinking that may, perhaps, arise from emotional attachment to outdated practices on behalf of family members."

"As a family business passes from one generation to the next, it needs to find the right calibre of leaders: will they come from within the family or be outsiders?"

For all these obstacles, family-owned businesses are thriving and make up some three-quarters of the UK's 4.2 million companies, the majority of which are small firms. Women, according to a recent survey, are more likely to be at the head of a family business than in a regular corporate workplace.

Within the UK franchising industry, more than eight out of ten such firms are run by married partners, according to the British Franchise Association survey. Critically, many 'next generation' family members see franchise businesses as a decent opportunity to get hands-on work experience.

But it's often the sad case that the transition of a business - from its creators to the 'next generation' - founders on the rocks.

In summer 2007, a report from the Small Business Services' Global Entrepreneurship Monitor suggested that - over the next ten years - roughly half of all small businesses will change ownership, the majority of which will be passing from one family's company from one generation to the next.

Yet the latest industry estimates suggest that a quarter of all family-run firms fail to make it to the second generation; and, much worse, only one in seven make it through to third generation. To improve these statistics, many family firms must regularly look long and hard at how they work: for example, are they keeping non-family staff happy?

While a charter can always be reviewed to resolve issues such as this - and, more generally, the changing nature of its business - its real value lies in allowing the family to sit down together and hammer out a form of unity that can let them all move on again.

"Families do, of course, get into [trouble]; for example, it's particularly hard when you make business decisions for family reasons rather than for commercial ones. But, with a charter, you can usually get back out of difficulty."

By Sam Dunn