1. Be aware that, in a small or family-owned business, special favors to family members and friends de-motivate employees and set a bad example.
2.Think twice about offering a contract to a supplier who is a relative. Award contracts on merit.
3.Avoid letting family members borrow company vehicles, and don’t allow your sister to ask the company computer wizard to set up her home office.
4.Don’t put family members on the payroll if they’re not working in the company or can’t make a real contribution to the business.
5.Think of the future. If you hope to seek investors or go public, dealings with family members outside the business will be questioned.
Its often friends and family that get in the way of a successful business. I had a similar experience with one of my friends who wanted me to work for him. Didn't turn out to be a very good experience in the end.
Absolutely right things said here, I too prefer not to involve family members in the business because it will may create problems in the future by taking business growth into matter.I think that relation is more important than money so rather not to take family into business so that there will not be a possibility of spoiling both business and relation.
5 Tips on Avoiding Conflicts of Interest 
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