Patak's. Name sound familiar? It should do if you've been reading the business pages in recent weeks. Patak's is the family food firm that grew from a single room operation in Kentish Town, London, to an operation today turning over more than £50m a year. It's also been at the centre of a vicious family feud.

Today, Patak's makes curry sauces and other products for consumption in 40 countries - including India - and very good they are too. What's rather less tasty is the relationship between the family members behind it.

The company is run by Kirit Pathak and his wife Meena. But Kirit's sisters, Chitralekha Mehta and Anila Shastri, believed they were entitled to a piece of it following the death of their father, and the company's founder, Laxmishanker Pathak, in 1997.

They eventually went to the High Court to prove their point, sparking an acrimonious six-week battle earlier this year. Insults flew as merrily as the writs. Only last week was the basis for a settlement reached, with the two sisters likely to win around £8m between them, although negotiations were continuing as Business Solutions went to press.

But while the Patak's case is clearly a particularly serious example of what can go wrong in a family business, it does highlight the dangers of such a partnership. Even if you're not in one yourself, the prospect of family feuds might even put you off working with, or supplying, a family firm. How should you approach the area?

Perhaps it is with this question in mind that business advice company Grant Thornton has joined with the University of Gloucestershire to form the soon-to-be-opened Grant Thornton Centre for Families in Business. This centre for learning and experience will help families share good practice and come to understand some of the pitfalls (and the positive elements) of working with your relatives.

There are many drawbacks. Your directors are quite likely to come in with an understanding that they won't become MD or, depending on your set-up, there may be no question of non-family people becoming shareholders. That can be quite a disincentive for those identifying themselves as high flyers.

And you'll have to make up your own mind when "family business" morphs into "nepotism" - that's if you care particularly. But the positives are many as well. Patrick Hudgell is managing director of Lightbulbs Direct (lightbulbs-direct.com). The staff consists of Hudgell, his wife and his two sons. He founded the business after recovering from cancer.

"As it started to take off my sons got into websites," he says. Hudgell relishes the way of working. "There are several advantages - the first thing is that you know all the people from the outset, you don't have to develop a relationship. You know each other's strengths and weaknesses and so forth, so you're up and running immediately."

The lack of hierarchy also appeals to him. "The way we operate our family is that we're all very much equal and this has moved into the way we do business in the company," he says. "If one of my sons has a good idea then we'll run with it if we all think it's a good idea." This contrasts, he believes, with a more hierarchical organisation.

"The other thing is that you can turn people on and off as you need them, everybody's flexible - my sons are quite happily working away on the website one day and delivering things the next. We all do what we have to make the business work." So far so good, but if you bring a family ethos into the workplace then isn't there a danger of bringing rows as well?

Hudgell hasn't had that, but he says that there can be issues to address when you work with the people with who you live. "You can't get away from it - it's very tempting to talk about work over supper or breakfast, or whatever. We have this joke, we try to separate our work and our social lives and when my wife comes into work in the morning she typically says 'oh hello, did you have a nice weekend?'"

For Hudgell it's a matter of keeping different parts of your life separate; it's not always as simple as that, however.

Stephen Bagnall is managing director of Bagnalls, a commercial painting and decorating business based in Shipley, West Yorkshire, of which his father was the head before him. With 550 employees it's a substantial company and the pressures are entirely different from those associated with a four-person start-up. He hadn't planned to come into the family business, but his A-Levels dictated otherwise. "I was advised by my father that if I wanted to come into the family business then I would have to have an honours degree in law, accountancy, business or surveying." He read quantity surveying at college and ended up in the company.

He quickly discovered that he had different ideas to his father on how to run a company. "It was extremely difficult," he says. "Although I chose to do it I'd have to say I wouldn't have chosen it had I known what was to lie ahead." The father/son relationship didn't exist for a long while, he explains. "What there was of it has been totally eroded since working under his direct control since 1993 ... the tragedy of it all, and I would use that word, is that I went away to school at 7, had further education after that, joined the business at the age of 23 after doing it all and never really got to know my father."

Stephen became involved in the day-to-day running of the business in March 1998 when his father contracted cancer. "Very suddenly the succession planning had to accelerate pretty damned quickly."

Stephen and one of his father's cousins became joint MDs and the business went wrong - an acquisition didn't work, an IT installation was a disaster and the company had its worst financial year ever. His father recovered and eventually so did the business, partly through help from external advice agency TEC. "My father joined in 1996, I joined in 1998 and I'm a great advocate of it. I would say quite honestly that if it hadn't been for that one of us would have walked. The two TEC chairmen who were looking after our respective interests brought us closer together and managed to get us just about to see eye to eye and get us through it all."

Over the last month Bagnall senior has taken on a chairmanship role and Stephen, who only now feels he knows his dad, works on the day-to-day stuff. "We're getting on the best we've ever done in our lives," says Stephen, who now believes they share the same values even if they differ in methods. Clearly a crisis like that suffered by the Bagnall family is going to be difficult to plan for. And if your succession ideas are scuppered there will inevitably be problems. When things are running more evenly, planning is the root of a lot of business success. Leigh Chadwick is one of three brothers who own and run General Clothing Stores Ltd, trading as Wildlife. The company, which recently won the award for best family business in the Orange Small Is Beautiful awards, also took an unusual decision in terms of its structure when the founder, Leigh's father Don Chadwick, died three years ago.

"We took the decision that rather than appointing one of us as MD we'd run it on a co-leadership basis. That's a fairly common model in the States in the way that family businesses are run ... it demonstrates that leadership doesn't have to be a solo act, which is in the face of conventional wisdom that says it should be."

The brothers absolutely must agree on where they want the business to go over the next five years, and they had to agree on very clear roles and responsibilities - and a salary structure to go with them - early on.

Chadwick is an advocate of getting outside help where necessary, which is why his is one of the businesses beating the drum about the Grant Thornton centre. A family doesn't automatically have the right skill set to run a company, he points out, so outsiders can be essential. His board has both family and non-family members. He does believe, though, that a family structure can engender a lot of loyalty from employees.

Bagnall agrees. "A characteristic of the business is that we have very long lengths of service - our management team is around 20 people, and the average length of service in that team is 18 and a half years."

Retaining people from outside the family isn't a problem even when they aren't offered share options, he says. "People are quite genuinely loyal to the family and very much bang on about the fact that we're now in the fifth generation of a family business - it's a unique card and one we like to play."