Small family business in Russia: formal or informal?

Purpose The purpose of this paper is to deal with informal entrepreneurial activity of micro and small family businesses in the specific transitional environment. Design/methodology/approach The paper uses two cases - an informal micro business (marginal family business), and a formal retail small firm (simpleton family firm), respectively, of a panel conducted in 2013-2015 in Moscow. Findings First, the real distribution of responsibilities between family members is informal; it relies more on interpersonal trust and common law. Second, exactly the ease of governing such trust-based businesses for the founders' generation sets limits of succession of small-scale family businesses. Third, as trust in the state is very low, the policy of Russian authorities to quickly force informal entrepreneurs to become legalized is substantially wrong; the results would be either a transformation of simpleton into marginal businesses or quitting business. Research limitations/implications Research limitations of the study are the number of observations and the localization of the panel only in the capital of Russia. Practical implications The fundamental failure of Russian State policy toward small-scale family businesses is its attempt to convince marginal to formalize and to oppress simpleton family businesses pushing them into informality. In fact, it should be designed vice versa: tolerate marginal businesses and let them to live and die while shaping a friendly environment for simpleton family firms. Originality/value The paper argues that the most important facet of informality in small family entrepreneurship is the informal property rights and governance duties' distribution among the family members.