I have 4 year old twins.
For the 1st and 2nd birthday parties we did a combined friends and family.
For the 3rd birthday, we did a kids party and then invited family over for something casual on a separate day.
For the 4th birthday, we did a kids party and then did family when it was convenient. We celebrated with my in-laws at Thanksgiving since we spend Thanksgiving with them and my kids are born in November. For my family, we tagged it onto my sibling's birthday who is also born in November. The celebration was really for her birthday, but my Mom and sister had a couple gifts for my kids so they opened them first.
In the future, we'll probably just do a kids party and then do whatever is convenient for family but not really make it into a separate party. When my kids get older, we might try to arrange for a dinner out with my family. My in-laws tend to get together regular once a month or two and celebrate whatever birthdays happened during that time anyway.
And eventually, I may have to give my kids separate birthdays, but I'll take combined ones while I can. :-)