Fresh Air & Cold Water for the Perplexed Family Business

Do your kids want your business for nothing, but encourage you to enjoy your retirement in high style? Did Mom always like you best, and now your siblings aren’t speaking to you, and worse, not doing what you tell them to? Are your family members charging their vacations to the company card? Are you having trouble building a board because nobody wants to give you advice they know you won’t follow?

IF SO, YOU MIGHT BE SUFFERING FROM FAMILY BUSINESS SYNDROME!!

That’s where this column might come in handy. I will attempt to lend you some perspective and a fresh outlook on your family business problems. Simply email me your question about your family business challenge, and I’ll reply online.

PLEASE NOTE: Your identity will not be disclosed, and Ira reserves the right to edit the question for clarity and some degree of general relevance. Ira Bryck will be saved harmless from any reader’s claim that their understanding or implementation of the advice in this column had an adverse effect. The column is for general informational purposes only. It is not intended as legal, accounting or psychological advice. Accordingly, readers should not act upon information in this column without seeking professional advice.
© 1994-2024 Ira Bryck – no reproduction or use without prior written consent.

Dear Ira, 

I have been researching for any issues relating to my father selling his family business to my brother well below FMV to be able to pass the company on for future generations.

The business was not properly appraised due to the nature of the business being an S – Corp? At the time of the sale tremendous pressure was applied arguing the fear of a buy sell agreement needing to be broken as the agreed price was set too low with the previous partners.

During the sale, an offer was made from a large corporation for around $10-11 million dollars. My brother purchased the company outright for $5 million of which $1 million was to be paid over the course of 10 years. Inventory was paid in full and there was around a $1 million in the checking account to help him survive.

After less than 5 years, the business was sold for $20 million. Nothing was done to make such a drastic increase in value other than the buyer wanting desperately to own the company. Legal deadlines approached making the purchase price escalate in order to secure the sale.

I am trying to find out what went wrong with the way this should have been handled during the initial sale to my brother. I have discussed this in detail and found that a stipulation should have been entered into the contact. In the event of a sale over a predetermined amount of years a portion of the profit from the sale revert back to my father. My fathers expectations were not met in the sale. The price was intended for future generations and in my opinion, money should be paid back to may father.

Is there such a stipulation, and is it common practice?

Any advice concerning this would be greatly appreciated.

Thanks,

Screwed

PLEASE NOTE: I have invited my colleague, Michael Camerota, a business intermediary with Touchstone Advisors, to be my guest respondent to this letter:

Dear Screwed,

You raise a number of issues, which affect family, legal, valuation and other.  Allow me to deal with at least the following four issues:

1. How and why was the business valued at only $5 million for a sale to your brother?
2. Why would a large corporation make an offer of $10 million around the same time as the sale to your brother and why would another company pay $20 million just five years later?
3. Why was the business sold to your brother with all of its inventory at no additional cost and with $1 million in the checking account?
4. In a sale among family members, how common is it to have a stipulation providing that in the event of a second sale during a predetermined period, a portion of the purchase price be returned to the Seller.

Below are my responses:

Issue #1:

The first thing to understand is that the same business may be appraised to be worth very different values depending upon both the purpose of the appraisal and the standards used in the appraisal.  For example, in a divorce situation, the husband’s appraiser would likely value his business for substantially less than the wife’s appraiser in a situation where she is looking to be paid some percentage of its value.  Similarly, the same appraiser might arrive at three different values for the same business if the purpose of each appraisal was.

1. An appraisal for estate tax purposes in which the higher the value the more taxes to be paid;
2. An appraisal for a buy-sell agreement where neither partner knows which one will die first; or
3. An appraisal to provide to a particular buyer interested in purchasing the business.

In this situation, your father may simply have wanted to sell the business to your brother at a discount; perhaps in return for his help in building the business over the years.  I can’t know from the situation presented.  In the alternative, if there was a buy – sell agreement, your father may not have wanted to sell to your brother at a price higher than he agreed to sell to his previous partners and may even have been prohibited from doing so.

The point is that especially in family situations, it is not uncommon for a sales price to be on the “low” (or even “high”) side due to extenuating circumstances and feelings.

Issue #2:

In the case of valuations for estate and gift tax, divorce, and buy- sell agreements, the standard usually required and generally used is a detailed set of rules set forth in IRS Revenue Ruling 59-60 which lay out how such a valuation is to be performed.  These rules assume a “hypothetical” buyer and seller, under no compulsion to act, having full knowledge of the facts, and paying all cash for the business.  In the case of the two buyers willing to pay substantially more for the business, the “fair market value” standard as defined in Revenue Ruling 50-60 simply does not apply.  The buyers you mention:

1. Likely had both synergistic and strategic reasons for purchasing the business: it was worth much more to them than to any “hypothetical buyer”.
2. Were likely under some “compulsion” to buy (note your statement that the last buyer “wanted the company desperately” and that “legal deadlines approached making the price escalate”) and
3. Likely structured the purchase with some cash, some debt and perhaps an earnout;
4. Almost certainly required the seller to execute a non-compete agreement, which is not taken into consideration when computing “fair market value”.

Issue #3;

Businesses of the size you present are almost always sold with the inventory included.  They are also usually sold with both accounts receivable and accounts payable included and sometimes with the cash necessary to operate the business.  These items can be viewed as the “gas in the tank” that go with the business and without which the business could not operate.  One can argue that $1 million in cash was excessive in this particular case but the fact that some cash was left in the business does not trouble me.

Issue #4:

A stipulation such as the one your refer to would perhaps have been appropriate in this situation, depending upon the intentions of your father which appear to be unknowable at this point.  Nevertheless, in my experience, such stipulations are not at all common in transfers among family members.

Sincerely,

Michael W. Camerota, JD, M&AMI, Touchstone Advisors, Enfield, CT 06082

[email protected] www.touchstoneadvisors.com

Right now I’m a university student and I will be graduating in a year. My dad runs his own businesses in Mexico and they have been very successful. The problem is, he is not capable of teaching me how to run them. He is the type of person that has very little patience and will get angry at anyone for anything, even small things like moving a calculator from one place in the desk, to another place of the same desk (I’m not kidding). My sister already graduated and tried to work for him and failed. She decided to look for another job. The problem was that he expected her to magically know everything there was to know about the businesses without him teaching her anything, and for her to start making decisions. Of course it doesn’t work that way. The employees wouldn’t tell her what to do because they had their own jobs and didn’t know what responsibilities to give her, and my dad would just tell her to get involved in everything and check everything in the businesses (whatever that means). I also have a little brother that just started university, but my dad is always saying that my brother can’t run the businesses either because he doesn’t care about them and he is irresponsible. In the end, my dad, along with my mom, have come to the conclusion that I’m the only hope of the family businesses. They always tell me that I’ll have to be the head of the businesses and somehow integrate my brother and my sister. This has also created problems between us because it is obvious to everyone that my dad has a preference towards me, and my brother and sister feel my dad hates them (which, unfortunately, might be the case). The sibling rivalry is not a big problem though, I know I’ll be able to solve that. My main concern is that once I graduate, my dad expects me to do what he has been doing for almost 40 years without any coaching. I have already told him that he’ll need to teach me what he does, how he talks to important clients, how to make decisions, etc. and he says he will, but I know he expects me to arrive knowing everything. And the thing is, he never liked school and he never finished high school, so it’s not so much that he doesn’t want to teach me, it’s that he does not know how to teach me. Of course there is more to the story, but it would be too long to write, so I’m just giving the basic and most important details here. I feel that I am losing my time studying Finance at the university because they are just teaching me how to be an employee and basic finance stuff. I’m not learning anything about running a company, making decisions, negotiating with clients, etc. So basically, I need to know how to run multiple businesses that have relationships with companies in France, Colombia, and the United States before I graduate. What advise can you give me? I’ve come to the conclusion that I have to teach myself how to run a business before I graduate, but I don’t know where to start. Could you recommend me some books to read, documentaries to watch, or classes to take?

Thank you so much for your time,

Dear Need to Learn,

They say the best way to learn something is to teach it, and in your case, you may need to teach the teacher how to teach. You both may end up learning quite a bit.

You need to take the lead in this situation, defining the rules of engagement. Tell your father that you would like to join the business for a 1 year trial run, with a goal of learning all that it takes to run the company EVENTUALLY. Explain that you currently don’t even know what you need to know, and what you don’t know, and that you will spend 2 months shadowing him and other managers, with no job responsibilities. You are there to create a job description and career track for yourself, able to delve into any area of the company, meet with customers, suppliers, expert advisors. The result of all this will be information gathering, finding your most effective role and path forward, and navigating a realistic mentor/mentee relationship with your father, as well as from all others that have perspectives and data that you need.

The 2 month shadowing would create the job description for the 1 year trial period. The trial period would equip you both to have an informed discussion about your career, that you now can’t have.

You might also consider starting a book study group with your father and some key managers, where you all read a business book and discuss it, maybe facilitated by a talented local business professor. This will be a good education for all, and build a good team spirit for you, your father, and the key managers. You can ask for recommendations on books, but Good to Great by Jim Collins would be a good start. Another good one is The Idea Driven Organization, by Alan Robinson and Dean Schroeder.

This may be a challenge for your father, if he is not experienced or confident as a student, but you can insist that to make your partnership with him a success, you need to prepare, including preparing him, to accept you with a realistic plan.

Once he agrees to this in theory, create a written battle plan / curriculum / time line, that you both sign. Choose a trusted person to oversee this relationship, or perhaps a small board of advisors, that could meet with you quarterly, to discuss an agenda of business and family business issues.

As far as a good book about family business, to get a better grasp on what should happen, and what often does, but shouldn’t happen, I’d recommend Succeeding Generations by Ivan Lansberg.

As I said in the beginning, this plan involves you taking the bull by the horns. But that could be a lot less risky than not having a grip, once you get on.

Please let me know how this is progressing (hopefully it will) or what happened when you suggested it.

Good luck!

Ira

Dear Ira;

My husband owns a business with his mother.  He started it with his father and mother being silent partners while he and his brother ran the business, also as partners.  His brother was bought out of the business, his father died and his other brother has never  been a part of the business.  His mom said she made it  very clear, to the son who was bought out, that if she dies her shares in the business go directly to my husband.  If there is nothing in writing how can I be sure the shares will stay with my husband?

Promises, promises

Dear Promises,

As the cliché goes: “a verbal contract isn’t worth the paper it’s written on” and without doubting the good intentions of anyone involved, your husband and you could make a calm and logical case that you like to sleep at night, and need to have everything in writing, legally bulletproof, to avoid any future misunderstanding that would upset the family.

Your mother in law should have a legally binding will, along with other health care directives, and you can lovingly insist that your family benefit from the clarity those documents, and the decisions and discussions that they necessitate, happen asap.

Making the transfer of stock explicit might also mean a discussion about what else, aside from the stock, might go to whom. If your husband gets stock, his brothers could get other assets. I can’t avoid pointing out that you quote your mother in law saying “if she dies.” The correct word choice, for all of us, is “when,” not “if.”

I hope this helps.

Ira

Dear Ira,

I am in deep doo-doo.

My husband, who owned a successful sole proprietorship, was diagnosed with pancreatic cancer last year. Just before he underwent surgery to remove it, he turned the business into a corporation with himself, me and his two grown sons as officers. He was scared he was going to die and thought that would solve all our problems. Far from it.

We have never successfully been able to have a board meeting due to the fact that one of his sons gets mad about something and storms out. Consequently there is no charter, no clear chain of command, And no clear duties for anyone.
I’ve tried all year to get my husband to make plans for the future. We have two small children together and I also have a daughter from my first marriage to support.

His sons have both been very hostile towards both him and myself, demanding to see our personal finances, access to our bank accounts, and have tried to turn my husband against me by repeatedly accusing me of wanton spending. The truth is his medical bills and treatments take up a full third of our income, my husband has done everything for the business and both his grown sons have done less than little (one of them sleeps on the job repeatedly and has to have his work re-done constantly. The other does little to nothing). I myself haven’t done much but that’s because caring for him and my kids is like having two full time jobs.

My husband owns 51% of the company, which I am supposed to inherit.
Unfortunately my husband’s health has taken a turn for the worse. He hasn’t been doing well anyway, but the last few days he has been forgetting the day of the week and cant remember anything important I’ve tried to tell him. Caring for him has been a full time job this last year, but now even more so because his balance is off and I’ve needed to walk with him everywhere. Stubborn man doesn’t even realize he’s not coherent no matter how hard I try to tell him.
In the meantime his oldest son has decided to wage full-fledged war against me. He sent me a bunch of nasty texts calling me every name in the book (which I didn’t return in kind.), accused me of wasting all the company money, and threatened that I should “enjoy it while it lasts”. He accused me of manipulating my husband and being lazy and called me names. All unprecipitated.
Yesterday I got sick of being accused of spending all the money. I made a household budget and showed it to him, and told him that a full third of our income has been going to his dad’s medical issues. (Bills, insurance, pills, etc). His response was chilling. He said, well, other people in the company need to be paid (meaning him and his brother) and we want to expand. I told him we need a check this week to keep his dads medical (his medical ins. Alone is almost $1000 a month due to preexisting conditions) and he just looked at me. My husband was right there but he wasn’t coherent enough to understand what was going on.
It also turns out that his other son has power of attorney, because he never changed it over to me. He’s always just trusted that his sons would do what is best for him and for me and my kids. I didn’t, but unfortunately any time I tried to bring it up we’d get into a fight and I’d get nowhere. Now unfortunately I’m being proven right.

I don’t know what to do. I don’t care about the business. I would just let them have it, except their dad needs the money from it in order to survive. I’ve run my own business successfully in the past, and in fact I gave up my own successful business to move across the country and be with my husband. We are in a very specialized field, so finding work somewhere else wont be too much of a problem.

I really just want to get the hell out of here and take my husband and kids with me. But I cant. I’m trapped. And I don’t know what recourse I have. I feel the storm coming and I’m totally unprepared.
My next step is to get power of attorney transferred to me. My husband already said we should (he does have interludes of lucidity). But after that I’m at a loss. He cant or won’t stand up to his sons, and I believe they are going to screw us all.

Please help me if you can.

Kind regards

Beleaguered

Dear Beleaguered,

I feel for you in your very complex and painful dilemma. Just when you could use the support of your husband’s sons, who are your business partners, instead you need to defend yourself from their attacks.

So you need a battle plan, beginning by first taking stock of your options. As you note, you could let go of the business and make a living elsewhere, and be able to focus on your husband’s care. If you were to offer it to them for sale, what amount would/could they agree to, that would provide you with what your husband needs to make ends meet?

You don’t seem at all confident that the sons have the skills or motivation to succeed at running the company. Is there an objective and trusted expert that could analyze and report the likely results of them as owners/operators, to give you all a reality check, and help them see any flaws in that plan? Or possibly, inform you that they could succeed, more than you suspect?

If they were convinced they could succeed at running the company, even after they were to hear a negative prediction, you could give them a time period to get bank or alternative financing. It doesn’t sound like your relationship lends itself to you holding paper, financing the sale yourself.

You feel hurt and misunderstood by their attacks on your motives and character. They may not have the ability to see you for who you are, but it doesn’t mean you can’t state your position clearly in writing, and give them the opportunity to read it. Could you make it a condition of entering into a negotiation with them that they have to read your statement out loud, without any hostile response, and express their understanding of it? Would it be satisfying to you to be understood, even at that basic level? And if they won’t do that, you don’t discuss with them how they might take over the company? (You might offer this as a 2 way deal, where you need to read and understand their position, stated logically and respectfully.)

You have more power in the situation than you may realize, especially if you do get power of attorney. You have the power to say no, the power to not engage, the power to do nothing, the power to set your terms for discussion.

You need to prioritize, but some multitasking is likely. Job One is taking care of your husband, but at the same time find the people who can help you in your delicate dealings with his sons. You need to create a flow chart that shows you your choices at each stage of your dealings with your partners (if they say yes, then A; if they say no, then B). You need to get your husband, in his lucid moments, to make some decisions with you, and take the needed actions.

It would be great if you could sit down with these 2 men and have a reasonable discussion. You all have skin in the game, and have reasons to create a win/win. It would be helpful to bring in a neutral facilitator with business knowledge, who can keep it all on track, so you each get as much of what you need, and keep the negativity and bad behavior in check. But at the same time, realize what power you have in the exchange- referred to in the world of mediation as BATNA- best alternative to a negotiated agreement- in your case, the power to say no.

Good luck.

Ira

My father in law helped my husband purchase a pool business with 60 clients back in 2001. It’s a Sole Proprietorship in my husband’s name. It was purchased with money that my husband’s grandfather left for him (my father in law’s dad) when he died.

My father in law has always done the book keeping. And keeps every detail to himself. My husband has steadily grown the business from 60 clients to 160 clients. We now have 3 part time workers as the referrals keep coming.
My husband is a worker though.. 14 hour days in the blistering heat. He’s a simple Go-with-the-flow kind of guy, daddy’s boy, easy, lives very simply, never asked questions and was fine having his father do the books. When my husband and I married in 2008 we combined finances and I was shocked the first year of our marriage when tax return time came around and we owed. Haha. That was the beginning of me being kept in the dark. So I tried to ignore what my husband’s father was up to with the business and just busted my own tail with my job as a sales person. Life was good financially because I was so busy setting and achieving sales goals for myself and such. Plus I was bringing in just as much money as he was while at my job so we didn’t need to stir the pot in the finances with my father in law yet…

Here we are 5 years later with 3 kid-s one who turns 4 next week- and I’m pregnant with my 4th. I’ve left work after the second and third child were born. Those would be our twins (20 months old). Our pool business income is all we have. It’s successful and we keep getting more and more clients which is great, but my father in law is so hesitant to talk about anything business finances related. Especially when it comes to paying us more. (That topic keeps coming up with new expenses for the kids… Little league, swim lessons, preschool… etc) The business is growing, my husband is working longer and harder because of the demand, yet we are getting paid the same. My father in law has refused to share his bookkeeping with us. He says it’s too complicated. He must be paying himself something that he is unwilling to share with us or something. I’ve come to that conclusion.  He will not provide a basic profit and loss sheet for my husband because he says it’s too much work and he doesn’t have time for that. Besides he says he just does it all at the end of the year before taxes anyway.  He claims since he’s out in the field sometimes helping with repairs and does monthly billing he cannot adhere to me or my husbands basic financial requests of a simple monthly profit and loss sheet. Why can’t we know what the business makes and spends? If he is going to be so possessive over these books he needs to provide that to us? We don’t even know where the heck they could be… I didn’t even know if the business was solely in my husbands name until we refinanced our home this year and they needed the business license certificate. I figured my father in law was part owner or something by the way he made me feel when we would ask about money from it. It’s like we are kids asking our daddy for money to go to the movies…. We feel we have to disclose what we want to spend our money on in order for him to even have a conversation with us about it.

I’m so angry. By Feb 2015 we will have 4 children under the age of 4, we cannot make any new financial plans or decisions based on the fact that asking my father in law to share the company information and see our assets and pay ourselves more is out of the question. My mind is going to crazy places right now thinking of what he could be doing perhaps even illegally for short term gain. He’s been stressed since the housing crisis and owns a couple of homes and one that is upside down.

I asked again for a monthly profit and loss sheet and what the balance looks like in the business account (which he calls business reserve… we are entitled to know that) He yelled at me and told me today for the first time that he feels like I am assuming he’s stealing from the business…. Which is crazy because all I’ve been asking for is a monthly profit and loss sheet for our own peace of mind for my small family’s future. He obviously is hiding something or he’s just the world’s most controlling father to his 36 year old son, and thinks I’m some dumb housewife that doesn’t need to know what’s going on.

My question is, how do I get all of the cards laid out on the table with him? Are there professionals that pretty much show up at his door step and say hey, your son wants to see the true assets of his company and what the company is paying for for yo,u and if the money is just sitting perfectly in a beautiful business account it if it’s been used by you and your upside-down mortgage. And what about his secret books that he won’t share with us? My husband at age 36 is finally ready to learn the business side if things rather than just being a work horse.

The only thing we’ve made headway in is that this Saturday we’ve arranged for him to chat with his dad and show him a few things. By the way this was not easy to arrange. I forced the meeting to happen. I’m very annoyed I can’t be there because this will be all new info to my (god bless him hard working blue collar husband) so I hope my father in law actually divulges info to him. The only reason I’m letting this happen without me there is because I want to give my husband the benefit of the doubt. He loves his father so much.

But I can tell by the reluctance of info that his father is sharing that we will be having this conversation again.

Sincerely

Dear Sheep in Law,

As I’ve noted many times in this column, I receive letters from people I don’t know, and only hear one side of the story. I would be making a big mistake in assuming that anyone feeling disregarded, kept in the dark, and suspecting their father in law could be hiding money from his son and your family is seeing the situation calmly and objectively.

But assuming for a moment that the situation is as you represent it, I cannot imagine a rationalization for your husband being kept out of the financial information loop, or for an owner of a small business to have his salary determined by a non owning bookkeeper, even if it’s his beloved father.

I don’t have a way to know if your understandable anger and frustration has crossed a line, and your father in law feels backed into a corner, but I’d suggest your best defense/offense is to calmly support your husband’s right to have full access to the books, to have an objective explanation of the state of the business, to have your father in law following a job description that outlines the appropriate authority and control for a non owning bookkeeper, and have all your husband’s questions answered to his full satisfaction.

I am not trying to marginalize you or your role as your husband’s supporter, life mate and advocate. I just think you’ll win the battles and the war if you’re clear that your husband is the person who has the authority to see all the information, to control the company, and to determine his father’s role in the company, assuming your husband is truly the sole owner of the company.

Your husband might tactfully, lovingly, respectfully, but firmly tell his father that he wants to hire his own financial analyst to explain to him the state of the business; that he’s starting a new chapter in how the company is managed, with the owner taking more control of the financials, as is the owner’s obvious right.

This person should be an experienced CPA with auditing talents, and skills in simultaneous translation from accounting to English; and a lot of people skills, to boot.

If something is truly haywire in the way your father in law is handling the money, your husband needs to find out. If there is some other explanation for what is going on, you are fully deserving to know what that is. You need to figure out how to change the perception of you from black sheep to loyal and upstanding wife and respectful but respected daugher in law, and help this situation get straighten out without unnecessary grief.

I hope this helps.

Dear Ira,

I am 25 years old, single, and have a job earning 75k a year with an upcoming promotion, but I am not happy with the hours or the type of work.

It is an intense environment in sales/client service for a pharmaceutical research company, which is an industry that I am not passionate about. While I am close to the city, I do not have much free time and I am not very happy.

My father has been discussing with me the option of returning to the growing family business as head of marketing. I am responsible for the initial business idea and started it with my father in 1997 while in college. The company is an Internet/catalog retailing company that I am very passionate about, located in my hometown. He’s offering me a small reduction in salary with a current 11% ownership in the company. Furthermore, I have the potential to eventually receive an equivalent portion of the profit and my father’s 58% portion of ownership as well. In addition, the job would be flexible in hours and allow me to set my own course. The success of the business would be greatly impacted by my performance, while reporting to my father. I would be under a lot of pressure to succeed and at the very least would need to generate the revenue to support my compensation and marketing investments. We have had a serious amount of money invested into the business over the last four years and we are just now reaching profits.

Settling into a focused career that is challenging and rewarding is important to me. With that said, I believe I have two options. Option one, do I continue with my frustrating job and return to school to finish my few needed credits for my degree, and eventually find another more rewarding job? Second option, do I move near home and return to the family business an hour from the city, finish my degree, work hard, and risk the increase of a difficult working relationship with my father as I am often micro-managed? My father and I have had numerous difficulties working together in the past, but we each respect our individual talents.

This is not a simple question, but any sound direction and suggested questions to help me find the answer would be helpful. Any specific research or case studies on young adults as successors to a family business and the associated difficulties would be helpful. Any articles or summaries of family arrangements around legal ownership agreements would provide me insight as well, including all the issues that should be addressed first, prior to any family arrangement.

Thank you very much for your help. I am looking forward to a thoughtful response.

Tempted but Cautious

Dear Tempted,

To quote from my wise father (and my latest play, about working with my wise old father) “The best job stinks, and the best boss stinks; but at least if you’re your own boss, it’s your own stink.”

Of course, in a family business, it’s often the mixed aroma of family members in too close quarters.

I would suggest formalizing some of your thinking into a list of pros and cons, but make a column for weighted scores for each factor, as well as extra spaces for remedies for the cons, giving a mitigating score for the remedies.

The exercise would be to arrive at a score around the question: “Should I leave my current situation to join my father in business?”

Any factor in support of this idea would be a pro, including: flexible hours, ability to grow company and receive return on my effort and risk, someday it will all be mine. Use your best judgment to assign a score for each of these factors, ranging from zero (no real benefit) to 5 (large benefit).

Any factor counter to this idea would go in the con column. For instance, your $75000 salary might be a con of you joining your father, being a pro of your staying put. However, you would add the mitigating factor of increased stock ownership, earning its own score. Ability to finish your degree might end up in both columns, phrased and scored differently in each.

And so on.

The con column might include your father’s micromanaging style. Underneath that you might add the mitigating factor of “could create precise job descriptions that clarify responsibilities, measures for success, rewards for good measures”

This exercise will help you sort out the many issues and possibilities. It will also show you, in the end, that the pros win, or the cons win. If the pros win, meaning join with your father, causing you great distress and nausea, add to the con column “I get nauseous thinking about joining the family business” and give those enough points so that the cons win.

Play with this score sheet for a few days, show it to a few trusted friends, who can help you think of more factors, examine the numbers you have assigned to various factors, etc.

In the end, you can even sit down with your father, asking him if there’s anything you left out to make the case for joining the business more compelling. For instance, if in the con column you list “will my father really give my stock, as he promises?” he might suggest “father will put precise stock transfer plan in legalese, and sign it”

Just a suggestion.

Ira Bryck

Dear Ira,

Here’s a loaded question:  Do I have to have a passion for the product we sell to really be successful?

We own a power equipment dealership.  We sell and service lawnmowers, string trimmers, snow throwers, etc.  If there is anything I don’t have a passion for, it is power equipment.

But before you ask why in the world I would move back here from another state and get involved with a product I don’t have a passion for, here is the answer:

I saw this as an opportunity to help run a business, and I do like business.  I was 30.  My dad was 73 and my mom was 70, so their active years in the business are numbered.  My brother was 47 and he doesn’t have the desire to handle the bookkeeping / marketing / paperwork / sales end of the business.

I figured; here’s an opportunity to move up to the top of the business chain fairly quickly, help out my family, have a fairly secure future, and use my business degree.

Now it’s five  years later and I am very demoralized.  Dad has always run the business by the seat of his pants (and done very well at it) and the idea of formal budgets, projections, and strategic planning are anathema to him.  He seems to think that that stuff is unnecessary if you just do business by common sense.

My brother has a very critical disposition.  I think he has spent most of his adult life trying to get my dad’s approval and never felt he did.  Most of the time he tends to make most of us (one of our other mechanics, his wife, and me) feel that he thinks we are incompetent by second-guessing and talking down to us.  (Although he does have the best interest of the business at heart in his own way, and he can be very thoughtful at times.  He’s not black-hearted,  just annoying).  However, this makes it hard for me, the baby of the family, to feel comfortable bringing up these new ideas of sound business practice and changing things.

Recently I started going to therapy to deal with my lack of assertiveness and that has helped me see that I can bring these issues up and I can champion my ideas for improving the business without feeling guilty or caving in to resistance, but I also realize that I have no passion for power equipment.  (By passion I mean really enjoying the product.  Tending to want to use it yourself, reading about it for enjoyment.) Is having a passion for business enough?  Or is my disinterest in power equipment a major indicator that I am in the wrong vocation.  At this point, I’m 35 and at a crossroads. Do I dive into this business wholeheartedly or do I start to develop an exit strategy with the best interests of everyone involved?

More Power to Me

Dear More Power,

Let me start off by saying: I don’t know.  And neither does anyone else. There is no definite right answer, nobody knows what the future holds, and it’s not over till it’s over.

But aside from all the cliché wisdom, it’s time to take inventory of your situation. On the plus side, you have a liking for what goes into running a business. But your family doesn’t seem to share that passion. You feel a historical lack of assertiveness in forwarding your ideas and opinions, which may be, in part, due to the negativity and disparity coming from your family partners.

I would advise seeing this as an opportunity to learn and improve, personally, and as a member of your family business team. Start by defining, in your own mind, what it means to assert yourself. It doesn’t mean being aggressive. An assertive person can gently stand their ground, not being pushy, but refusing to be pushed; can confidently express themselves, but still recognize the need for compromise; can be tough, yet vulnerable. When your brother is annoyingly condescending, tell him respectfully that he needs to speak to you (and others) with more respect and thoughtfulness. When either your father or brother reject your ideas for structuring the business, gently insist they examine with you the pros and cons of doing it your way vs their way. Get good at making lists of pros and cons: Pros of budgeting: knowing how much money you can spend. Knowing you’ve had a good /bad year. Cons: Running the business incoherently, maybe heading for insolvency without even realizing it.

If you could become more expert – even develop a passion- for strategically persuading your father and brother to see the wisdom of running the business well, it would have more power for you than a warehouse of power equipment.

(I would suggest that you add into the process the granting of the proper responsibility and authority to do a given job, and a way to evaluate if it’s being done right, both to hold people accountable and correct improper procedures and policies.)

I worked for many years in my family’s children’s clothing business, wondering “if not for me, would children run around naked?”  After a while, the question was inconsequential. What I enjoyed about the job was the relationships, the ability to make a living doing some honest work that I felt competent at, that we built an institution with a legacy and a good reputation.

Now I do a job – working with family businesses- that I feel is more stimulating and meaningful. I’m proud to tell people what I do, and the response is often “Wow- you sound like you’re having a lot of fun.” But at the end of the day, my real satisfaction of the job is the relationships, the ability to make a living doing some honest work that I felt competent at, that I’ve built an institution with a legacy and a good reputation.

This is not to tell you that you should be satisfied selling power equipment, and you are sentenced to work in an unsatisfying situation.  There’s a lot of careers out there, and every possibility that you’ll do at least as well not working for your family business. The satisfaction you get from turning around your present situation may or may not be any more rewarding or important than using your skills for something that really does excite you. Loving what you do for most of your waking hours is a pretty good motivator to get out of bed in the morning.

Ira Bryck

Dear Ira

Treat your business like business and your family like family. That hasn’t happened. My dad and 3 partners incorporated and operated a paint store. There was no particular place for me or my husband in the business. Dad had a good bookkeeper, couldn’t fathom having a woman on the sales floor and the business partners would have had a cow if the son-in-law was brought into the business. His bookkeeper moved, left town and he asked me to come back to work. At the time I had 2 small children, but I said OK. Between working at the store, taking care of my family and helping my elderly parents I’ve been worked to death for the last 20 years. Although Dad is 10 to 20 years older than his partners, he outlasted them. One by one, they have retired and cashed in their stock. Dad is now 88 years old and I am 48. About 3 years ago he started giving me a little of his stock and he says that he wants me to run the store. He continues to micro manage everything I do. He butts-in to all of my decisions, reminds me when statement day is coming-up (like I don’t know) and reminds me to fill the postage meter…He doesn’t like what I do with advertising, but refuses to take care of it himself. When he was out of the store for 3 years taking care of Mom and then having some healthcare problems of his own, I took care of the store. While he was out, I computerized the sales floor and inventory. He has come to accept the computers as necessary in today’s world, but he continues to nit-pick my work. I think that I’ve been used as a cheap bookkeeper and secretary for the past 20 years. My opinions were never valued, I wasn’t allowed to buy company stock, and I had an enormously high responsibility level. When the delivery man says he needs to take tomorrow off, it’s “OK”. When I need time off, it’s “Who’s going to take care of your work?…have you done this?, what about that?” Many years I’ve only taken 1 week of vacation. My salary has only been half of Dad’s partners’ salaries. (What does a secretary do? Everything that the boss don’t wanna do.) It’s not easy being the “boss’s daughter”. If I leave early, an employee might say, ” Must be nice being the boss’s daughter and getting to leave early.” Nobody notices that I ate lunch at my desk and didn’t get a lunch hour. There is resentment from the employees because they perceive that I get extra advantages. I think that the employees are treated like human beings while I’m treated like the farmer’s plow horse. The partners treated me with disdain because they couldn’t treat me like other employees; couldn’t fire me, couldn’t chew me out. And the partners wondered if they we just being strung along, that Daddy was saving the store for me. Because of the way I’ve been treated all these years, I never envisioned myself running the paint store. I thought that the partners would eventually take over and replace me. Then with the partners out of the picture, I thought Dad would sell his business. My Dad is 88 and a widower. He loves to garden, but he’s too old and weak to push a garden tiller, etc. He can still drive his car, so he comes-up to the paint store and stays all day. We eat lunch together, go to the doctor, grocery store, pharmacy. The paint store has become a senior care retreat for my Dad. Since Mom died, I’ve become his primary companion. My children are in college now at a local university. I’m very pissed that I’ve spent all their growing years working at the paint store and now they are almost all grown up and gone. I can’t get those years back and I’ve been poorly compensated for that loss. Dad thinks that I just won’t have the children as a distraction anymore and I can concentrate on him and the store. Do I have siblings? You bet. A brother (64) that left town after high school and lives 500 miles away. 2 sisters (59 & 55) that got their college degrees and teach school and they moved away too. They all think that it’s great that Dad has something to do with his time and they think that the paint store is nice. I am the youngest, a “bonus” baby, that came along after they got rid of all of the baby stuff and the youngest had started school. I had built-in babysitters and was treated well by my siblings. I wasn’t as smart as my siblings; I didn’t leave town. Inheritance? You bet. When Mom died, her money went into a trust to avoid taxes. Dad has a house, 99% of the company stock, owns the company real estate outright, no debts, and liquid investments. He apparently is sitting on every dime. I’m fed-up with the whole situation. My husband makes good money, I didn’t need the job. I used to love my Daddy dearly. There was a time when I would do anything for him, and I did. I put him and his paint store before my family and husband. Now how can I extricate myself from this? He’s old, maybe he won’t live much longer? Have I told him that I don’t want the store? I’ve told him, his friend-accountant, my siblings, my kids, my husband. My kids and husband thinks that’s fine. My siblings think I’m mean, selfish and stupid. The employees don’t want to see the store close, but why should I continue to do something that makes me unhappy just so they can keep their jobs? Dad just pretends that I’m blowing-off steam and that I don’t really mean it, or he’s just trying to ignore what is unpleasant to him. And yet, there is an elephant in the room that nobody wants to talk about: Dad is Old. When he dies, somebody will have to clean-up the mess–Me. I think that some old people reach the point where they cannot make up their mind, they just do what they’ve always done and hope for the best. Dad is on auto pilot.

Painted in a Corner

Dear Painted,

As they used to say on TV, there are a million stories in the Naked City. What’s so fascinating about a good family business drama is that if there are 7 people involved, there are 8 versions of reality. One can imagine, just as you describe in your letter, that each member of your family sees the situation completely differently. Who are the heroes? Who are the villains? Hard to say- did anyone force you to work for peanuts all those years, regretfully missing out on the joys of more devoted parenting? Down the block from you is a woman who was never allowed to join her family’s furniture business- she regrets being a full time mother. Next door to her is a man who can’t understand why his daughter doesn’t express more of an interest in signing over her house to take over the family’s restaurant. Fact is, we’re all somewhat on “auto-pilot” and wondering how other people get all the breaks. All our lives are full of opportunities and threats, and we need to be alert to take advantage and avoid, respectively. Sure, it would have been great if your father was more appreciative, his partners less threatened, the employees less resentful, your siblings more proactively fair-minded. It would have made this story more storybook. But the story’s not over. It’s not too late for you to figure out what you want to say and do, and act on it. You might start by figuring out exactly how you feel about everyone you mention in this letter. Assume for a moment that none of them are actively trying to rip you off- maybe they’re all just on auto-pilot, doing the best they can with what they’ve got. Try to see each of their points of view. It’s possible your father knew he was getting your best efforts for less than he would have paid an outside bookkeeper, but couldn’t see clearly that his attitudes about women, daughters, his “baby” kept your check too small. He may not have realized that he was aging, and one day would wake up 88 years old. Your siblings may not have thought enough about how your years of sacrifice, devoted service, and missing out on mothering entitled you to more and faster gifting of company stock. They may not even realize that you were underpaid, overworked, resentful, etc. They may not realize their 48 year old sister didn’t enjoy the last 20 years in the business. And so on. And if you can get past your anger at everyone, it may be time to speak with them about what you want: what you think you deserve, what you want to do with the next chapter in your life. There are many choices, including: buying the business at an appropriately friendly price, selling the business, and dividing the assets in a way that compensates you for your years of hard labor, closing the business, and doing what you want to do with the next 48 years of your life. The list goes o, and each choice should be judged as more or less viable in its fairness, appreciation, good business sense, and how it serves your goals, going forward. To be sure, there are things you’d like to say to an elderly father you felt held you down, and to other members of your life. But just as important are the things you say to yourself, and hope that you are listening. I’d close with “living well is the best revenge,” but hope you see revenge is not what is called for.

Good luck.
Ira Bryck

Dear Ira,

I really enjoy running my family business with my eldest sibling – my sister, but I do not get along with my older brother, who is the middle child. I am the youngest of three kids. My main problem is with his violent temper. There are always recurring scenes of violent exchanges of word between me and my brother. Usually, I would order him to do something and he would be resentful and react with a violent outburst of foul language directed at me. He would usually say things like– Shut the “f” up you “f”ing “b” or I will kill you. Today, for example, I finished packing merchandise for a customer, the box was heavy so I “told” him to move the box over there. I recognize that I always have a bit of contempt in my voice when I speak to him and that just sets him off. He resents taking orders from me since I am younger. My sister always has to come between and stop things from getting out of hand. He never hits me, I think partly because he is still afraid of my father, and also because I always never back down from a confrontation. I am not stupid, I would not dare him to hit me or anything, but I do take the verbal abuse. He often ends up punching the wall and one time put a hole into it and likes to punch boxes. He is over 37, have been trying to graduate from junior college for well over 10 years now, is obsessed with sports, sleeps, eats, talks only sports, and probably has an IQ of a child. He wakes up late, drives a junky, dirty, car to the store late, leaves early, and really resents helping out with the family business. His main duty is to carry heavy boxes into the store. About ten years ago, he thought we were holding him back from his dream of becoming a professional baseball player. Back then,he would often become verbally abusive to his older sister and often times scream at her. I was at school most of the time and did not help at the store much and avoided him. One time, the manager at Dodger Stadium threatened to have the police arrest him if he didn’t stop calling them. Now, his new obsession is to become a professional runner. He told my brother in law that he wants to just be a pro-runner and not have to do anything else in life. Again, he is discovering that he is not good atthis sport either. And I believe he is frustrated as well as with school. You see Ira, this is no ordinary problem I have, I was molested by my brother as a child, so there is a lot of animosity towards him and it is still very much alive. I had sought psychological counseling while in college but could not find peace of mind. I finally found relief from this burning hatred of him when I prayed to God and told him that I forgave my brother. Only in recent years did I begin to understand that he has a mind of a little boy. I always must be half awake when I take my 30 minute nap at 3pm since he still will try things to this very day. I am 35 years old, still single, have yet to find a man I can tolerate. I do not sleep well and must always have a dead bolt installed on my bedroom door to feel safe and will wake up fully at the slightest of noise in the night. I become uncomfortable whenever my brother comes into the room and get really paranoid when he stands behind me. When I first graduated from the university, I told my mother that I do not believe I can work with my brother but she asked me to try. The business is very important to my parents, it is profitable and successful, and we all have put our sweat and tears and gut and everything into building it for well over 15 years now. Ever since high school, my dream has and still is to be in the stock market and to own my own business, maybe a nice franchise. My parents recognize that their son is not normal but they feel like his place is with us and that if he were to go out into the real world, he would get taken advantage of. I talked to them about this problem over lunch at a restaurant out of earshot. My father just says the usual, “What can I do, I can’t tell him what to do either, he doesn’t listen to me either. If you are smart, you will leave him alone, not boss him around, because one day, when I am no longer around, he WILL KILL you. My mother just says that the older the kids get the more problems. I told them I do not think I can work with him anymore. That my sister will just have to work a little harder and take over my responsibility. She does sales, I do sales and in the past 3 years the buying also. My parents are semi-retired now; they have pretty much relinquished the control but still control the kids. My father does not want to hire any extra help. For this, I got a hernia from lifting some very heavy boxes up and down the stairs. My sister has problems too. I want to leave the company, but at 35 and no work record, who would hire me. I really like dealing with my suppliers; we have a good solid credit history and reputation with them. I like many of my customers and have always felt a great sense of gratitude and appreciation for their business. What is my outlook, especially with the recession? What do I do? Should I stay or leave? I do realize now that my brother is a good kid but that the family has problems and issues that are never and probably will never be resolved. Mixed in with the sibling rivalry, greed, economic dependency, jealousy of who is the favorite, and other major flaws is my deep dislike of him and likewise for him of me. It took my family and I 25 years of struggle to get to where we are and I really am crying when I look at what I have to leave. When we first came here to the United States of America from SE Asia, we did not have a home and just lost our country to the communist, and the only thing we possessed was the clothing on our back and what the U.S. military gave us. I can still remember what those items are to this day. It was a gray wool blanket, a tube of toothpaste- we still use Crest today, a toothbrush, and a Milky Way bar. My parents worked more than one job to feed the kids. Today, we have a nice home but it is very heavily dependent on all our combined earnings. I wonder what price I must pay in the future to keep what we have. Please, any advice will be much appreciated. And please do not think to tell the authority about my brother, for I will never turn him in. In an Asian family, shame is worse then death.

Sincerely,
Yellow Carnations

Dear Yellow Carnations,

Your situation is very tense, and I can see you have thought through several possible responses, none of which seem realistic for you. That doesn’t mean that one of them isn’t the best alternative to doing nothing. You feel that between loyalty to your parents, the shame of exposing your family’s problems, financial necessity, and the fact that the business is the fruit of years of labor after leaving your country of origin, you are trapped into accepting your explosive and possibly dangerous relationship with your brother. I suggest to you that the effort you need to make to stay where you are is not less than what is needed to start something new, move somewhere else, or, at least, confront the situation with the help of some trusted friends or relatives in your community. The shame that you feel your culture imposes on exposing your brother’s temper, abuse, and violence fades in comparison with the threat to you everyday, and the pain which has already been inflicted. There is a difference between having the situation on the front page of the newspaper, and confronting your family with the ultimatum that certain people need to commit to better behaviors or you be forced to leave the business, and expect that part of what you helped to build will be yours to take, to start something new. At the very least, your family needs a strongly worded Code of Conduct, with consequences for your brother, and others. It seems to me there is a need for you to regulate your own communications, as well; as you say you often speak to him unprofessionally, with an understandably angry tone, but one that aggravates him, doing you no good. Though you say you’ve been through therapy and that it hasn’t helped, I would urge you to do more work with skilled professionals, at least to resolve and heal your personal pain. It may also be helpful for you to realize that you are more capable to start something new, different, and far enough away from the threat of violence and abuse; and that you have more chance of gainful employment that you may realize. A therapist good at discussing practical options, along with dealing with your mental and emotional distress would be very helpful. If you feel trapped, it’s very unlikely you’ll be able to come up with good alternatives without some great help. It seems to me that the history you have with your brother makes it unlikely that you can achieve a healthy working relationship, but that doesn’t mean you should be the one to leave the company. I think you should also insist your family consider finding another situation for him. If his job is really limited to lifting heavy boxes, he certainly is underutilized, and easily replaced. He may find more satisfaction working for a friend’s business, or finding other work. In the end, more meaningful and satisfying work will help your brother achieve some self-esteem and emotional balance. Your parents help support him, if this is truly necessary and they are able, with a gift of love, rather than a salary. There are ways to fix family problems that are not shameful. A family business only works when the family relationships add to the value of the business, not when a poorly functioning family is serving a life sentence. I cannot imagine how your family is creating something that is more than the sum of its parts. I would urge you to gather up your courage and creativity, and consider how you can’t save others if you don’t save yourself.

Ira Bryck

Dear Ira,

Thank you for your advice. And for this timely response. I have already talked to my mother about these two things you suggested. Whether I should leave and find a new working environment or whether my brother should leave. Her suggestion is old fashioned. She wants me to find a man, get married, and she believes that will solve everything. My father, meanwhile, locks himself in the bedroom and threatened my mother with divorce if she doesn’t control her son. Father has never really enjoyed being around his son and actually resents him a great deal, even as an infant. My mother states that it is out of the question that her son leave for other employment. Her first priority has, is, will always be to keep the family “together” at any cost. I have been seeking a job online but without any success. It is only a matter of time. I really am seeking a job where I can learn new management skill and expand my expertise in my product line and my industry. I am in the import and wholesale business. Can you give me some suggestion about where or how to look? Thanks

Sincerely,
Yellow Carnations
(BTW, yellow is for friendship, and flowers are pure)

PS To give you a better picture of him here are some of his usual past activities. He has gotten into trouble many times when left alone for too long. Here is a short summary of some things he has done: • Set a trash can on fire, set a commercial building on fire • Threw a cat into the water • Heated up a salad bowl on the stove top and thus giving me a burn. Kind of a sick sense of humor • Used to take cute, little grade school girls to school until some elders in the neighborhood notified my family that he is not supposed to do that • only plays with kids, even now • often when interacting with other male adults, they end up trying to cheat him, make fun of him, or just ignoring him.

Dear Yellow Carnations,

While I can understand your mother’s good intentions, I quote humorist Al Franken, when he asks: “you stay together for the children, but will they stay “together” for you?” Does she not have a greater obligation to make sure your brother is getting the help he needs, then just keeping him close? And while the squeaky wheel gets the grease, why punish the wheels that are not making as much noise? As for you, you may be open to a wider type of search. I can heartily recommend taking a very simple assessment included in a great book, “Now Discover Your Strengths.” The book comes with a code that you enter into a website designed by Gallup Organization, and the results explain your most dominant strengths, that can help you expand your thinking on what type of work you may find exciting, energizing, fit your talents, and so on. Obviously, you may also need to expand your geographic borders to find more potential employers; or maybe consider beginning some sort of business or consulting yourself. While I certainly have nothing against getting married, I can’t see how that’s the either/or you must face at this time. Balance is very important, and your mother may not be realizing all that it may take for her daughter to lead a fulfilling life. If you want to let me know the general vicinity you live in, I may be able to steer you to a good counselor to help sort some of these issues out.

Good luck.
Ira

Dear Ira,

Your advice is very good. I had given some thought to opening a business of my own. I am competent and capable and really do enjoy my work. But, I also realize that this is a recession we are in. My industry is in an upheaval with this awful recession as I am sure many industries are being tested now. Only the strong survive, and I know this to be so true. Fortunately for us, we are not suffering too much since we run the business very lean. No extra help, minimal expenses, most of us live very frugally, and it is nice to know that not having a social life really does help save money. So, this leaves me with getting a job or better yet as you have suggested becoming a consultant. I do not know where my search will lead me but I do know that I have a very strong faith in God and I do not believe I will turn bad, as my parents fear. They believe that interacting with an open circle of people is not good for a person. As for psychological counseling, I tried that once and did not like it at all. I just cried to the counselor most of the sessions. After about two weeks of “therapy”, I decided that I do not like myself very much when I am weak. I resented my therapist for knowing my secret and I always sensed that she dreaded my telling her my problems. In addition, it was really tough going to therapy then to class directly then to work. Very difficult and awkward to hide something so private. So, I never went back. Besides, crying never does any good, for anyone. And, honestly I have forgiven my brother, I just can’t trust him nor stand the sight of him, that is all. And lastly, I would like to give you an insight into why Asians have kids. So that someone will take care of them when they grow old. It is a very bitter truth and one I do not wish to perpetuate. Thank you for all your advice and God Bless you for being there for people like me.

Sincerely,
Yellow Carnations

Dear Yellow Carnations,

In the end, the decision to change, either personally or your situation, is yours alone. But if you stay in your current situation, you need to figure out how to make things tolerable, even enjoyable. Despite the dictates of your culture, you have every right to insist that people treat you fairly and respectfully. Cultures change slowly, but often due to individuals sticking up for themselves. Your best bargaining chip might be the truth. “I have been treated badly, and despite the risk to me, I have no choice but to leave if things don’t change.” What has worked for people includes creating a code of conduct, assembled with or without help from a facilitator (help is better, though that involves telling outsiders what is happening). One way to enforce the code of conduct is that your brother agrees to pay you a painful amount of money every time he curses at you; an excruciating amount of money if he threatens you; and is fired from the business, and agrees to enter serious therapy, the very next time he touches you. If he does not agree to conditions such as these, and if your family members think they are pointless, that may be interesting information for you, in deciding whether your family is worth investing your time and energy in. Life is short, but might seem interminably long, if you live according to rules that never let you win. I would urge you to question your assumptions, assess if the greater risk is to jump ship or stay put, and realize you have much to give, and much to get. I wish you good fortune, and am thinking of you.

Ira Bryck

Dear Ira,

Thanks again for your thoughtful insight. From your advice I have just come to realize a few very important things that I never thought about before. Please do not take this the wrong way, but while your suggestions are good ones for an American family they are really irrelevant for Old World Asian culture. I would be ridiculed by my parents- I know it even before trying. Why? Because they think the problem is in the past, and when ever I so much as broach the subject, they cut me off and tell me that I am trying to make my brother “lose face”. My mother would say “it is in the past” and my father would say, ” you are trying to peel the skin on his face off”, in other words I am trying to make him “lose face”. They will insist it is irrelevant to the current situation. Only in America is a women equal to a man…and then again maybe not. I do care about the well being of my family and hope that my decision will not impact them negatively. As I have stated in my original letter, I hope my leaving will not be the end of the business. But, somehow, I feel like I am taking away one of the crucial wheels of the engine. But, then again it is a five wheel car (business), and perhaps I am the fifth wheel after all. Like a troublemaker, doing more harm then good. Let’s just hope so. I will not take up your time anymore as I am sure there are some really valid family business problems out there that need your attention. Here is a parting thought; I am stronger because of my pain. And I have more character and a stronger faith in God then ever. Without this problem, I might not have really, really found the Lord.

Sincerely,
Yellow Carnations

Dear Yellow Carnations,

I think you have the guts, the soul and the brains to succeed; whether to survive and improve your family business dilemma, or venture out to greener pastures. I’m sure that even within the constraints and values of Asian culture, there are avenues to greater safety and fairness. You have emerged from an intolerable situation already; you can do it again. Becoming the most fulfilled you can possibly be is an honorable gift to your family.

Ira Bryck

Dear Ira,

My father has built up his business over the past 25 years from a $12,000 investment with $100,000 worth of sales to $1,700,000. He wants to retire in the worst way. The problem is the following. His accountant says the business is worth $450,000. My Father wants to sell it to my brother and me for $250,000. His accountant says the Canadian government will not allow this to happen. They will tax it higher. The business has made money for 25 years (not much- $10,000 to $40,000 after expenses, typically). However, due to a loss of demand for one of his four main retail areas, he has lost $30,000 each of the last two years. My brother has just started out in life new wife, new child, new house; so has little or no net worth. I have approximately $325,000 in net worth, however $180,000 in rrsp’s, and $80,000 in real-estate (our house), that balance is in vehicles and some cash ( $10,000). How can we make this happen before his health gets worse????

Timing of the Essence

Dear Timing,

I plead ignorance to the particulars of Canadian business appraisals and tax laws, and even in the U.S., would refer you to a good accountant and business appraiser for their piece of the puzzle. But a good start would be to sit together with your father (and mother, if she is alive and involved in his finances and life decisions), and you and your brother, to determine: 1) A theory of how the transition of ownership and management should be structured. Will you and your brother be equal owners? What will each of your positions be in the company? Are additional investors needed and/or practical? Are their sources for lending that would even out you and your brother’s investment? Are there gifting strategies that make sense for your father’s estate planning, and his income needs in the years ahead? 2) What are the prospects for the future success of the business? Is it a good investment for the next generation? What return on investment can you expect? Are you and your brother uniquely talented to deal with the struggles ahead? Do you get along well enough, and make decisions rationally? Are you open to outside, objective advice to guide the company through rough waters, and take advantage of opportunities? 3) Put your expert advisors to work for you. Begin a discussion of the guiding principles that will determine the best way to achieve your goals. Brainstorm on the most creative ways to achieve them, to the benefit of all involved. Let your strategic goals drive the discussion, then figure out the best course from a legal, accounting, banking point of view; rather than have boilerplate solutions drive the plan. Many families have major misconceptions about what is possible, and getting several expert advisors together can make many obstacles magically manageable.

Ira Bryck

Dear Ira,

I work for a family business (I am a non-family member) that is in a difficult growth period. I am currently in the situation of trying to help the managing family member grow and strengthen the business while also dealing with the family’s complex dynamics. I am in the unique position of understanding and working well with both family members and employees and being able to act a bridge between the two when necessary. My problem is, is that I need to learn more about how to fix the problems that exist and find information that will help me better understand what needs to be done to help the business achieve better structure so it can grow. If you have any advice I would very much appreciate it.

Both Sides Now

Dear Sides,

You are in an enviable but difficult position: fortunate, because you can be an important catalyst for growth and change; unfortunate because so much may rest on your ability to mediate between family members and non, between ticklish relationship challenges and fleeting business goals. And this in addition to doing your job! Change in a business is often possible through the efforts and talents of people who neither own nor preside over the company. You describe your ability to relate well to both employees and owners, and the odds are good that comes from the trust they have in your ethics, perspective, and competence. These qualities are important capital for you to use in taking the lead in discussions about growing the company. You may consider leveraging these strengths, convincing the owners that you are the proper person to lead a discussion on the company’s goals and criteria for success. This can’t occur without the change to a more professional structure, and an understanding among family members (whether managers or owners) that a business can only flourish where they know the difference between a conference table and a kitchen table. You don’t mention what level of management you are in, but you can be effective, no matter what. If you were, for example, non-family president (or general manager), you might communicate that even though you are accountable to the family members in their role as owners, they are accountable to you in your role as company leader. If you have a more middle management position, you can still lead the family and employees in a discussion of how fruitful the company will be if all can buy into a corporate culture of strategic planning and professionalism. In this brave new world, all members, family or not, would know how they can participate in the company’s achievement of strategic goals. Once an organization starts down this road, it is hard to stop redesigning every aspect of the operation. A strategic plan must talk about budgets; budgets must talk about projections and earnings, which must talk about return on investment, which must talk about the ownership feeling of even non-owning employees, which must talk about compensation, which must talk about job descriptions, performance, attracting and retaining the best available talent, creating a great workplace,and so on. As far as outside resources, I would consider beginning some serious reading and discussion with a small circle of owners and employees with leadership potential. Contemplation of the ideas expressed in such books as “Good to Great” (Jim Collins), “First Break All the Rules” (Marcus Buckingham of Gallup), and “A Stake in the Outcome” by Jack Stack will give you all much to mull over. Become a Learning Organization, in the spirit of Peter Senge (“Fifth Discipline”), and you will be too busy managing profound growth and enthusiastic workers to get stuck in the usual mess of family problems dragged into the workplace. There are many excellent consultants and advisors to assist along the way, and a talented company of learners will be able to utilize them to best advantage.

Ira Bryck

Dear Ira,

Thanks in advance for any help you’re able to provide. Here is my situation. About 7 years ago, my brother opened a restaurant. My father, brother and myself each put up 1/3 of the money and organized a corporation, each of us owning 1/3 of the stock. My brother ran the restaurant. We held annual meetings where we were updated. My father and I would sometimes offer ideas (none of which were taken), and we were generally dismissed as “not knowing the restaurant biz” and that we were “silent partners.” It was not an ideal situation but the restaurant was making money, which we were banking. A few years ago, we sold 10% of the biz to Bill, a guy who had been with us from the start, co-running the restaurant. He bought 3 1/3% from each of us. Last year, we took the money we had saved and opened a second restaurant, about 15 miles from the first. My brother had been in charge of this, and Bill in charge of the first. The second restaurant is it’s own corporation, with the same 30/30/30/10 ownership. The situation with my brother has deteriorated. He has financial control of both restaurants; and virtually refuses to disclose any information. He has to at year’s end for our taxes, but basically not otherwise. And he still refuses to listen to any suggestions from any of us- even screaming at my mother for suggesting that a dried out plant might need watering. (none of these suggestions are particularly material to the running of the restaurant, maybe something like, “why don’t you take an ad out in a particular paper at a cost of $300?”) Basically he says, “it’s my business, my baby. I built it from the ground up, so leave me alone.” Bill, my father and I want to build the business. Since my brother left the first place, Bill has added a full liquor license (we only had beer and wine previously), and happy hour specials. Sean says the business is good enough and wants to be left alone. Also, my brother and Bill earn nice salaries from the restaurant. My dad and I do not. We would like to start receiving dividends, but my brother says there’s never any money to pay out, and says we are not entitled to anything. Our latest issue involves the bookkeeping. Restaurant #1 has made about $50m/ year for the last few years. Sean has not told us how Restaurant #2 is doing, but we all think it is losing money. The accountant just told us that for 2001, #1 made $5m and #2 made $5m. Bill knows that’s not accurate and we now have no idea how either place is doing. The situation is rapidly deteriorating on a personal level. My brother spends most of his time trashing Bill, who it seems he’s threatened by. He’s barely speaking to me or my parents, and wants us to “stop interfering, and butt out of his business.” It is taking a huge emotional toll on Bill, my parents, my brother, and me. I have proposed that Sean buy us out of one place, and we buy him out of the other. My father is somewhat interested to be in business with Bill, without my brother’s involvement. I am in the Northeast, and the restaurants and my parents are in the South. I am reaching a stage in life where I would soon like to be spending more time there. Frankly, I could easily envision working with Bill…certainly not with my brother. Thanks again for any advice. Looking forward to hearing back from you.

Sincerely,
Emotionally Invested

PS Today, my brother’s wife, a new mother, called my mom and said that she would be leaving him, because he is so stressed over his father’s and my involvement in “his business” and is causing an unhappy home life for him. The message was, get them off his back or I’m out of here. Obviously, his wife has only been hearing his version of events. I do not know if she is aware that Sean owns 30% and the rest of us own 70%. This obviously creates even more family pressure.

Dear Invested,

If you read the other questions and answers on this advice site, you will notice some commonality in the problems faced by family members in business. Your family’s disputes, concerning the rights of owners versus managers, whether family or not, are sticking points for many, due to the difficulty in seeing others’ points of view. As a consultant to family businesses, it is impressive how one “situation” can have multiple interpretations. It makes me hesitant to draw any conclusions, at least until I’ve heard from all the parties, something an advice column doesn’t afford me. From your perspective, your brother is unappreciative of the investment his partners have made, which has enabled him to own a business. Assuming this is not something he could do without your involvement, he is, at the very least, acting un-strategically in alienating you. While it isn’t clear from your letter if there was any agreement on return on investment, your right to sell your share of the business, your right to fire the management (the same person as one of the owners, but 2 distinct roles), your right to see financial information and have it studied by your own advisors, it should be obvious that you didn’t contract for your current relationship, which is threatening your sibling and parental relationships, your brother’s marriage, quite possibly the operation of the restaurants. There is some evidence from your telling of the story (again, only one perspective) that your brother tends towards manipulative behavior: ranging from screaming, to non-reporting, to instigating his wife to the point that the marriage is over if she can’t make you go away. Though I’d like to recommend a pleasant sit down meeting where everyone could state their goals and visions, it sounds like too little, too late; and not something that your brother would ever cooperate with. I would do some research into your legal and viable options, and present them in a carefully worded letter. If I was you, I’d state regret that the relationships have deteriorated this much; that you are disappointed in the disrespect he shows to partners and family members; how he has acted badly in his non-communication with majority partners. State unequivocally that the status quo is unacceptable, and for financial and family reasons, major changes are inevitable. Examine what you are willing to do, and to what end. If you offered him realistic and fair terms to purchase your stock, and he doesn’t accept it, would you be willing to sell to an outsider who would force his hand more than you? Would you consider buying his 30% and then selling the whole thing?; and with your brother cashed out, he could search for partners who will accept him as he is. You might also consider getting both restaurants appraised by an arm’s length expert, and work some sort of swap so that he becomes sole owner of #1 and you, Bill, and your father are free to enjoy and prosper in #2. If you cashed him out of his share of #2, he would have some money to get you out of #1, owe you the difference, and so on. But some healing of the family is also in order. You don’t say if you all have children, but if this is the case, how many cousins suffer at the hands of the disputes of their parents? Even if you manage to get a business divorce, it would still be healthy to gather family members in a mediation/ counseling session, for some good old fashioned acceptance of a fair share of blame, apologizing and forgiving, stating some goals for the future of the family (and maybe a code of conduct). It would help your larger family to state plainly that adults sometimes act childishly, and that it shouldn’t hinder the relationships of children;. There are people who specialize in this sort of family business counseling, and I’d be open to discussing how to find them in your area. I wish you luck and persistence in a hard job ahead.

Ira Bryck

Dear Ira,

I am the operations manager for, and son of, an entrepreneur. I have a brother and a sister, neither of whom are involved in the business. The business has grown significantly since I joined my father 6 years ago. My father has taken the following steps to keep the business healthy after his passing: I will get 40% of the ownership stock, with my brother and sister splitting 60% I will get 51% of the voting stock, and my father clearly stated in legal and informal documents (letters etc.) that I will make all management decisions. Finally, my compensation, for as long as I am with the company, will be tied to a published governmental salary such as a GS-15, Step 10. My father thinks he has covered any source of potential friction, and obviously any system depends on the good-will of the participants. But, do you see any looming crisis if this system is adopted?

Bases Covered?

Dear Bases,

I applaud the preemptive thinking your father has undertaken, hoping to institute a structure that is clear cut and fair. As you state, good will is the wild card that can make this arrangement fantastically smooth or horribly explosive. And good will is not evenly distributed through the population. If your family is lucky enough to have a high degree of good will (and trust and generosity), your arrangement may be good enough. But as an added measure of security, some additional formality may increase the chances for success. I would suggest that you not wait till your father’s passing to enact several governance and communication strategies among the siblings / future owners. It will not only be gratifying for your father to see, but build momentum that may not be possible to build later, when you all may be grieving, or less connected as adult children. Though you’ll have 51% of the vote in managing the company (which is too often seen as 100%, though a president elected by 51% is often thought to have “no mandate”), your siblings together will own the majority of the stock. That’s a delicate balance, fraught with all sorts of unfortunate possibilities. I would suggest you build a peaceful and creative mechanism for reaching consensus and dealing with differences of opinion when discussing growth, change and risk. At the minimum, a “family council” that has ownership discussions about goals of the business, shared visions of future direction, return on investment, and so on. Better yet, or in addition, consider creating an outside board of directors, with family representation, but not family majority, that would enable an expert and informed examination of the many issues facing the company. As far as your compensation being tied to salary surveys, I would add a level of merit pay, not only for you, but for all employees and managers who succeed in achieving the company’s financial goals. I would recommend you and you siblings (and father or parents) participate in some learning about how these systems work; for instance, The Great Game of Business is one good model to create a team of people thinking like owners. The ongoing discussion between you and your siblings needs to be both practical and theoretical, to discuss the many “what ifs”; for instance: “What if the company grows wildly under your charge?” If you decide ahead of time what reward there is for the chief officer, versus the owners, there won’t be resentment about the subjective, seat-of-the-pants decisions you may make when there’s a mountain of cash to be divided. Or “What if we are approached by a very enthused and wealthy buyer?” Again, helpful to have worked out all these scenarios, so you can all think with cool heads in the heat of the moment. An openminded discussion that creates an insurance funded buy sell agreement would certainly be in order. Owners should also understand that the company cannot grow without reinvestment, and there is a responsibility of owners to see themselves as stewards, not simply investors. As an owner and manager, you will have to be particularly good at seeing things from various points of view.

Good luck,
Ira Bryck

Dear Ira,

I’ve been in business for 29 years. I am 67 years old. I have a daughter and son in law that work full time with an admitted non-ability to run our business, as well as a daughter that works 2 days a week. They have all been with us for 20+ years. My youngest family member, a son, joined the business 3 years ago with a degree in computer systems and no management background. At first he was welcomed with open arms by all, and it was thought he’d eventually run the business. But since he’s been under fire from my other children, causing me great heartache and frustration. I still think he’s our only family member with any chance of succeeding me. What to do?

Concerned Father and Boss

Dear Concerned,

A family business frequently attracts several relatives who find many benefits there, including that they are hired without many of the real world successes, business degrees and experiences that satisfy the needs of the company. Your children and son in law, admitting that they don’t have what it takes to run the business (in whatever form this admission actually was communicated) should have no expectation of executive rank, authority, or compensation. A job in a family business, like any job, should promise nothing more than a competitive salary and healthy working conditions for a job well done; too often the promise is unkept on both sides of the table. If you’ve not yet told your family that you are on the lookout for a competent successor, it’s time for a serious discussion. It is necessary to take inventory of what talents and skills are needed to run the company, and to separate those from what personal qualifications your family members may have that have earned your love and respect, not to mention the unconditional love that families are known to provide. Lead your family in an analysis of the pros and cons of competent family management, versus unqualified leadership, versus selling the company, versus bringing in outside managers (for the long run or during a mentoring period). Explore the faulty notions of a leader being chosen based on age, longevity in the company, popularity, etc. Describe your discomfort in acknowledging that you must, for the good of the company, decide who is the most competent to lead; and your hope that this decision can be made without taking a large toll on the family relationships. Ask them whether they can buy in to a process where an outside management consultant helps determine if there is, in fact, a competent successor in the family ranks. Family members must accept that if they cannot support and cooperate with leadership by most competent heir (meaning it will be disruptive and ineffective) they should discontinue their work within the company. In the rare case where shared leadership may be an option (i.e. “Office of the President”) it is also essential that there are no saboteurs in the coalition, or bomb throwers on the outskirts. You don’t explain why the initial support for your youngest son turned sour. Possibilities that come to mind are jealousy, lack of confidence in his ability, or conflicts- whether current and relevant, or historic childhood squabbles- that you are not privy to. Sibling relationships have a life of their own; from their point of view there may be perfectly valid reasons why they could not work under their brother, your son. One more reason why an outside expert may be clearer and more effective in judging presidential potential. The extent to which you can set goals and principles to guide you in this tricky process may determine your family’s success. You’ll be doing them no long-term favors by making an arbitrary decision. Even if they don’t remain together in the family business, they will still have to live with the repercussions of how this was handled.

Good luck.
Ira Bryck

Dear Ira,

Please help me think through a situation I’m facing with my business and family. I began in ’93, after West Point and some years in the Army; starting in Engineering, Project Mgmt, and progressed through the company. In ’94 and ’95 the business lost $600K each year and was on the brink of bankruptcy. I took over the operations in late ’95. From ’96 on the business has done much better. We have reduced debt from $1.2M to $500K, and have had consistent earnings of ~ $200K – $300K per year on ~ $6M in sales. My Dad passed away in June ’98, but was not really involved in the operations since ’97. I am now nearly complete on my purchase of the company from the estate, paying $600K with a purchase money note. It’s a good deal, but based on where the company was 5 years ago I feel I’ve earned it. I am very frustrated because I have 3 sisters who say it’s a “sweetheart deal” and it concerns me that they don’t appreciate where the business was and is now. Had the business been liquidated 5 years ago, when then bank almost called the note. We are close to closing but I told my family that I’m not sure this is what I want, as I sense that my sisters (all older) will always feel that I “stole” the business. Two years ago we tried to get offers on the business to arrive at a fair value, and the best offer we could get was $400K due to the very competitive and cyclical nature of the business. Also, the 9/11 tragedy has had an adverse impact on the business. I have always settled for a modest salary based on the business size, but have held out for the upside potential. The estate probably has another $2M in assets, excluding the business. Please give me some honest feedback.

Thank you,

Don’t Call Me Sweetheart

Dear Don’t Call Me,

I agree that you have legitimate concerns about your sisters resenting a sweetheart deal. But not so much to kill the deal, if you work toward increasing their perspective and ability to make businesslike decisions. It would not be a win for your family or anyone in it to have a kneejerk reaction determine the outcome. If your family has a frank discussion – best done with a facilitator who can maintain calm and organize the information- you could assess the strengths, weaknesses, opportunities and threats of your purchase of the business. This might enable the family to conclude whether the deal is fair and the estate division is equitable. Strengths might include that the family company will be continued, sustaining a legacy all may be proud of; and the business being run in a manner that gives back to the community, more so than a competitor might manage. Weaknesses might be the risk inherent in running a business, rather than cashing out to an outsider (but then there’s risk in taking that cash and buying Microsoft stock). Opportunities include the satisfaction and gain you will receive sustaining your apparently impressive track record; and implementing your own brand of innovation and leadership that reversed the trend of some bad years. Then there is the threat of your strained family bonds, with your sisters thinking you have deprived them of the higher sales price an outsider might agree to. Not to mention the threat of you feeling deprived of a fair deal in order to not damage your sibling relationships. It appears that your family needs more objective expertise. Rather than trying to ascertain the company’s value by getting bites from prospective buyers, hire a professional appraiser, who is aware of purpose of the evaluation, since the magic number is flexible, based on whether the appraisal is for estate planning, a planned sale, or leveraging for growth. The more arms length information you can gather, the less your sisters can assume the deal is in your favor. It would also help to establish guiding principles, to ensure that your family’s behavior and decisions will adhere to shared values and priorities. If you agree that “Our family relationships are valuable, and need to be nourished,” you might not be as prone to damage them for a bit more income. If you all feel that ” business decisions should be based on strategic and logical factors” you might conclude that the business is worth what it will fetch on the open market, whether the buyer is family or not. Such preemptive agreements will assist you to make decisions without feeling shortchanged or favored. It should be understood that a deal that is good for you is not necessarily bad for your sisters. Your family is fortunate to have another $2mm in assets in the estate, since most family business founders have 90% of their assets tied up in the company. Remember that the business has a certain stock value, another value in terms of assets; and both of those figures need to consider both the earning potential and risk. A company dollar is not equivalent to a U.S. dollar. If you sell the business to an outsider, the proceeds would be part of the estate. If you buy the business, your purchase price would also go to the estate. The discussion needs to be bigger than the price of the company, and who gets how much. Strive to act with fairness, generosity, and faith that there’s enough to go around; and to be satisfied with your slice of intelligently divided pie.

Thanks,
Ira Bryck

Dear Ira:

I am president of a family owned subchapter S Corporation. I own 30%, my brother owns 30% and my sister owns 40%. We inherited this company 15 years ago. My brother and I manage the business and make all the decisions. My sister, who lives 400 miles away, has no involvement in the company. My brother and I are paid a salary plus some benefits. All the profits are distributed each year. These distributions have been substantial until business year 2000 when a combination of events caused us to distribute only about 15% of the usual amount. My sister came home to see why the money was short and while looking at the financial statements, discovered our salaries. (This should have been no surprise to her as we mail financials to her each year). She has gone back to her home and talked to her “financial adviser” who suggests that she draw a salary also! I need some advice how to handle this situation because I don’t think we should pay her a salary.

Thank you,
Subchapter Sibling

Dear Subchapter Sibling:

Your family finds itself in a classic struggle, and there is hardly ever one “right answer” for these dilemmas. My motto in thinking about this type of issue is “treat the business like a business and the family like a family.” This is easier to do when you are proactively building the policies and objectives of a business; harder when trying to unravel a confusion, to separate appreciation from compensation, and when each family member collects their own “expert testimony” to support a position. You don’t state why the shares were distributed the way they were, with your sister owning more than the two working siblings. This split may have itself been the result of a well meaning but unclear intention of your parents; or maybe a method to justify her not drawing a salary (though salaried employees- family or not- presumably earn their keep in the company). In any event, your sister is the major shareholder. So your sister is somewhat correct when she feels entitled to a return on investment, though the diligent manager – and owner- will understand that the company has financial needs for reinvestment. Rather than resort to paying for No-Show jobs, it’s time for the family to sit down and discuss some large issues. The complex, conflicting relationships that threaten a family business are often represented by three partially overlapping circles, indicating the family, ownership, and management spheres. Where they overlap, there is confusion about roles and rules, so very important to understand “what hat you’re wearing.” With a talented and knowledgeable facilitator to mediate, you should have a meeting of all owners, to discuss what are the reasonable expectations of Owners (a fair return, that the company be run responsibly and sustainably, that there might be lean years and fat years, and owners will notice those phases in their bank account). Owners need to realize that they do not have the right to get paid as managers; so in my opinion, it is inappropriate for your sister to draw a salary. Her golden eggs are dividend checks. At the same time, you should be discussing the proper understanding of the role of management. In your case, some research into building a compensation policy based on (1) industry standards as reported in surveys available from universities and industry groups, including Society for Human Resource Management (www.shrm.com) (2) Merit Pay, where a percentage of profits are pooled, and distributed to employees and managers based on Performance Evaluations, and (3) Return on Investment for Owners. And then there is family, where your family makes some effort to build good will and momentum with all the normal sort of activities that families enjoy. This may sound unnecessary for the business, but important ingredients of the healthy family business include trust, generosity, and an “all for one, one for all” attitude- easier to build where work and money is not involved. Back to business: the ROI issue is important, but widely ignored. One compensation expert pointed out how many business owners know more about the 5-10% of their assets tied up in the stock market than the 90% tied up in their business. Owners need to set a goal for the ROI, which would include, pre-emptively, how much reinvesting would be necessary that year. I don’t know what sort of communication goes along with your annual distribution of financials, but a more elaborate annual report- better yet, an annual meeting where all these issues are discussed cleanly and with an eye to your agreed upon goals and principles. This is a general answer, and without knowing more and hearing the various points of view, difficult to fit perfectly. But is sounds like you are in a situation where money talks louder than family members, and that you have to change. Hope this is helpful. Feel free to write again.

Ira Bryck

Here is a follow-up report. My brother, sister and I met yesterday and the following was presented to my sister: I told her that when wearing my “family hat”, I wanted to find any way to accommodate her with more income but when I put on my “business hat, I saw many warnings about paying her a salary. My brother and I then offered for the corporation to loan her some money on a demand note with a very low interest rate for her to live comfortably for the next 18 months until the Sub S business returns a good distribution. My sister would be put on the Board of Directors of the Sub S and we would commence to pay a board fee that she could use to repay interest and principal on her note. At least 2 meetings will be scheduled with one requiring her attendance at distribution time (pick up her check in person) and the other meeting could be presented in a conference call. Furthermore, my brother and I would cease drawing a salary and take our income as distributions. We would Keep our medical insurance and vehicles in the company. This arrangement seems to be very satisfactory to my sister and my brother and I are also pleased. Let me know what you think and if you have any questions.

Thank you for your reply,

from Ira:

I’m glad to see that you were able to come up with a creative scheme to deal with your issues that satisfy all sides financially and in terms of treating the business with professionalism and respect. What I would add to the mix is an ongoing discussion that is provoked by the right questions. A few examples: What are reasonable expectations of a stakeholder of this company? What sort of objectivity do we need from a Board of Directors? What is the philosophy guiding compensation, both for family and non family employees? What ongoing topics need discussion and clarification among family members, so that decisions are made wisely?

Comments from a Reader of this Published Q&A:

Dear Ira-

I enjoy reading Related Matters and thank you for having it sent to me. I do have a comment about the letter from Subchapter Sibling and his follow up. It has been my experience that when parents leave a business to children where some continue the business and others are only stockholders , the additional stock that goes to the non-involved child is to make up for the salary and other perquisites that the operators will receive. In this case the brothers are clearly in control and are entitled to compensation for their efforts from which the sister will benefit. Leaving aside the devotion of the boys for their sister which can be shown in many other ways I think their solution is not a wise one. The plan that they have come up with is clearly a sham, not for the best interest of the business and with tax exposure that may well cause an unfavorable tax audit. Also in these modern times why are they still in a subchapter mode which in my view is not better than some of the llc types. Also their problem may be solved as part of a recapitalization to have a A stock and B stock format or a preferred stock. I hope that you do not mind these comments but the problem involved activates my memory of these situations which are so often present in family businesses large or small.

Regards,
E.