Home > business, estate planning, Real Estate > Lessons From Trial: Family Businesses and Disaster Prevention by a Proper Business Succession Plan.

Lessons From Trial: Family Businesses and Disaster Prevention by a Proper Business Succession Plan.

I just finished up a complex and messy trial that spanned over a few weeks centering on a family owned and operated business.

The case involved multiple family members over multiple generations, and differing levels of involvement in the family business, and, as it turned out, differing expectations of the business succession plan once the business owner (Grandmother) passed away.

This case had been in court for years, and was the rare exception that did not settle before trial.

Why Didn’t it Settle?

Although the legal issues involved were complex – spanning corporate law, real estate, and probate and trust law, and related fiduciary duties, I believe the reason the case did not settle was only minimally related to the parties’ legal duties.

It was primarily the emotional and personal aspects of the relationship between the estranged family members  – the ups and downs – that spanned over Grandmother’s (Owner’s) life time.

I suppose the better question is, why was the case in Court to begin with? Posed differently, what could have prevented the fight in the first place?

Proper Communication Could Have Prevented the Lawsuit 

I read a recent blog post by The Family Business Consultant Group, advisers to family owned businesses, titled  “Communication in family enterprises: The role of assumptions” – you can check that out here

As I reviewed the article, I couldn’t help but reflect on the various questions that could have been asked between the parties  at any given time over the decades of the business operation.

If those questions were properly communicated (and of course, in turn, memorialized in writing) it would have lead to a mutual understanding of the business succession after Grandmother’s death.

A Proper Business Succession Plan Could Have Prevented the Lawsuit

Family relationships are complicated. They get even more complicated when the family owns and operates a business.

Current owners would do well to engage professional advisers-, legal, tax, accounting, insurance, etc.. in order to make sure business succession is not only are properly communicated, but also properly memorialized in a written plan.

Even if not every family member agrees with the plan, at least it is in writing, and properly communicated to all. This would go along ways to avoid a messy family dispute.

Comments? Questions?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

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