Legal News

?People Are Funny?

By Brian Harris

This was a classic TV show in which people did humiliating things for money. Sound familiar?

Sometimes, you can suggest to a client a very sensible course of action in deciding on the future of a family business, but find that the client doesn?t want to do it.  Often, it?s because lawyers are acting in a logical way to think of a solution to a problem, taking into account tax and corporate law.  But the client is thinking in a different way, adding in the cost in personal relationships in doing or not doing something.  The client might agree that the proposal makes sense, but know that members of the family will view it from an emotional viewpoint, with the baggage of family relationships that have developed over many years.  So the lawyer might find that carefully made plans go nowhere, for reasons that aren?t always clear or clearly explained by the client.

A situation of this type was faced by a client a few years ago.  The client had a son and a daughter working in the business.  He had hoped that both of them would be successful in the business, but that didn?t happen.  One child was a hard worker, in at 6 a.m., while the other drifted in at 9:30 a.m.  The right planning technique would have been that the industrious child be recognized as the business successor, but the parent didn?t want to do that.  The client loved and cared for both children and didn?t want to hurt either of them.  The problem this created, obviously, was that the more industrious child began to feel that hard work was not paying off.  It took several years of talking around the point for the client to understand that two paths were necessary.  The children could be treated fairly equally from a financial standpoint, but one would become the business owner, while the other would be guided into another endeavor.  Was this entirely fair?  Perhaps not, but it reached a resolution that allowed a family-owned business to continue on and to prosper, which surely would not have happened if both children had remained in the business.

The psychological aspects of family business planning were brought home in a recent meeting in Philadelphia.  A group of lawyers, bankers, investment advisers, accountants and other professionals is organizing a chapter in this region of the Family Firm Institute, an international organization for family business advisers that sponsors research and study on the issues facing family businesses and how to resolve them.  At the meeting, which featured members of a family who described their history of forming a business, growing it and selling it, there were a large number of psychologists, psychiatrists and family business consultants in attendance.  In discussions at the meeting, they brought home the value of bringing their expertise into the mix of family advisers for the express purpose of helping businesses to run more smoothly and their transition to be accomplished successfully. 

Lawyers often act as counselors to family businesses, stepping a little beyond the task of telling clients the law.  But there are circumstances in which psychological/family issues interfere with carrying out worthwhile planning ideas in ways that go beyond the lawyer?s ability to help.  It?s here that the lawyer might consider bringing in, and sharing the stage with, professionals trained in a different discipline who can help clients reach an understanding of personal and family concerns that interfere with the success of a family business.  In doing so, the lawyer can increase the likelihood that the clients will adopt the lawyer?s planning suggestions and improve the chances of family business success.

Robert H. Louis
Saul Ewing
http://saul.com

Full post as published by The Legal Intelligencer Blog on July 08, 2009 (boomark / email).