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Family ties complicate negotiations
for a husband-and-wife team who want to buy a business from her
parents.
Dear Small Biz Adviser
My husband and I are looking to purchase the store that my mom and
dad own. We have been with the store for seven years and have run
it on our own for the past year. It is a corporation and when we
buy we would also be incorporated.
The problem is taxes. They have also sold land
and another business last year and have been hit hard with taxes
this April. Is there any way to buy the store but not create another
big tax problem for them? Can we make it work to our advantage because
we're family? We have to come to a mutual agreement that will keep
both sides happy -- my dad wants his retirement and we want a profitable
business with payments we can afford.
Sincerely,
Wife and husband in Minnesota
Dear Family:
There's no easy answer to this one. I don't even want to be in the
shoes of the person I will suggest you visit.
In the first case, we are dealing with the matter
of taxes. You were not specific as to the nature of the problems,
and too many questions need answers before I could begin to suggest
how to proceed. But you, your husband, mom and dad need to go and
sit down with a tax accountant. Explain what all four of you are
attempting to do and provide all the relevant financial data. The
tax accountant will then be faced with a twofold problem:
- We are dealing with a family matter. How
can any one professional represent the best interests of both
parties? That will only come about when all four of you decide
what is the most important priority. In other words, does the
tax burden for your parents or your financial investment take
greater priority?
- Business is a matter where you want to create
a win-win situation for both parties to a negotiation. That may
not always be possible. In this case, it sounds as if the big
question is how much you will pay for the business -- pay too
much and you're in the poorhouse, pay too little and your parents
take up residence there. And negotiations on how much to pay for
the business become even more difficult if each party knows the
intimate financial details of the other..
Perhaps the best solution would be to get the
feedback from the tax accountant regarding the impact on all parties
to the sale. Advise the accountant to avoid showing preference to
your parents or you and your husband. Encourage the accountant to
simply elaborate on the positive and negative impact of the sale
of the business, possible alternatives to consider and leave it
at that. Then you, your husband, mom and dad need to sit down and
discuss this matter honestly, and with the intention of protecting
the interests of both sides to the best of your abilities.
YOU will most likely determine the level of
success. They are your mom and dad. And, most likely, you have a
very strong love for them. On the other hand, absent a prenuptial
agreement, marriage means total commitment to your spouse above
all other matters.
In our home we have three generations, including
my father-in-law. I never get between my wife and her dad. At the
same time, her dad never comes between my wife and me. But there
is no matter of business involved in our case. That is a much easier
task to accomplish. Though your parents may not live with you, there
are emotional ties and the business ties may complicate them.
In the end, the only advice I can give is for
your entire family to learn the financial implications on all parties
by the sale of the business. Then go home and decide for yourselves
what is the better route to take.
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-- Posted: May 23, 2000
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