Hi all! I’m new to this community (and to business ownership), so please bear with me.
Context, my dad built a business with the husband of his sister. They built it from nothing. During my teens the business was booming, they had several stores in several states. Not sure why but at some point my dad and uncle had a disagreement and split the business in two. My dad was also nearing retirement, with a good reitement fund, and didn’t want to work that much more. The business started going a but worse and several stores closed, but it was still profitable.
More context, my siblings and I all have good careers and are doing great, except one of us. He studied something unrelated to business and worked for some years but he ended up helping my dad with the business. My dad oversaw it and my brother ran the day to the day things. He got married and his wife also helped with it.
Current situation, my brother and his wife don’t really know what they’re doing and there’s only one store left. The store still makes money, but my brother is very bad at managing his personal finances and has mismanaged the store. His wife is also not the best at this. My dad entirely passed ownership to my brother, but he still receives a decent percentage of the profits.
The rest of my siblings and I are thinking we should do something. Since none of us wants to take over, I suggested that we hire a business manager. We might have to pay this person from our pockets for a while but the idea is that this person makes the business grow back to its potential.
My question is about the ownership of the business. As said before, the one sibling is full owner. The rest of us want to help him out so that he can rely on this business, but we are wary of him being responsible. We will also invest a good amount hiring the business manager and to incentivize them we might offer some ownership too. Money is not that big of a deal for the rest of the siblings and me, but we think it makes sense that we are part owners and part responsible.
How would you suggest we divide this?
My suggestion is that you speak with a lawyer and tax professional in order to accurately plan and hash away the division between all of the parties.
Cross your t’s and dot your i’s.
As a CPA, one of the worst things I see individuals/businesses do is not plan for succession as well as fail to plan for the tax consequences.
Your intentions are good but the plan of coming in, taking over and forcing a change in operations is, well, bad. Very little chance of this being successful. It will cost you more than you think and not get you what you want. Even when the people who need to change and appear to want the change hire a consultant/manager, they’re often unwilling or unable to make the changes the consultant/manager recommends. The odds of you as outsiders being able to step in and force this are frankly almost nil.
Your brother is going to run this into the ground. He just is. Nothing you can do about it but decide how much support you’ll give him when it’s over.
I’m a CPA who served as a consultant turning around troubled businesses for years. Your particular scenario is filled with red flags.