3. Why Is Having Sibling, or Other, Partners So Risky?
Partners have a complex relationship that is both business and personal in nature. There are groups of partners who have trouble managing some aspect of the business side of their relationship and end up unhappy, unfulfilled, fighting or unwinding their partnership. They may have different visions of what the business should be and where it should be headed. They may fight over who’s president, or not have faith that their partners are capable of performing their jobs. They may fight over money—how much to put into the business, when and how to make distributions, or how to spend money. Many purely business-related issues provoke conflict among partners and may cause one or more of the partners to believe it is not worth their while to continue together. In one case, two brothers in their forties became partners when their father retired from the consulting company he had founded. They fought ferociously for twelve months over whether the brother belatedly entering the family business would be a 45 or 50% co-owner. Their fight tore at the very heart of the family, especially because everyone claimed that for all their lives they had been the closest of brothers and “a cross word had never come between them.”
While those brothers had always gotten along beautifully, many successors fail because they cannot get along on a personal level. In some cases, the businesses may be performing well but some or all of the partners may leave the business because they cannot work out their individual differences. They may have personalities that rub the wrong way, or they may have personal values that conflict. Despite what many people believe, even siblings raised in the same household may have personal values that are so disparate that they cannot work together in a cooperative manner. Some partners have unrealistic expectations of their partners and feel let down by them despite having never shared their expectations with their partners. Other partners are plagued by the belief that the arrangement among the partners is not fair, that they have been disadvantaged in one way or another because of what their partners get that they don’t. These interpersonal issues are particularly nettlesome when they are played out against the background of the family relationships.
In most cases, partners’ conflicts are not just business, or not just personal, but span both the personal and business realms. The issues are an intricate blend of interpersonal complaints and financial, management or ownership issues. But the complexity inherent in partnerships is not by itself a sufficient explanation for why they are so unstable. We know that some partnerships are exceptionally successful. In 15 years of mediating disputes among family and non-family partners, the stories we have heard from partners lead us to the conclusion that the best explanation for why partners experience such difficulty is because they fail to plan in sufficient detail for how they would work together. In the context of estate planning, this means that the problem is not leaving the parents’ second home at the beach to all of the children or putting the mother’s company in the hands of her daughter and a key employee. The problem is insufficient planning by the clients for how these partnerships would work. Continue…
1. Introduction
2. Creating Partnerships: Benefits and Risks of Passing Key Assets to More Than One Person
3. Why Is Having Sibling, or Other, Partners So Risky?
4. The Roots of Poor Partnership Planning
5. Lowering Risk through Effective Planning: The Partnership Charter
6. The Role of a Partnership Charter in Succession and Estate Planning
