Who shot JR? Why family businesses can be risky

The JPA Brenson Lawlor business owner services team guide you through a potential family business mine field.

Recite the phrase, ‘Who shot JR?’ to a member of the younger generations, and you’ll be faced with a quizzical stare – who or what is JR? Ask someone who grew up in the 1980s who shot JR and they’ll be able to tell you where they were and who they were with when JR, star of the hit American TV series ‘Dallas’, was shot. Incredibly, 75% of all US households tuned in to see who killed oil baron and
all-round bad guy, JR Ewing.

Dallas? TV? Hardware? – yes, they’re all connected because what kept viewers coming back to watch Dallas were the sub-plots of a family business at war, constantly. Lawyers will tell you, ‘where there’s a will, there’s a family’. Accountants, less prosaically, will advise ‘where there’s a family business, get a family agreement’.

Families can, and do, fall out. Psychologists and family therapists have earned the means to send their kids to expensive colleges on the back of in-fighting in family
businesses. People are forever trying to understand their siblings, and what makes them – in their minds – wholly unreasonable. Families fall out over, inter alia, sibling rivalry, conflict with in-laws and simple estrangement over time. But the big one is inheritance – a simple word but one that has kept the Four Courts busy since opening for business.

We dedicate part of our professional advices, to try to avoid these inheritance wars. And, though the situation is improving, bad things do happen – sometimes due to serious illness or death of an owner, and other times where little or no succession preparation is made…or sometimes it just happens. This can lead to what sports players call ‘unforced errors’ – a spouse, who may not be wholly
familiar with the business, suddenly making key decisions that can, in turn, lead to siblings falling out when those decisions don’t go their way. Often too, there’s no provision made for the retirement of the business owner or their spouse. It can be difficult.

I’m always taken aback by the statistic that fewer than 5% of family businesses get to the third generation. It’s clear, without a plan, succession can be difficult or nigh on impossible.

Our Rules of Succession are:

• No succession should occur unless sufficient provision is made for the business owner and spouse. This means looking at their “Statement of Affairs” including
  making plans for company pensions etc.
• The most important decision to protect the business is to ensure management succession. This is not the ownership of the business and this distinction should
  not be misunderstood. The big challenge here is to find the “right person for the job”.
• Get a family agreement in place as early as possible. The details of a family agreement will be different for each situation. However, ideally, it would refer to the following: –
  • Family buy-in to protect the business.
  • Commitment of all children (including those not working in the business). Structures to professionalise the business.
  • Funding of retirement, wills and overall succession planning.
  • Transition plan and timetable.

Follow these rules and you may fare better than poor old JR.

For advice on any matter affecting retirement and business succession, contact JPA Brenson Lawlor Business Owner Services Team:

Ian Lawlor – Managing Partner- [email protected]
Michael O’ Leary – Tax Partner – [email protected]