Business & Family Dilemmas

[debthaven]

I agree with @pinkcshmere and NomoreDramaQ1015 .

Other thought ... It seems that he is more concerned with your siblings' income than yours. That may be part of why he is reluctant to change things ... he may have figured that his job/your company was an easy way to help them out ... possibly forever?!

Instead, could you help him encourage those siblings to take charge of the more valuable items he decides to get rid of, and sell them themselves for extra income? 

Best of luck to you. It's NOT an easy situation, because the bottom line is, you both have very different goals. 

But he will definitely need help getting rid of the "clutter". I'm like you, if it's not useful, out it goes. My DH is absolutely NOT like me in that regard. So I get it. 

[geenamercile]

I am glad that you and your dad had a good talk.

[Ryan]

Feb 20, 2022 17:40:58 GMT -5 @pinkcshmere said:

It’s great that you two had a conversation. All the stuff he has in the building does provide more insight. On top of change period, which a lot of people struggle with (I’m one of those people, except I’d love a POSITIVE change that meant I had enough income that I don’t have to work every day), there’s also all the stuff he’ll have to let go of that he’s been storing there, plus whatever other emotional stuff he has going on about it.

Remain firm….. trying to handle it gracefully and having compassion for how difficult this is for him doesn’t mean you can’t also be firm about what needs to happen with the business. 

Yeah, definitely I'm going to remain firm on this.  I was telling my wife that my family has generally avoided conflict and tough conversations.  It's not really in my nature, but I think my job has gotten me more comfortable with tougher conversations.  I never really thought about it much, but after looking through all that stuff, it must be kind of a painful place to be.  He has so much left there that hasn't moved since my grandpa died over 15 years ago.  My dad isn't good at communicating his feelings at all, so even getting that out of him yesterday was tough.  He basically would talk for a minute and then walk away.  

[Ryan]

Feb 20, 2022 18:13:14 GMT -5 NomoreDramaQ1015 said:

Could you help him go through the stuff?

It will take patience but you can listen to him talk about that machine he built, tell stories of stuff from your childhood and maybe share your own.

If he knows all that history isn't forgotten and someone acknowledges his struggle it may make it easier to let go.

As far as the overwhelming physical work involved see if you have any companies like Got Junk. They can haul while you guys point and direct. He doesn't have to worry about emptying it out himself.

I told him I'd go through it with him.  I'll probably act more like a quarterback for figuring out what to do with things.  Probably 40% of the job should be easy stuff, like just literally throwing junk away.  30% will be more challenging because he'll contemplate keeping it, even though it's something that should be thrown away (old financial records, old fax machines, phones, file cabinets, etc).  The last 30% will be a little challenging.  It'll be stuff that probably does feel weird to just throw away, but realistically is the right choice.  

[djAdvocate]

i have to say that you are doing a good job of adulting this situation.

[Ryan]

Feb 20, 2022 18:49:42 GMT -5 debthaven said:

I agree with @pinkcshmere and NomoreDramaQ1015 .

Other thought ... It seems that he is more concerned with your siblings' income than yours. That may be part of why he is reluctant to change things ... he may have figured that his job/your company was an easy way to help them out ... possibly forever?!

Instead, could you help him encourage those siblings to take charge of the more valuable items he decides to get rid of, and sell them themselves for extra income? 

Best of luck to you. It's NOT an easy situation, because the bottom line is, you both have very different goals. 

But he will definitely need help getting rid of the "clutter". I'm like you, if it's not useful, out it goes. My DH is absolutely NOT like me in that regard. So I get it. 

My siblings are tough to explain to anyone.  I have 2 that have more pressing issues (depression, substance abuse at times), but they are the ones that have more common sense.  I can explain this situation to them and I wouldn't need to do any convincing.  My 2 other siblings have anxiety and they are very attached to my parents.  They think it's more important for my parents to be happy right now vs. doing what's right in the long-term.  One of them in particular basically has never worked and just mooches off my parents.  She would describe her job as working for my dad, but she mainly just helps out around the house.  

My dad probably was surprised at the speed in which I wanted to move out of the building, I'm not sure he was really thinking about my siblings at the time.  I had been a little unhappy with certain things for awhile and would stew for a bit, but always just settle back in thinking that the good outweighed the bad.  We had a high margin, high volume business for years and he was used to that.  I think it bothered him that margins were getting squeezed because he would always complain about it to me.  He'd say margins were too slim so I'd raise prices and then he'd complain the volume had slowed.  He wanted to make $10 per order, but we were only making $5 and he'd complain about that.  When talking about the reduced margin, he would remind me of the cost of running the building.  All of this led me to think that HE was wondering if it was worth it.

Anyways, to your question about my siblings taking a role.  Yes, I'll probably have a couple of them helping out.  Honestly though, there isn't much of value there.  It's mostly just scrap metal and maybe some stuff you can sell on Facebook marketplace or craigslist.  

On my siblings financial condition though, I think he had pipe dreams of one of my siblings taking over the operations side of the business. I was just very upfront with him and told him that'll never happen mostly because the motivation wasn't there for them.  At the end of the talk, when I was trying to really push him in the lease/sell option, I said that a possible upside with the lease is that he could provide an income stream for his kids that maybe would need extra income.  I have 1 sibling in particular that is a very hard worker, but they are single and money is always tight.  Setting this up now would provide a little cushion

[TheOtherMe]

Decisions on the sentimental things can be very difficult and, yes, time consuming.  I still have too much of my parents' stuff but I am not ready to let it go yet.

[Deleted]

I think you are doing great! Please keep us updated.

[Ryan]

I don't know if I mentioned this, but my dad did agree to at least speak with a broker.  Found a guy today that specializes in the area and I can tell by talking with him that he'll have a good rapport with my dad.  He confirmed what I had read and basically said that we'd have an easy time either leasing or selling the property.  Leasing could fetch upwards of $100K/annually with the tenant covering the taxes and CAM, but there would be some improvements likely required in order to do so.  Selling would probably get roughly $1.3M.  

My dad is supposed to meet with him this week so I'll be curious how it goes.  I will just let my dad handle it unless he asks me to go there, but I don't think he will since it will be just a walkthru.  

I do wonder what my dad's plan would've been if I hadn't pressed the issue a bit.  I could ask him obviously, but I think he would've said he didn't know.  He's the opposite of my father in law who basically has everything completely buttoned up.  He has a plan thought up for basically all of his assets.  

[bookkeeper]

Ryan, you have done the right thing offering to help your dad clean out his building.  The junk removal has to happen eventually anyway.  Better to do it while he is alive and can help direct you as to what is history and what is trash.  My parents stayed in the collection phase of their lives too long.  Same story as your dad, my grandmother died and her house was cleared out.  Mom couldn't deal with the stuff, but wouldn't donate or throw it out.  Twenty five years roll by and my Dad dies.  Now we have a farm full of stuff that has not been cared for and a little old lady who still doesn't want to throw anything away.

My brother has been cleaning out and selling anything of value on her farm for the last six years.  Much of it has gone to the metal scrap yard.  My dad was sick with cancer at the end of his life and was not interested in cleaning or downsizing.  Your dad is healthy and able.  Take advantage of this time, things can change very quickly.

More important than the stuff in his building, is untangling yourself from his business operation and moving your business forward with you in control of your work product.  If your Dad died tomorrow, would your business be caught up in his estate?  Also a good time to discuss estate planning with both your parents after they have a new owner/renter for the building.

[Ryan]

Reviving an old thread, but didn't want to rehash most of the story.  So my dad finally got the building onto the market in late May of this year.  I tried not to push him too much, but I was frustrated by the fact that he didn't list the property while he was trying to clear it out.  As a result of the delay, the market cooled a bit and interest rates rose.  The broker initially was unsure what the building would fetch because they kept setting new records, but estimated it would be roughly $1.15M but said it could be higher if the right buyer came along. 

Right before it goes on the market, he texted me in April and said something about how we need to discuss the business because he didn't think I could run it without a building. He said that he would like to purchase a multi-tenant building after he sells his current one. So I just send him something back saying that the business can't support it, I have storage options, and I'd rather scale down than enter into any lease arrangement.  

He ends up getting a strong offer, but turns it down..  This week, he has another offer on the table for $1.0M and all cash and he told me he countered at $1.3M.  My dad relays this info to me, I tell him that's great news and basically said don't let this one get away. He starts complaining about taxes and implies he wants to roll it into a new property.  

I reply back and reiterate the original plan of him selling the building, taking the money, me taking over the business completely.  He then just replies back "cutting me out?".  At this point, I'm FUMING.  Almost 20 years ago, my dad could not even think about retirement.  I brought him into this business, gave him a huge cut of the profits, and basically worked for nothing for the last 2 years because I allowed all the profits to go towards the building.  I don't mind any of those decisions because it was a great partnership that worked, despite the unorthodox nature of it.   However now I'm sitting here completely confused at what he's thinking.  He is 74 years old and about to clear $1M from the sale of the building.  I'm asking him to step aside and allow me to work to make something out of the business while there is still something there and he keeps acting like I'm cutting him out.

I will have this conversation with him, but I just needed to vent.  The problem is that my dad is not very direct and avoids confrontation so he probably won't fight me on this but there is definitely something under the surface.  The problem is that I really want to know what exactly what he's looking to get out of this.  I think most people would say "Well, he wants to stay busy probably", but I don't think that's entirely it.  He mostly does order fulfillment now and, if I suggested to him that I would pay him to fulfill my orders (market rate), I don't think he'd be happy.  I think he wants to share in the upside.  He's a very frugal person and I think he just doesn't like the idea of income not coming in.

I think ultimately, I want him to understand without me having to say it because I don't want to say it.  I don't want to tell him that I'm not cutting him out, I cut him IN several years ago and that he should be grateful.  I also don't want to tell him that I really don't need him anymore, he doesn't need the money, and that I am only asking for him to stop being selfish and give me back what I started. 

Sorry for the long rant....I'm just so bitter now. 

[finnime]

I liked your post, Ryan, because you started out with the offer(s) your dad got.

As for what he's asking you to do, I understand your bitterness. But I think I also understand his upset. He is having trouble with the crucible he's at between active businessman and retiree; between engaged and powerful versus sidelined and observer only. I would say it would help for him to get counseling, and it would, except that I really doubt he'd be even marginally comfortable with that idea.

Is there an alternate place or project into which he can pour his energies? I know that retired executives help mentor new businesses and people in SCORE. This isn't your job, I know, but it is something a son might point out to his father. He needs to find a new way to define his own value to the world.

[giramomma]

You are thoughtful, Ryan.

But, you can't have your cake and eat it too.

You are likely going to have to bite the bullet and have the blunt, difficult conversation and then deal with the fallout.

Have you considered finding a therapist to support you and help you navigate this? What you want, likely will not happen. And, if you want to have a decent relationship with your dad, you are likely going to have to find a way to get through the bitterness.

In my family, the older folks get, the more they double down on their position. Or, history is rewritten. Or some other combination.

My parents were frugal. My mom is 77, now, and it has morphed into unfounded fears about the future. I think she has roughly the same net income my family does. I've ballparked her bills to be about 2K a month, which leaves her with 2K a month to set on fire, if she chooses. She absolutely will tell me she can't turn the heat on now as it's getting cold, or turn it up past 60 because she is broke. She tells me she has to watch how much food she buys because she perceives herself to be broke. It's not the truth. But, it's her truth, and I cannot change it. I can point to mom's accounts and say "you have mid 6 figures in savings you don't ever have to touch." And that data point will be lost on her. She will make up some excuse about still being broke.

Your dad may not remember events correctly. He may have changed his narrative to suit his needs. My mom has a need to been seen as someone who is generous, who would give you the shirt off her back to help, even if it's at her own personal expense.. That need, trumps reality. I have two options. I can either challenge my mom so we revisit history accurately and determine in fact that her actions did not stem from her generosity or I can let it go. Fortunately, it was pretty benign and I just let it go. Trying to convince my mom she was wrong would have just made things a whole lot worse.

Your dad may be telling himself that he's where he is because of the effort that he put in, not you. Maybe he still sees you in a parent/child dynamic. Where parents have the power and entitled. If you owe your dad or if your dad holds the power in your relationship, then it's just expected that you owe. Your dad may not see the need to be grateful to you, or even demonstrate that. It is really quite shocking to see what my mom thinks that I owe her, just because she and dad had some fun and they got knocked up. She thinks she is owed my money, my time, and a relationship with my kids, because she is "the mother." My mom has yet to thank me for dropping everything and supporting her when dad died. Or try to meet her needs while balancing everything else. Why should she thank me? She has no reason to because I owe it to her.

[bookkeeper]

Feb 18, 2022 23:58:32 GMT -5 Ryan said:

Feb 18, 2022 11:09:30 GMT -5 bookkeeper said:

I worked as a bookkeeper.  I went to work every day to make money.  I worked with farmers and ranchers who referred to their business choices as "lifestyle" centered, not necessarily profit centered.

OP's father has made this side gig into his "lifestyle" business.  I like to use facts to get my point across.  I would use some quarterly profit and loss numbers to show the father how the business is unprofitable (for you) in its current state.  With the numbers on a page in front of him, explain to the father that you work this business for money and you're not getting any. OP could ask his father if he would like to work for half or a quarter of what he makes now to make the business profitable. Put the ball back in his court so to speak.  

Nobody likes change, especially the kind that takes your six figure income away.  I would need some time to get over that as well.  Luckily, he can pivot and rent the commercial building and receive similar income from that. 

Lastly, what is the tax structure of your business.  LLC, C-corp, S-Corp?  Does the father really have a say in the business or is he a 1099 employee who is also renting space to the OP.   Untangling family from business is hard.  Someone will feel slighted no matter how the changes play out. This is the reason I have strict rules about doing business with family.

Yeah, I think thing that was challenging was that I thought it would be an easier conversation.  My dad and I are pretty similar in a lot of ways, so I had assumed he'd already know what we had to do before I brought it up.  He literally just told me a few weeks ago that the business broke even and there was no profits to pay me out of.  I think in his mind he's thinking that he kinda broke even too, he got paid maybe $45K + $20K in rent, but he had to go in everyday.  In my mind though, I'm thinking "What am I even doing this for?!"  

To answer your question, yes, our setup is very messy which is why he does have a say.  When I started the business, it took off so quickly that I had nothing setup (corporation, sales tax, accounting, etc).  My dad did have everything setup through his business and he had a very large tax loss carryforward to burn through.  We ran everything through his company and I took a % of profits.  We both got paid very well, but I always hated this setup.  Ultimately, if I was adamant enough, he would go along with me but I don't want him to go along, I want him to come to the same conclusion.  

Your father does indeed have a say in your business once you used his tax id and used his tax loss to profit your business.  Have you done anything to unwind "your" business from "his" business?  Have you gotten your own tax id and offered to compensate your father for using the coat tails of his existing business?  

If you want control of your business, you need to make it legally your own.  Until you untangle yourself legally from your father and his businesses, you will remain in this limbo.

[Ryan]

Oct 12, 2022 4:47:17 GMT -5 finnime said:

I liked your post, Ryan , because you started out with the offer(s) your dad got.

As for what he's asking you to do, I understand your bitterness. But I think I also understand his upset. He is having trouble with the crucible he's at between active businessman and retiree; between engaged and powerful versus sidelined and observer only. I would say it would help for him to get counseling, and it would, except that I really doubt he'd be even marginally comfortable with that idea.

Is there an alternate place or project into which he can pour his energies? I know that retired executives help mentor new businesses and people in SCORE. This isn't your job, I know, but it is something a son might point out to his father. He needs to find a new way to define his own value to the world.

The thing is, he has plenty to do so I'm not sure why he even wants to continue this.  To be honest, it's very mindless work, especially at this point.  Back in the hayday, we were shipping out 100's of orders per day and the phone was ringing.  Now, we ship 20% of that maybe and the day consists of printing labels and shipping orders.  He works alone, so I'm not sure how he can consider it to be that enjoyable.  

Outside of work, he has hobbies that he doesn't have time for.  Painting, gardening, unfinished projects around the house, my mom is retired, vacations, etc.  

[Ryan]

Oct 12, 2022 6:55:58 GMT -5 giramomma said:

You are thoughtful, Ryan.

But, you can't have your cake and eat it too.

You are likely going to have to bite the bullet and have the blunt, difficult conversation and then deal with the fallout.

Have you considered finding a therapist to support you and help you navigate this? What you want, likely will not happen. And, if you want to have a decent relationship with your dad, you are likely going to have to find a way to get through the bitterness.

In my family, the older folks get, the more they double down on their position. Or, history is rewritten. Or some other combination.

My parents were frugal. My mom is 77, now, and it has morphed into unfounded fears about the future. I think she has roughly the same net income my family does. I've ballparked her bills to be about 2K a month, which leaves her with 2K a month to set on fire, if she chooses. She absolutely will tell me she can't turn the heat on now as it's getting cold, or turn it up past 60 because she is broke. She tells me she has to watch how much food she buys because she perceives herself to be broke. It's not the truth. But, it's her truth, and I cannot change it. I can point to mom's accounts and say "you have mid 6 figures in savings you don't ever have to touch." And that data point will be lost on her. She will make up some excuse about still being broke.

Your dad may not remember events correctly. He may have changed his narrative to suit his needs. My mom has a need to been seen as someone who is generous, who would give you the shirt off her back to help, even if it's at her own personal expense.. That need, trumps reality. I have two options. I can either challenge my mom so we revisit history accurately and determine in fact that her actions did not stem from her generosity or I can let it go. Fortunately, it was pretty benign and I just let it go. Trying to convince my mom she was wrong would have just made things a whole lot worse.

Your dad may be telling himself that he's where he is because of the effort that he put in, not you. Maybe he still sees you in a parent/child dynamic. Where parents have the power and entitled. If you owe your dad or if your dad holds the power in your relationship, then it's just expected that you owe. Your dad may not see the need to be grateful to you, or even demonstrate that. It is really quite shocking to see what my mom thinks that I owe her, just because she and dad had some fun and they got knocked up. She thinks she is owed my money, my time, and a relationship with my kids, because she is "the mother." My mom has yet to thank me for dropping everything and supporting her when dad died. Or try to meet her needs while balancing everything else. Why should she thank me? She has no reason to because I owe it to her.

Yeah, I think you are right.  I think in his mind, he does the actual work.  The trucks come in, unloads truck, stocks inventory, ships product, etc.  When I first started this, I never wanted to actually do the work, so I was always going to dropship.  When his business was failing, I thought it would be a good win/win because it was easier to stock some inventory and then have him ship it.  Things took off and the rest is history.  I don't think it helps matters that my siblings all would support the view that he is carrying the business.  I have a couple siblings that very much put my parents on a pedestal, the 4 of them are more the close-knit family group and me and my other sister are more outside because we have our own families and live a bit further away.

I really allowed my dad to have complete control over the income of the business.  I'm not saying he did anything wrong, but it definitely got very mucky.  He would run cars through the business, he would pay for building improvements, some borderline stuff was expensed, basically a lot of stuff that was not clearly defined as being "my" responsibility.  I was ok with that because I was making good money and it allowed me to keep my day job.  What I really should have done is to keep everything within the corporation and paid him for the services he provided and not made him a "partner".  I think he honestly forgets the history of all of this and I would prefer not bring it up because I don't want to sour the entire relationship.

I think he wants to continue the same arrangement, but with a new/smaller building.  I won't go for that, if he wants to do that, I'll just tell him that I'm not going to participate.   I've already told him it doesn't make sense for me to do it since I haven't made money in 2 years.  The only way I'll continue is if he sells me the assets that were paid for by the business and I told control of all income/expenses.  That way I can properly bring everything under one roof and have the financials to sell the business in the future.  If he wants to buy a building, he can do so but I'll only reimburse him for orders fulfilled, it won't be a split.

Sounds harsh, but I don't want to hold any resentment and that is what makes sense for me.

[raeoflyte]

Can you take him out to lunch to discuss the business - and talk through the history stressing your business and his business and how you were able to help each other but that business needs have changed and you can't continue your business without income going forward.

[Ryan]

Oct 12, 2022 7:55:08 GMT -5 bookkeeper said:

Feb 18, 2022 23:58:32 GMT -5 Ryan said:

Yeah, I think thing that was challenging was that I thought it would be an easier conversation.  My dad and I are pretty similar in a lot of ways, so I had assumed he'd already know what we had to do before I brought it up.  He literally just told me a few weeks ago that the business broke even and there was no profits to pay me out of.  I think in his mind he's thinking that he kinda broke even too, he got paid maybe $45K + $20K in rent, but he had to go in everyday.  In my mind though, I'm thinking "What am I even doing this for?!"  

To answer your question, yes, our setup is very messy which is why he does have a say.  When I started the business, it took off so quickly that I had nothing setup (corporation, sales tax, accounting, etc).  My dad did have everything setup through his business and he had a very large tax loss carryforward to burn through.  We ran everything through his company and I took a % of profits.  We both got paid very well, but I always hated this setup.  Ultimately, if I was adamant enough, he would go along with me but I don't want him to go along, I want him to come to the same conclusion.  

Your father does indeed have a say in your business once you used his tax id and used his tax loss to profit your business.  Have you done anything to unwind "your" business from "his" business?  Have you gotten your own tax id and offered to compensate your father for using the coat tails of his existing business?  

If you want control of your business, you need to make it legally your own.  Until you untangle yourself legally from your father and his businesses, you will remain in this limbo.

I didn't benefit from the tax loss, that was his benefit.  Payments were made to my corporation and I paid tax on my net income.  I have my own corporation, own tax ID.  I can switch certain aspects over today if I wanted to, other things are messier because they are in his corporations name.  

I'm not denying that this was a dumb way to set things up.  If I was smart, I would've formed the corporation, purchased the inventory, paid all expenses, etc..  I can't go back now, all I can ask is for my dad to help me to set it up the way it should have been.  I really need to buy his corporation, but he hasn't indicated that he wants to do that.  

This is very difficult because if he didn't go along with me, my only choice would be a) Work for free b) basically leave and let him hold the bag on the inventory (which he wouldn't be able to sell).  It would be a pain, but I have all the website properties and supplier relationships, so I could replicate what we have.  

[Ryan]

Oct 12, 2022 10:26:40 GMT -5 raeoflyte said:

Can you take him out to lunch to discuss the business - and talk through the history stressing your business and his business and how you were able to help each other but that business needs have changed and you can't continue your business without income going forward.

The frustrating thing is that I thought I squashed that earlier this year.  He took it poorly, then understood where I was coming from and seemed to be good with it.  Then I think some time went by and he basically went back to "Well, I'll just downsize and scale everything down and we'll just keep it the same".  He seemingly understands where I'm coming from, but his desire to just keep things the same overrides that.  Yesterday was the first time where he could tell I was upset, but he'll avoid the conversation as long as possible.  He holds things in and avoids hard conversations.  When we talk, he'll agree verbally but he still won't want to do it.  It'll probably end up repeating itself several times and I honestly just don't have the patience to work on this business without a clear path forward.  

[raeoflyte]

Oct 12, 2022 11:00:48 GMT -5 Ryan said:

Oct 12, 2022 10:26:40 GMT -5 raeoflyte said:

Can you take him out to lunch to discuss the business - and talk through the history stressing your business and his business and how you were able to help each other but that business needs have changed and you can't continue your business without income going forward.

The frustrating thing is that I thought I squashed that earlier this year.  He took it poorly, then understood where I was coming from and seemed to be good with it.  Then I think some time went by and he basically went back to "Well, I'll just downsize and scale everything down and we'll just keep it the same".  He seemingly understands where I'm coming from, but his desire to just keep things the same overrides that.  Yesterday was the first time where he could tell I was upset, but he'll avoid the conversation as long as possible.  He holds things in and avoids hard conversations.  When we talk, he'll agree verbally but he still won't want to do it.  It'll probably end up repeating itself several times and I honestly just don't have the patience to work on this business without a clear path forward.  

I think you have to keep stressing you cant run a side gig and not make money - too busy with real job, kids, spouse, etc. Youre so appreciative of his time and energy and that you 2 were able to work together and make a good thing for both of you for so long blah, blah, blah, rinse and repeat. If you could work in that the intention was to drop ship from the start that would be good too.

Or decide to close the business and you could open up another shop.

[haapai]

I read this thread a long time ago and the thing that jumped out at me was in the second paragraph. 

he ran a lot of expenses through his business that were not related to my company

I think that you are failing to grasp what your dad gets from the existing setup, especially the tax angles and the time spent with his son.  Being a business owner is probably also a big thing. 

It might help to calculate the financial value of the tax-avoidance angles that your father is exploiting.  It could add up to an awful lot.  It also might not be measurable in money.  There are a lot of people in this world who really, really hate paying taxes and really really enjoy paying as little tax as possible.  Some of those folks definitely cut off their noses to spite the taxman.  Your father might be one of them. 

[Ryan]

Oct 12, 2022 14:23:21 GMT -5 haapai said:

I read this thread a long time ago and the thing that jumped out at me was in the second paragraph. 

he ran a lot of expenses through his business that were not related to my company

I think that you are failing to grasp what your dad gets from the existing setup, especially the tax angles and the time spent with his son.  Being a business owner is probably also a big thing. 

It might help to calculate the financial value of the tax-avoidance angles that your father is exploiting.  It could add up to an awful lot.  It also might not be measurable in money.  There are a lot of people in this world who really, really hate paying taxes and really really enjoy paying as little tax as possible.  Some of those folks definitely cut off their noses to spite the taxman.  Your father might be one of them. 

Yeah, I worked in banking and someone like my dad was not all that unique.  He basically could not use his financial statements as a tool in his business because he was too busy fudging numbers.  I always knew that he was willing to have shoddy books if it meant he could save a few bucks on taxes, but didn't realize he hated paying them this much.  It was almost like he was unhappy when he found out he'd sell for over $1M because he'd pay 15% capital gains.  I asked him why that bothered him, 15% is as low as you can get.  He said that if rolled it into another building, he wouldn't have to pay them.  I'm like "Yeah, but we'd have to pay them when we sold the building....plus we'd have to actually sell the building and pay a broker".  

What is actually pretty interesting is that my dad was in my situation probably 30 years ago.  His dad started the business, my dad ran it, and he was forced to keep his sister (who did nothing) on the books at a high salary.  My grandpa always came in the office and pretty much weighed in on every decision.  My dad ended up getting bitter towards his sister and towards his dad because he wanted him to hand over the reigns.  

Maybe he's enjoyed the last 15 years because it allowed him to operate as he sees fit.   I can maybe see if you don't think your son is ready to run it and it's your nest egg, you kind of guide him along and keep an eye out.  That's not the case here, it's not even like it's "his baby".

[NomoreDramaQ1015]

Could you do something like your dad would need to buy you out otherwise you are shutting it down?

If it comes time where my dad wants to sell his and we express an interest the agreement is he will stay on for X amount of time, then we either need to buy him out or he's going to sell it and take the money from it. 

He's made it clear he's not going to hang onto a business that isn't generating him any income/value just because we are family.  We need to pony up and run it or he will choose to do what is in his best interest.  It's a business transaction and we have to hold up our end of the deal.

I can't imagine your dad will be happy either way but this gives him time to reflect and gives you a solid out.  You said he had to buy you out on X date, it's X date, you're done with it.  X date being of your choosing since it is your business.

[haapai]

I worked for a CPA for about a year and he had a few clients that he referred to, jocularly, as "tax rebels".  They hated paying taxes with a white-hot passion and I was instructed to leave dealing with them to him. 

I'm glad that you know the type.  I'm also intentionally not quoting what you just typed because you might want to delete it. 

But the type is common.  Pretty much anyone who has ever been surprised by a terrifying tax bill and found a way to legally avoid it, or avoid it in the future, can become the type of tax rebel that reflexively avoids paying taxes to their own detriment.

I am sorry that I did not have the ovaries to say this to you months ago.  On the other hand, you might have grasped this months ago. 

[Rukh O'Rorke]

Oct 12, 2022 15:22:02 GMT -5 Ryan said:

Oct 12, 2022 14:23:21 GMT -5 haapai said:

I read this thread a long time ago and the thing that jumped out at me was in the second paragraph. 

he ran a lot of expenses through his business that were not related to my company

I think that you are failing to grasp what your dad gets from the existing setup, especially the tax angles and the time spent with his son.  Being a business owner is probably also a big thing. 

It might help to calculate the financial value of the tax-avoidance angles that your father is exploiting.  It could add up to an awful lot.  It also might not be measurable in money.  There are a lot of people in this world who really, really hate paying taxes and really really enjoy paying as little tax as possible.  Some of those folks definitely cut off their noses to spite the taxman.  Your father might be one of them. 

Yeah, I worked in banking and someone like my dad was not all that unique.  He basically could not use his financial statements as a tool in his business because he was too busy fudging numbers.  I always knew that he was willing to have shoddy books if it meant he could save a few bucks on taxes, but didn't realize he hated paying them this much.  It was almost like he was unhappy when he found out he'd sell for over $1M because he'd pay 15% capital gains.  I asked him why that bothered him, 15% is as low as you can get.  He said that if rolled it into another building, he wouldn't have to pay them.  I'm like "Yeah, but we'd have to pay them when we sold the building....plus we'd have to actually sell the building and pay a broker".  

What is actually pretty interesting is that my dad was in my situation probably 30 years ago.  His dad started the business, my dad ran it, and he was forced to keep his sister (who did nothing) on the books at a high salary.  My grandpa always came in the office and pretty much weighed in on every decision.  My dad ended up getting bitter towards his sister and towards his dad because he wanted him to hand over the reigns.  

Maybe he's enjoyed the last 15 years because it allowed him to operate as he sees fit.   I can maybe see if you don't think your son is ready to run it and it's your nest egg, you kind of guide him along and keep an eye out.  That's not the case here, it's not even like it's "his baby".

so ryan, what was the effect on your income of him running all this stuff through the business? Did that actually decrease your payout? Or was it just saving him taxes?

[Ryan]

Oct 12, 2022 16:51:12 GMT -5 Rukh O'Rorke said:

Oct 12, 2022 15:22:02 GMT -5 Ryan said:

Yeah, I worked in banking and someone like my dad was not all that unique.  He basically could not use his financial statements as a tool in his business because he was too busy fudging numbers.  I always knew that he was willing to have shoddy books if it meant he could save a few bucks on taxes, but didn't realize he hated paying them this much.  It was almost like he was unhappy when he found out he'd sell for over $1M because he'd pay 15% capital gains.  I asked him why that bothered him, 15% is as low as you can get.  He said that if rolled it into another building, he wouldn't have to pay them.  I'm like "Yeah, but we'd have to pay them when we sold the building....plus we'd have to actually sell the building and pay a broker".  

What is actually pretty interesting is that my dad was in my situation probably 30 years ago.  His dad started the business, my dad ran it, and he was forced to keep his sister (who did nothing) on the books at a high salary.  My grandpa always came in the office and pretty much weighed in on every decision.  My dad ended up getting bitter towards his sister and towards his dad because he wanted him to hand over the reigns.  

Maybe he's enjoyed the last 15 years because it allowed him to operate as he sees fit.   I can maybe see if you don't think your son is ready to run it and it's your nest egg, you kind of guide him along and keep an eye out.  That's not the case here, it's not even like it's "his baby".

so ryan, what was the effect on your income of him running all this stuff through the business? Did that actually decrease your payout? Or was it just saving him taxes?

It's hard to say, the fact that he was able to use up that loss carryforward meant that we had more cash on hand.  However it didn't really change how much I made necessarily.  Like I said, it was complicated early on because my dad owned his company with my grandpa and we weren't sure there was enough business to justify incorporating, insurance, etc.  It was just a little side business that ended up growing.  So you can almost say that I became like a sales rep for the company in that I earned a commission on each sale.  Early on, it was very simplistic, like a flat 20%.  Later it got more complicated because of other factors.  

I'll start by saying that my dad is very frugal overall, he wasn't being an extremely extravagant spender by any stretch.  When he did the books, he would wait to the end of the year to add up all "expenses" and then say "we made x amount".  This did not impact me because I calculated how much he paid me.  Still though, he would reimburse himself for all of those "expenses" and to be honest, I never really knew what that total was.  Where it impacted me was that he would need me to hold onto my payment a little longer before I cashed it. Honestly I think there were times where he paid me even though the business might not have supported it.  I guess the root of the problem was that he didn't know how to handle the financial aspect.  He thought because something can be expensed, it should be.  Over the long period, he didn't think about how that impacted everything.  

Another funny thing is that he was very strange with his decision making and didn't think about how it impacted cash.  A 20' container might cost $5K, but a 40 foot container might only be $5500.  For 6 months, he opted to get a 40' container and fill it up with one of our lighter products to maximize the space.  The problem is, we didn't need this much so we ended up sitting on the inventory for like 2 years.

[haapai]

You and your father are in very different places in life.  You are discussing this strictly as a business decision.  Your father may have other concerns.  We don't know if your father has filed for social security yet.  We don't know if your mom is good at handling money or the size of her social security benefit.  We do not know how much of your father's income or wealth is tied to the business.  We do not know if your siblings with substance abuse problems have been getting financial support from your parents. 

Keeping money in assets, even assets that are wildly underused, can be a strategy for keeping money away from people with substance abuse problems. 

Does closing the business throw a wrench in your father's attempt to maximize his social security benefit? 

I'm a little surprised by your dad leaning more toward selling the building instead of renting it. 

[Ryan]

Oct 13, 2022 14:25:33 GMT -5 haapai said:

You and your father are in very different places in life.  You are discussing this strictly as a business decision.  Your father may have other concerns.  We don't know if your father has filed for social security yet.  We don't know if your mom is good at handling money or the size of her social security benefit.  We do not know how much of your father's income or wealth is tied to the business.  We do not know if your siblings with substance abuse problems have been getting financial support from your parents. 

Keeping money in assets, even assets that are wildly underused, can be a strategy for keeping money away from people with substance abuse problems. 

Does closing the business throw a wrench in your father's attempt to maximize his social security benefit? 

I'm a little surprised by your dad leaning more toward selling the building instead of renting it. 

I'm not sure on the social security question, but almost certain my mom takes it and also has a pension.  I think their retirement wasn't going particularly well in their 50's, but then they really started to pour it on over the last 20 years.  The business was profitable, they inherited money from both of their parents, and expenses were reduced.  My dad is frugal enough to where if he's actually spending money, he likely has more than enough.

I do have siblings in the situation you described though, 1 with substance abuse and 1 is just not motivated.  Not sure how much financial support they have offered them, but I don't think it's been that much.  If I were to guess, I'd say that there are 2 main reasons he doesn't want to quit....he wants someplace to go everyday and he likes the security that having an income source provides...even if he doesn't need it.

He wants to sell the building as opposed to lease because he knows he'll have to put like $100K into the building and doesn't really want to deal with that.  I get it and it makes sense.  

I think that is why he really wanted to get a multi-tenant building, something small.  If he rolled the proceeds from the sale into the building then he could continue to work at a smaller scale and then have the income from the other units.  I did consider that for a split second, but even that doesn't really make sense.  He's better off just renting out all the units, the single unit would be a money loser for him.  

I'm proposing a buy-out plan for him and I'm hoping that if I can propose something over like 3 years, it'll alleviate one of the (money) concerns about stopping working.  I'm hoping that he'll like retirement so much that he'll wish he did it earlier.  

[Ryan]

Oct 13, 2022 19:32:17 GMT -5 Ryan said:

Oct 13, 2022 14:25:33 GMT -5 haapai said:

You and your father are in very different places in life.  You are discussing this strictly as a business decision.  Your father may have other concerns.  We don't know if your father has filed for social security yet.  We don't know if your mom is good at handling money or the size of her social security benefit.  We do not know how much of your father's income or wealth is tied to the business.  We do not know if your siblings with substance abuse problems have been getting financial support from your parents. 

Keeping money in assets, even assets that are wildly underused, can be a strategy for keeping money away from people with substance abuse problems. 

Does closing the business throw a wrench in your father's attempt to maximize his social security benefit? 

I'm a little surprised by your dad leaning more toward selling the building instead of renting it. 

I'm not sure on the social security question, but almost certain my mom takes it and also has a pension.  I think their retirement wasn't going particularly well in their 50's, but then they really started to pour it on over the last 20 years.  The business was profitable, they inherited money from both of their parents, and expenses were reduced.  My dad is frugal enough to where if he's actually spending money, he likely has more than enough.

I do have siblings in the situation you described though, 1 with substance abuse and 1 is just not motivated.  Not sure how much financial support they have offered them, but I don't think it's been that much.  If I were to guess, I'd say that there are 2 main reasons he doesn't want to quit....he wants someplace to go everyday and he likes the security that having an income source provides...even if he doesn't need it.

He wants to sell the building as opposed to lease because he knows he'll have to put like $100K into the building and doesn't really want to deal with that.  I get it and it makes sense.  

I think that is why he really wanted to get a multi-tenant building, something small.  If he rolled the proceeds from the sale into the building then he could continue to work at a smaller scale and then have the income from the other units.  I did consider that for a split second, but even that doesn't really make sense.  He's better off just renting out all the units, the single unit would be a money loser for him.  

I'm proposing a buy-out plan for him and I'm hoping that if I can propose something over like 3 years, it'll alleviate one of the (money) concerns about stopping working.  I'm hoping that he'll like retirement so much that he'll wish he did it earlier.  

Just to round out the story, the building is still on the market but very, very close to being sold.  After he reiterated his desire to stay in the business, I had a talk with him and he backed down.  We said we'd revisit a buyout amount and then figure it out later.  My main issue with the lack of control I had and visibility into the finances.  I told him that I wanted the buyout to be finalized by 12/31/22 so we could just finalize the amount and move on, I literally cannot take this dragging out any longer.  

So initially, I think he was thinking that he owned the inventory and all the assets, so the purchase agreement would be for all of that.  As I was thinking about it, I thought why would I pay for all of that, all of the proceeds to purchase those things came from the business.  I proposed we split the bank balances and the inventory and I'd buy out his 50%.  He is sitting there confused not understanding why I would have a right to this.  I kept reiterating that all the money to purchase those assets came from cash flow from the business, which is (more or less) owned 50/50.  He's struggling with this, then I ask him how much he takes from the business as a salary.  He says he hasn't taken a salary.  However after further probing, it turns out he was taking a pretty large amount of funds from the business through various means and pretty much said something like "Do you want me to just give everything to you or split it 50/50".  I agreed to 50/50 and we moved on.

I went home and told my wife that I really wasn't mad, although I should be.  Then after I thought about it more, I really did start to get mad.  Mostly because I was kicking myself about not confronting him during years where we were wildly profitable and cash was coming in like crazy.  To be fair, I think it was a very slow leak over many years that just revealed itself when things got slow.  We were always able to buy inventory, but I found it strange that we didn't have ample reserves.  I was always able to cash my distribution checks, but it was weird that I had to wait longer and longer.  If you divided up the money between 1) Reinvest in inventory 2) Overhead 3) Dad profit 4) Son profit, he was basically borrowing from "inventory" money to pay himself and never really considering why that was an issue.  I blame myself a bit for not pushing him on this.

My wife was even more baffled by this.  My dad is a very normal, honest guy and she was so confused as to how he thought this was ok.  She also was confused as to why he would even accept me buying him out when I basically provided him an income for the last 20 years and he's on the cusp of selling a $1.5M building that he doesn't own a mortgage on.  She's like "Why is he even willing to accept anything from you?"

I have to admit, it confuses me too.  The only explanation I can think of is that he went through some very stressful, low income years when he was younger and had all of us kids and that kind of shaped him.  I remember when I was young, I asked him if he would be upset if he lost a $1 bill.  He's like "Yeah, kind of".  I said "What about if you lost $5" and he said "Yeah, that would bother me".  I finally said "What if you lost $20" and he said "That would bother me for the entire day".  

I just want to put this entire fiasco to bed, but I have a feeling there will be way more conversations about this. 

[finnime]

Sounds promising, Ryan. Here's to a smooth sale closing and divvying up of the proceeds and inventory without conflict. FWIW I think you're quite right about your father's reasons for thinking the way he does. People who go through (relative) scarcity get scarred.