Question: Is a family business synonymous with small business?

Q: My brother and I disagree about the definition of a family business. I say a family business is one that's owned in the majority by members of one family. My brother goes along with that, but he says that a family business also must be a small business. When a company grows beyond, say, 10 employees and $1 million in revenues, it shouldn't be called a family business. What do you say?

A: A lot of people share your brother's idea that family business is synonymous with small business. But I'm not one of them. Neither are the Fords (the car family), the Waltons (the Wal-Mart family), the Bronfmans (the Seagram family) and other family owners of Fortune 500 companies.

In some cases, family owners of a larger company may decide that "family owned" no longer works in marketing or investor relations, so it's down-played. In others, family ownership retreats into the background because the family isn't prominently involved in running the company. But family-owned business is a huge chunk of American business, and regardless of its size any company whose controlling interest is owned by one family is, in fact, a family business.

Q: The father of my golfing buddy recently invited him to give up his CPA practice and come into the family's very successful business, with a promise of the CEO's job when his dad retires in about 10 years. Despite the increased income and other benefits, my buddy is about to turn the offer down cold. He says he doesn't want to trade his profession for a job in a business that the guys at the club would call "dinky." Is he crazy?

A: Let me say first that running a family owned business isn't everyone's cup of tea. There can be personal stresses and management burdens that just don't occur in a non-family company. There's the constant exposure to family members, at work and at home, that gets on some people's nerves. And there are family implications in almost every major business decision. So your friend might not have the temperament and the commitment to take on the leadership of his family's business. If that's the case, it's better to know it now rather than later.

But to get back to your question, yes, I think he's crazy. I don't care how good or bad his prospects are in the family company, turning any business offer down because of his club buddie's opinions is about as nutty a decision as I've seen in a long time.

Q: When my father and his brother inherited the printing company that their father founded, my uncle left management to my father and settled for a smaller stock holding and quarterly dividends. Now that I'm about to take over from Dad, I've been trying to talk to my uncle about what you call "the special conditions and needs of family owned companies," but he won't buy it. He says a family business is just like any other business and all that "special needs" stuff is bull feathers. Should I give up the discussion?

A: Because your uncle's stock gives him a voice in how the company is run, I suggest you keep trying to make him understand the special qualities of a family owned company. Maybe he's trying to ignore the management complexities because he opted out of sharing that burden. In any case, if you're the successor, you have to keep a clear eye on the special needs of the business and the family and run the company accordingly. Good luck to you.

Q: My daughter and her husband want to buy out my interest in the company my late husband started 35 years ago. They've offered a purchase price they can afford, but the monthly payments won't provide much of a comfortable life for me. Is there any way to know if the price is a fair one for both them and me?

A: Commission an appraisal of the company's market value by a qualified business appraiser. Your CPA can probably recommend an experienced, ideally even certified, business appraiser, or you can check the yellow pages. The terms of payment for your stock can be negotiated, maybe with your CPA's help, to provide for your needs. But begin the process with a professional appraisal of the business's real current value.

James Lea, a professor at the University of North Carolina at Chapel Hill, is author of Keeping It In the Family: Successful Succession of the Family Business.

2000Copyright
Provided by ProQuest Information and Learning Company. All rights Reserved.