...to think that my sister is being a bit greedy (family business)?

[Financeprincess]

My sister set up a business about a year ago. She'd been made redundant almost three years ago, and has two small children. She's divorced. The business uses the skills she developed when working.

In its first incarnation, she invited a retired family member, in an advisory capacity, plus a former colleague to join her. The former colleague insisted that her husband also be made a shareholder "so that she wasn't in the minority", and my sister agreed. He didn't have any skills to bring. They each held 25% of the shares.

Things soon went wrong and after much acrimony, my sister and the family member bought out the former colleague and husband. This summer, my sister asked me to join the business. I'm a chartered accountant, and have many business skills that the operation lacks. I work full time and live 60 miles away from my sister and the other family member.

As background, I've always been very generous towards my sister, both with time and financially. She's just over a year my junior, and has always been in my shadow rather. I've had a much more successful career, for example, but I've never made a big deal out of it. Just recently, my career has stalled a little. So, being involved with a start up might revitalise my CV a bit.

At the first board meeting, the matter of shareholdings came up. I suggested 30/30/40 in favour of my sister. Her previous share, under the old ownership, was 25%. The retired family member said that she "just wanted to help [my sister]" and was willing to go down to 10%. She thought that I should have the same as her.

I said that I'd be willing to compromise at 20%, but since they were asking me to be finance director, build and run a website, twitter feed, web interface etc., and undertake considerable travel on company business, I felt that anything less wouldn't really be worth my while. I thought that it was important for us to be able to communicate calmly and sensibly, like (some) business people, rather than getting involved in the emotional stuff that often comes with family businesses.

My sister is not the most emotionally mature person; I love her, but she can be difficult if she doesn't get what she wants. She sulks and avoids conflict, which makes her passive aggressive; anybody who offends her must be made to pay, you know the sort of thing. She's also quite keen on imputing sinister motives to people. The other family member is from the same mould. I'm not perfect, but I'm not like them. Anyway.....

After the meeting, I spoke to my sister. She said that the business was her idea, that it should be hers and that she didn't think that I or the other family member deserved more than 10%. She said that she might not want me working in the business after all because she was worried that we'd fall out, citing previous sibling quarrels (of which there are few), that she didn't see that I brought much value and that she only asked me to join the business "to give me a bit of interest" (gee, thanks!). She then burst into tears and told me that she'd had a difficult year, so why couldn't I just do what she wanted? It turned into the usual routine: me treading on eggshells to avoid her sulks.

I said that 20% would be fair for somebody you expected to be your finance and IT director, as well as performing other duties in the business. She said, "just put in 10% of the effort then".

I think she's being quite greedy and selfish, frankly. I'd waive dividends, and she's drawing a salary as well as other benefits from the business. There's no way I'd short change her financially. Families are not like Dragons' Den, but I think that in a family business, you have to be businesslike and leave the personal stuff at the door. Also, she was prepared to give her colleague's husband, with no skills, 25% when she set up the business. Why am I only worth 10%?

I'm wondering about walking away, or at least making it clear what I'm prepared to contribute in exchange for 10% (which will be less than I'm doing now; I've been asked to give up 40% of my annual holiday entitlement for business-related activities, plus is it fair to ask me to drive 120 miles round trip for regular board meetings?). Not sure whether I'd be cutting off my nose to spite my face though.

AIBU? Any thoughts? Thanks.

Whether you are accurately valuing your skills is less relevant or important than the fact that you and your sister differ about the value of your skills. Doesn't much matter who is right, it's the fact you can't agree that indicates this arrangement is probably not a good idea.

Plus you and she don't sound as though you will rub along together easily-too much of the kind of the business relationship is going to bring to the fore issues in the sibling relationship.

I agree, walk away. I wouldn't want to be involved in a business with a major shareholder who considered sulking and stropping acceptable behaviour.

(And I love your smackdowns OP - please stick around!)

To comment, I would be interested to know what your sister is providing to justify her 80%. How much capital has she put in? How much of her time does she commit to it relative to what you would be committing? Is it a novel idea? Any IP?

surely as a fledgling family business, who owns the shares is not the most important thing at the moment. Why are you so obsessed with titles of what kind of Director or job description. Most family business involve mucking in doing anything, the job description means nothing because the truth is you will be doing everything. you are also likely to get very little reward for 3-5 years.

I wouldn't touch it (the business) with a bargepole. Sounds like it'd be nothing but hassle and grief getting involved.

soul2000 obviously has some experience in this area.

more mucking in.
less I am the Finance Director

I would walk away, and had to do something similar with a friend.

It sounds like you have an awful lot more business acumen than she does, which will probably mean clashes a-plenty over the coming years.

When it comes to exit, for example, would she take a lower figure with an earn-out, over a higher figure without?

Would she be willing to add leverage to the business or dilute her holding to attract more investment?

The issue I had with my friend was that she was a total control freak who loved the idea of it being 'her' business and was therefore unwilling to lose the bragging rights.

I tried many times to explain that owning 30% of something worth a million quid would be miles better than owning 75% of something worth a couple of hundred grand, but she was totally unable to see the bigger picture and this ultimately signaled to me that it would be futile to try and bring in the other investment needed to grow the business (I wasn't after a big equity stake, btw, but part of what I was trying to do was bring in external investment)

Rather than fall out over it, I walked away fairly early on in the process and there were no hard feelings. Predictably, the business is still bumping along, but will never be where it could have been with a bit more resource behind it and probably never will be. But to have had me always pointing out the gaps in her finance and business knowledge would have just lead to huge resentment and a falling out.

what pretty much everyone said. I also think you know in your gut that it won't work if you are arguing already about it.

but I also like how you stood up to people on here too.

I'm in business with my DP and a mutual friend. My DP has the majority share. When we are in work-mode, we have to leave our friendship/relationship at the door and operate in business mode. This does mean that sometimes we fall out, but it's important to separate the two streams of life. It's not easy and takes maturity on everyone's behalf to acheive. Your sister sounds like she is unableto make this distinction. You're not there to do her a favour, you're making a valid contribution that should be recognised. Alas this is the hard part of entering a professional relationship with family and friends.

The way you describe it as a family business makes it seem that you feel you are entitled to a share. It's not a family business - it's her business. If you do the work, be paid on a consultancy basis.

Walk away. On no account go into business with your sister. She sounds like a fucking nightmare. I've been involved in a lot of startups and I can tell you from your OP alone that if you carry on it will not end well.

If you want something new to do, start your own business.

Walk away, this has disaster written all over it!

OP is your sister an expert at any part of the business?

Don't get involved. She wants you to do the strategy work, which is a great deal of networking and thinking, plus the financials and aid make the business worth more in 3-5 years, if everyone agrees with your business model. Already you can see that there will be arguments and she says its her business and will do it her way.

Who would be company secretary? That's work too.

10% isn't worth it. Plus as a family member you will not be able to avoid working as and when, discussing it all the time etc etc.

As to any agreements on leaving the business, exit strategy etc, if she doesn't have a business plan or any idea how she would get there, and doesn't really want to hire anyone and pay them, it is unlikely to happen. You need to get a company lawyer involved to thrash out what would happen in the event of an exit strategy paying off, as she will trot out " its my idea etc etc"

Either take the 10% and work for a fee ( according to your worth now) as well as a show of goodwill from her, mainly as I assume you are happy to give up weekends, holidays etc. then if she makes millions and you only get 10% she can gloat, but you will have been paid for your time, which is only fair, and at considerably less risk, plus 10% for taking on directorship.

Also speak to a lawyer re if you want to sell your share and resign from the business. Or just resign but retain the share:)

Walk away. Keep your relationship with your sister...

Thanks ladies. I'm getting the 'walk away' message loud and clear! Lovely to have some really good advice, both from people who have been in this position and those who can take an objective view.

Some clarifications for certain contributors:

I don't "feel entitled to a share of the business". My sister asked me to join and become a shareholder in exchange for assuming a number of responsibilities. If we weren't related, nobody would consider this to be a case of misplaced entitlement.

Also, I do plenty of mucking in, thanks, and I'm not "obsessed with titles". My sister asked me to be finance and IT director. That doesn't mean I think I'm too good for sorting out mailing lists/ checking out premises etc, so don't be too quick to stick the boot in.

Finally, I've been a qualified CA for 14 years, have worked extensively with large and small businesses and started my own business 8 years ago, which I closed 5 years later, despite the fact that it was doing well, because I was too busy with a new job to give my clients my full attention. So I hope that sets some of your minds at rest, and I won't be answering questions to prove it. No, I was not running a brothel.

You should know, as an accountant, to steer well clear of this situation.
Partnerships usually end up in discord, family partnerships can be horrendous when the fall out occurs.

Write a list of the pros and cons of joining your sister's business. You may need some additional space for the latter, but not the former. Then do as the others say and run a mile!

In my personal experience mixing business with friends and family can be a complete nightmare and best avoided. The fallout for all family members whether in the business can be awful. I wouldn't go there!

Jaysus, we believe a handful of trolls every month, but we cannot believe a woman's word when she says she is an experienced chartered accountant?

Is this so unbelievable?

i dont think anyone has questioned if she is a CA or not. i have questioned if her experience is relevant to running a small business.

i employ an accountant. i listen to what they say. but that is a very different skills set than running a business. and thats not an insult.

an entrepreneur is a very different skillset than a good accountant, in most cases.

Tell that to Heston Blumenthal and Ann Maree Morrison. Both are qualified accountants and successful entrepreneurs. Cheers!

Walk away from the shares % and take a salary (a proper one for the amount of time/effort you are doing), or walk away entirely.

OP At the first board meeting, the matter of shareholdings came up. I suggested 30/30/40 in favour of my sister.

so you work FT in your current job.

so she gives you 30% of her business then works FT in the business you both own?

and your small business experience was running your own co for 5 years then getting a job working for someone else?

and you really think she is being unreasonable?

there is no point commenting any further. so I will wish you well and leave it at that.