my toxic inheritance

[OldShooter]

I have been casually following this thread. I'm still where I was in Post #5. OP needs to settle on one or two courses of action to pursue. Right now, and from a distance of course, it looks like he's in analysis paralysis. Events TBD will bring that to an end at some point if he doesn't end it by himself.

 

[RunningBum]

(1) The liquidation value of the company is high based on the disposition of a similar company I managed last year. The return on assets is low because of the nature of the business and some poor management practices I inherited that aren't easy to fix.
(2) Just walking away and letting it crumble has problems, too. For example, there are long-time employees and other stakeholders who would be negatively affected. Furthermore, the liquidation value of a biz after operations have fallen apart is likely to be lower than the liquidation of a reasonably healthy ongoing concern.
(3) All talk of salary is irrelevant to my situation. I need more time, not more money.

What about liquidating the company now, and including employees in the proceeds as part of a profit sharing or stock ownership plan of some kind, based on position and years of service? That way they aren't just kicked to the curb. It seems like liquidating is the best outcome for the shareholders as well, unless you want to stay indefinitely.

 

[MatatuPuncher]

It would be real entertaining if we could get the other side of the story to this saga.

 

[Global Wizzo]

I have a relative who inherited stock in a closed corporation from her deceased spouse. She’s not too good with technical matters (including finance) and made some spectacular mistakes with her stock that resulted in couple of lawsuits from an aggrieved co-investor. The anxiety associated with these lawsuits lowered her quality of life for a couple of years although she could afford the lawyer fees. Her lawyer drafted an elaborate defense that totally missed obvious and elementary aspects of her case for a cool $120k in fees. Her case ended up being dropped just before going to trial each time. The first case was by a pro se plaintiff. I was impressed how in the U.S. you can walk up and punch someone and be charged with assault and also walk up, slap someone with a lawsuit, cost your victim a small fortune in legal fees, and not be charged with assault. What’s the difference? (BTW: the complaint filed by the pro se plaintiff was a hilarious rambling mess. How can such a document even be allowed to enter the U.S. legal system?)

I’m in the same boat as my relative. I was gifted stock in a private corporation, and it’s driving me crazy. My quality of life would be so much higher if I could find a way to get rid of my stock. What’s the problem? Well, I’m the only technically-trained stockholder who has held a technical / managerial position in a corporation so 95% of the operating responsibility is mine with a right to only a small fraction of the income / assets. Actually, the money is not the issue, it’s just that I don’t respect my co-investors (all of them are relatives; some are spoiled, entitled brats) and don’t want to be in business with them.

There are various options: sell my stock back to the corporation (not going to happen), sell my stock to another stockholder (might happen), gift my stock to other stockholders (might happen), sell my stock to an outsider (don’t have any candidates). I googled looking for an e-bay-like marketplace where I could list my stock for sale, but didn’t find anything. All of the websites I found are for the pre-IPO private stock of companies that have registered with the secondary market platform. Purchasing my stock on an e-bay-like website would be extremely risky for a buyer, so I would expect a huge discount from liquidation value.

It would be so much easier to decide what to do if my stake in the company weren’t so darn valuable. If I gifted my shares (avoiding the restrictions of the stock purchase agreement) my post-gift net worth would still be quite high, but I have a residual nagging greed impulse that I can’t quite shake. I’m working on it, though.

Anyway, thanks for listening to my rant.

I don’t know if something like this will work, could you gift the stock to a 501.c.3 with some type of an income split for X years?

If so, gets you out of the business, yields some tax and possible income advantages.

One organization I used to be part of received stock donations. There you could earmark the income for scholarships or other targets.

 

[socca]

I don’t know if something like this will work, could you gift the stock to a 501.c.3 with some type of an income split for X years? ...

I investigated this and the initial results weren't too promising. Universities didn't seem interested in private company stock that isn't pre-IPO and thus easy to sell reasonably soon. Is there a small nonprofit somewhere that might accept the stock as a donation? I don't know.

BTW: the website hiive.com claims to be "the" marketplace for private company stock. Well, not exactly. If your company is VC-backed and pre-IPO, then maybe. How about a marketplace for private company stock that isn't VC-backed and isn't pre-IPO?

 

[Canoeboy]

From several hints, I’m going to take a stab at saying this is a very large family farm which is incorporated. Lots of land, family members (shareholders) working hard long days focused on immediate tasks, less so on aspects of business management (focus of the OP). While high net value (land), it has high capital costs, high revenue & expenses with very low/negligible/variable profit margin. If I guessed correctly, it’s not an easy situation to get out of - far more complex than getting out of a traditional business.

Just my guess…

 

[yclipse]

I have a relative who inherited stock in a closed corporation from her deceased spouse. She’s not too good with technical matters (including finance) and made some spectacular mistakes with her stock that resulted in couple of lawsuits from an aggrieved co-investor. The anxiety associated with these lawsuits lowered her quality of life for a couple of years although she could afford the lawyer fees. Her lawyer drafted an elaborate defense that totally missed obvious and elementary aspects of her case for a cool $120k in fees. Her case ended up being dropped just before going to trial each time. The first case was by a pro se plaintiff. I was impressed how in the U.S. you can walk up and punch someone and be charged with assault and also walk up, slap someone with a lawsuit, cost your victim a small fortune in legal fees, and not be charged with assault. What’s the difference? (BTW: the complaint filed by the pro se plaintiff was a hilarious rambling mess. How can such a document even be allowed to enter the U.S. legal system?)

I’m in the same boat as my relative. I was gifted stock in a private corporation, and it’s driving me crazy. My quality of life would be so much higher if I could find a way to get rid of my stock. What’s the problem? Well, I’m the only technically-trained stockholder who has held a technical / managerial position in a corporation so 95% of the operating responsibility is mine with a right to only a small fraction of the income / assets. Actually, the money is not the issue, it’s just that I don’t respect my co-investors (all of them are relatives; some are spoiled, entitled brats) and don’t want to be in business with them.

There are various options: sell my stock back to the corporation (not going to happen), sell my stock to another stockholder (might happen), gift my stock to other stockholders (might happen), sell my stock to an outsider (don’t have any candidates). I googled looking for an e-bay-like marketplace where I could list my stock for sale, but didn’t find anything. All of the websites I found are for the pre-IPO private stock of companies that have registered with the secondary market platform. Purchasing my stock on an e-bay-like website would be extremely risky for a buyer, so I would expect a huge discount from liquidation value.

It would be so much easier to decide what to do if my stake in the company weren’t so darn valuable. If I gifted my shares (avoiding the restrictions of the stock purchase agreement) my post-gift net worth would still be quite high, but I have a residual nagging greed impulse that I can’t quite shake. I’m working on it, though.

Anyway, thanks for listening to my rant.

From the perspective of an estate planner, this is the paradigm situation to demonstrate why the owner of a small business should not simply pass his shares to his children in equal measures if only one is actively involved in the business at the time of his death. He should favor the active one in some fashion; usually a majority share to ensure that the person who knows what he is doing is able to make the decisions about where the business is going.

 

[Kings over Queens]

From the perspective of an estate planner, this is the paradigm situation to demonstrate why the owner of a small business should not simply pass his shares to his children in equal measures if only one is actively involved in the business at the time of his death. He should favor the active one in some fashion; usually a majority share to ensure that the person who knows what he is doing is able to make the decisions about where the business is going.

I'll add, it's a prime example for buy sell agreements funded with life insurance.

 

[Texas Proud]

From the perspective of an estate planner, this is the paradigm situation to demonstrate why the owner of a small business should not simply pass his shares to his children in equal measures if only one is actively involved in the business at the time of his death. He should favor the active one in some fashion; usually a majority share to ensure that the person who knows what he is doing is able to make the decisions about where the business is going.

Or, just pay the person a salary that is FMV... but OP thinks this is not an option so is not happening...

BTW, this also means paying anybody else working FMV which might be a small fraction of the person running the business... but divorce ownership from working...