The recent court case of Scafidi v. Hille No. 2014-CA-01261-SCT offers countless reminders for small business owners both experienced and novice about the importance of planning and documenting no matter what the relationship is between the parties involved. While there may be certain factors that may make it seem unnecessary to plan or develop managerial and operational strategies, this case highlights just how messy things can become no matter what the relationship is between the individuals. The overall message is to always plan ahead, document finances and other important information, and remember that when it comes to business, relationships should be set aside.
A Breakdown of the Case
Scafidi v. Hille centers on issues between a brother and sister who inherited a total of three family businesses. Due to the lack of proper planning, the funds were comingled, at one point one or both individuals were kept out of big decision-making processes, funds were not split properly and in the end this led to a huge upset between siblings and a lengthy court battle. The lack of formality in the operation of the business made the case complex and a battle that could have been completely avoided. In the end, each party was awarded a single business each and the third business was sold and funds were split. However, with some planning, not only could they both have been spared legal expenses and the stress associated with such a process, but they could have had three thriving businesses that each one could have benefited from. This case highlights the exact reasons why any business should hire a knowledgeable business attorney to assist with the process.
What Could Have Helped?
In short, a simple business plan would have made a world of difference. There should have been a written agreement that decided who did what and when. In that agreement, there should have been managerial outlines as well as the outcome of any meeting that was held between the two owners. Proper planning and documentation would have saved time, money, and potentially kept the business thriving in the family for years to come. This case and cases similar to it lead to deep fractures in relationships. Again, this could all be avoided with the proper planning. While it may be tempting to skip steps simply because of the relationships between business partners, people should leave nothing out. If nothing else, it protects the relationship just as much as the business.
Any business requires an element of effective planning. Seeking the advice of an experienced business attorney will help avoid issues such as the ones described in the case above. Attorney Kristina Reed is located in Sacramento, California. She is an experienced business attorney that provides each of her clients extensive assistance with business planning to help establish expectations and long-term goals. She is ready to talk with you about your business and help you avoid costly mistakes in the future.