We spotlighted in a recent blog post some of the complexity that can attach when an adult child turns to parents for business funding, especially for an unproven entrepreneurial venture. We noted the “slippery slope” dimensions of that in our July 17 entry, especially for parents having a hard time being rigidly dispassionate about such an entreaty.
That blog effort touched upon some of the business aspects centrally important to any parent’s decision concerning money transfer to a child to fund a commercial dream. As noted therein, focus on a solid business plan is an imperative. So too is creation of a formal operating agreement that legally chronicles all key business matters. Seeking input from proven commercial law attorneys can materially help with business formation/selection, fashioning rules concerning voting rights, financial contributions and duties, and myriad other matters.
Estate planning concerns can emerge as important, too, especially if there are other adult children not asking for money. A business article underscoring the primacy of estate administration considerations under such a scenario strongly advises parents to “consider family dynamics if there are siblings.”
The urge is not to. Many parents clam up when one child among several siblings voices distinct financial needs. That can – in fact, usually does – lead to conflict down the road if other siblings are materially surprised with details that emerge from a will and other planning documents.
Professional legal advice can help greatly in that sphere, too. As noted in the above article, there can be various ways to treat multiple children fairly in estate planning without making identical distributions to them in a final accounting.
The bottom line for many parents being asked for help by a child in a commercial matter is that important considerations arise in both business and estate planning spheres, respectively. A legal team that integrates these practice areas and has a demonstrated record of proven client advocacy can help in a comprehensive way.