By Dave Ramsey

Dear Dave,

My father is one-third owner in our family business. He isn’t involved with the company anymore, but he still insists on taking a salary. I’ve become a little bitter over the situation, and I was wondering if you think there’s a solution or if I should just get over it.

- Tracy

Dear Tracy,

As an owner, especially one who is no longer actively involved in the company, he should be getting a distribution of the profits, not a salary. Specifically, he should receive one-third when the profits are distributed.

From what you’ve said, three owners form a board, or counsel, and you three direct the leadership and management of the company. If two of you outvote your dad on issues, he has to live with it because he’s what’s known as a minority owner.

Let me give you a visual. Draw three concentric circles so that they all overlap in the center. Any given two of them overlap on the sides, correct? It should look a bit like the Olympic symbol—a Venn diagram. In each circle write “owner,” “management and leadership” and “family.” This is a standard family-business diagram. Most problems in family businesses come when someone forgets which circle they’re in. You could be a member of the family but not have any ownership or be in leadership. You could be in leadership but not be part of the family or be an owner. You could also be a member of the family and be an owner but not work at the company. That would be your father.

I think you guys have to reset things in your business. It’s time for the working owners to sit down with your father and have an adult conversation about the mistakes that have been made where salaries and profit distributions are concerned. The discussion should be professional and gentle and go something like this: “Dad, we all set this up in the beginning. But we’ve made some mistakes because we shouldn’t be paying a salary to people who don’t work in the business."

“You’ve been repaid for your venture money and, from this point forward, you’ll be getting a distribution of profits instead of a salary. We think this is fair and reasonable. If you don’t agree, then we can discuss buying you out of your third of the company.”

I have two daughters and a son-in-law who work for me at my company. I love them with all my heart, but when we’re inside the building at work, we put on our professional hats and my name is Dave. I’m the boss and the CEO, not “Dad.” They work within their departments and answer to their leaders and to me. Then, when we sit down to dinner or get together for weekends and holidays, we switch gears and put on the family hats. It’s just Dad and the kids.

But you’ve got to have a professional relationship inside the family business. Otherwise, stupid things will happen or you’ll end up wanting to kill each other!

—Dave

Dave Ramsey is a personal money management expert and national radio personality. His three New York Times® best-selling books – Financial Peace, More Than Enough, and The Total Money Makeover – have sold more than 6 million copies combined. His latest book is EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches.

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank.