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C IL | I’ll play one more time since you are being deliberately obtuse.
The point is, 1. is model farm child A an employee of your parents, and if so, is model farm child A being reasonably compensated for labor? Are the expectations of model farm child A the same as would be for outside labor? Or is part of model farm child A’s compensation overt or expected equity in an operations? And if so, why isn’t it written down.
The point, 2: to be fair to model non-farm child B, there should be a division between assets the parents held and the value of the operation at the time farm child A entered the operation as more than arms-length labor, and the projected value of those assets at the time the parents exit the operation, vs the actual value of the operation at the time the parents exit. Presumably in many cases the value of the operation, after a succeeding generation brings in enthusiasm, labor, outside thinking, new management etc would exceed the value of an operation left to dwindle down. The child, or could be said functional operational partner, should receive cash or equity equal to the additional value they created for the business. Could be 50k, 500k, dairy lost it all, maybe it’s $2M. Dunno. But That is how capitalism works - people respond to incentives. Then the remaining adjusted equity that the parents control can be split up however they want to do it - it’s their stuff.
That is the point. People do things that aren’t economically efficient all the time. Doesn’t mean it’s not dumb.
Edited by sand85 2/12/2019 19:51
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How is the young guys suppose to carry on?
