Wendy & Jen Wreck the Movies: Hobson’s Choice (1954) or The Importance of Not being a Jerk

May 19, 2022 | Wendy Hoey Sheinberg | Jennifer F. Hillman | Trusts & Estates

What Happened:

Henry Hobson is a widowed blowhard who fancies himself superior to everyone because he owns a shoe business.  Hobson’s daughter Maggie actually runs the business, but Hobson does not pay her.

Hobson is downright nasty to most of the people in his life.  He demeans Maggie and tells her she is too old to marry.  At the same time, he refuses to provide marriage settlements for his other daughters Alice and Vicky and refuses to let them marry their chosen beaus (Albert Prosser, Esq., and Freddie Beenstock, respectively).  Hobson also belittles his star employee Will Mossop in front of customers which leads one very posh customer (Mrs. Hepworth) to vow that she will never set foot in Hobson’s shop again.  When Hobson isn’t busy bringing sunshine into everyone’s lives, he can be found at the local pub.

Maggie and Will bond over their shared love of shoes and hatred of Hobson’s bullying ways.  Maggie and Will eventually decide to marry.  Hobson responds to the engagement by threatening Will with a belt and raging that their wedding will make him a laughingstock of the community.  Thereafter, a fist fight ensues, and Will and Maggie walk out, leaving Hobson to tend his own business.

Maggie and Will visit Mrs. Hepworth who supplies them with a small business loan.  Together, Maggie and Will develop W. Mossop, a high-class shoemaker.  As any good business (and life) partner would, Maggie recognizes and acknowledges Will’s value.  Maggie also works with Will to improve his education and business savvy.  Maggie knows that exploiting a business partner is a recipe for failure.

Hobson continues to self-medicate with alcohol while spewing his venom of hateful entitlement at the local pub.  On the night of Maggie’s wedding Hobson drinks himself into a hallucinatory stupor.  While walking home from the pub, Hobson jumps into Beenstock’s cellar where he damages the storeroom and the inventory.  Beenstock sues Hobson for trespass and damages.  Hobson settles the matter out of court by providing Alice and Vicky with marriage settlements so they can marry their beloveds (the aforementioned Albert Prosser, Esq., and Freddie Beenstock).

Undeterred, Hobson continues on his path of self-destruction, while Maggie and Will build a thriving business.  Hobson’s doctor diagnoses him with chronic alcoholism, declares he cannot live alone and threatens to have Hobson certified.  Vicky and Alice refuse to help and insist that Maggie has to take care of Hobson.

Hobson finally “allows” Maggie to move in and stingily offers to pay Will his old salary and half of the house expenses.  Maggie and Will lay down the law and announce they will only come back as equal partners, with Hobson as a silent partner.  In a shocking moment of reason and clarity Hobson agrees to their terms.

What should have happened:

Maggie meets Wendy and Jen at a networking event.  Maggie tells Wendy and Jen that she ran her father’s business (Hobson’s) for years.  Maggie also tells them that her father went to great lengths to diminish the value of her input.  Every year Maggie asked to be paid a salary, and every year Hobson weaved a convoluted tale about high carrying costs and little profit (even though Maggie kept the books).  Maggie tells Wendy and Jen that Hobson pays no attention to the business because he is too busy cavorting around, taking long vacations and spending his days drinking expensive wine at fancy restaurants.

Maggie reveals that her fiancé Will Mossop is a wildly talented craftsman who has developed quite a following as the classy cobbler of the well-heeled set.  Maggie says that Hobson failed to realize Will’s genius and constantly belittled his contributions.  After Maggie and Will announced their engagement, Hobson threw them both out on the street.  Maggie tells Wendy and Jen that she and Will are opening a new shoe business called “Mags & Mossop.”

Wendy and Jen congratulate Maggie on her newfound independence and explain that Maggie and her fiancé must carefully consider what type of entity to form for the business.  Wendy and Jen explain that Maggie and Will need to address important issues such as how to divide equity and profits, in addition to terms related to repayment of their start-up loan.  Maggie is grateful for the advice and so happy to be taken seriously after years of exploitation by her father.

Maggie meets with Wendy, Jen, and their partner Kate Heptig.  Kate is immediately smitten with the Mags & Mossop ballet flat and swears her undying loyalty to the brand.  Kate then listens to Maggie’s business plan and recommends an S Corporation.  Kate tells Maggie that Will must hire a separate attorney to review the shareholder agreement on his behalf to avoid a conflict of interest.  Kate forms Mags & Mossop, Inc. and drafts the shareholder agreement which gives Maggie a 51% interest and Will a 49% interest.  The shareholder agreement clearly defines each shareholder’s responsibilities as well as the liability for current and future debt.

Maggie and Will sign a prenuptial agreement and have an amazing wedding.  Their guests dance until dawn in their Mags & Mossop limited edition wedding footwear.

Mags & Mossop, Inc. becomes widely successful; Maggie and Will pay off their loans and make historic profits.

Business-savvy Maggie wants to create a global online presence allowing people to buy Mags & Mossop footwear from anywhere on the planet.  Maggie creates a platform that allows customers to upload their foot measurements and style preferences to a proprietary portal which designs and delivers a customer’s bespoke Mags & Mossop footwear to them in fourteen days.  Kate helps Maggie form Maggie’s Molds, Inc.  Wendy and Jen explain to Maggie that the individual investment in Maggie’s Molds, Inc. might be eligible for Qualified Small Business Stock (QSBS) treatment which will allow Maggie to exclude much of her capital gain when she later sells some of her shares.  Maggie works with Wendy and Jen’s partners Mike Cannata and Nancy Del Pizzo to secure appropriate intellectual property protections and license agreements.  Maggie also works with Wendy and Jen’s partner Lou Vlahos to make the proper tax elections.

The next year Maggie tells Wendy and Jen that her father (Hobson) has asked Maggie and Will to become partners in Hobson’s sole proprietorship.  Hobson wants Maggie and Will to become his live-in aides and give up their successful businesses to become 50% partners in his floundering shop.

Wendy and Jen have a lot of questions and some suggestions.  Wendy and Jen want to know why Hobson needs round the clock care.  Maggie explains that after a lifetime of alcohol abuse her father has about six months to live.  Maggie says Hobson has been experiencing hallucinations.  Hobson’s doctor has concluded that he cannot live alone and has threatened to have Hobson certified.  Maggie tells Wendy and Jen that her two younger, self-important, and snobby sisters have declared this to be Maggie’s problem and not theirs (they have always resented her success).

Wendy and Jen explain to Maggie that if Hobson lacks capacity, he can’t enter into a valid partnership agreement.  Wendy and Jen also explain that Maggie would likely be considered Hobson’s caregiver, and business arrangements with caregivers are subject to heightened scrutiny since the relationship can easily lead to undue influence.

Wendy and Jen also emphasize the inequity of the agreement.  Mags & Mossop, Inc. and Maggie’s Molds are thriving, independent, debt-free businesses.  Folding two thriving businesses into a floundering partnership is like driving a brand-new car off a cliff.  Additionally, there will be tax consequences because joining the entities will either be considered a sale or liquidation, with specific tax consequences.  Assuming Hobson has capacity, the better option would be to buy the name of his business and the real property for its fair market value.  Wendy and Jen also caution that Hobson must have an independent attorney of his own choosing.  Not only does independent representation avoid a conflict of interest, but it will help to substantiate the lack of undue influence and Hobson’s ability to advocate on his own behalf.  The structured buyout can provide Hobson with equal monthly payments, which he can use to hire a housekeeper and a cook.

Hobson completes a full neurological assessment.  Wendy and Jen send the proposal to Hobson’s attorney and son-in-law Albert Prosser, Esq., who reviews the terms.  Hobson complains to Albert that the proposal does not really offer him anything but a take-it or leave-it option.  Albert explains that the proposal gives Hobson a way out of the hole he dug for himself and lets him live independently without having to answer to Maggie.  Albert also explains that Hobson could try to sell his business to someone else. Ultimately Hobson rejects the offer and moves in with Alice and Albert.  Maggie and Will, breathe a sigh of relief and continue building their global empire.  In 2022, Maggie is named business leader of the year by Snazzy Shoe Magazine.  Netflix even options the rights to Maggie’s life story.  Wendy, Jen, and Kate all attend the world premiere of the heartwarming movie “Maggie’s Magic” wearing sparkly Mags & Mossop limited edition shoes.

Building a business involves growth and the ability to recognize and encourage the talents of the people around you.  Forming a business involves complex organizational and tax issues that must be considered. Business is business, even when it is family.  It is important that all stakeholders have the opportunity to consult with independent representation.  Solving for potential issues at the beginning of a business relationship helps to avoid actual issues down the road.  Your business is your livelihood, and it is important to consult with knowledgeable, experienced attorneys.

Save the drama for the movies.

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