Differing Perspectives

More and more I realize that the saying “perception is reality” has consequences.  For example, when you read documents, everything is filtered through your personal mental framework.  It is like being an eyewitness to a crime – everyone sees different things. No two descriptions will be the same.

If the relevant, consistent points can be integrated somehow, those differing perspectives may result in improved perception..  I heard an example of this one day.  An expert was talking about observing a contest at a county fair.  The contest involved guessing the weight of a cow.  Over 200 people submitted their guesses.  When all of the guesses were totaled the median weight guessed was 197 lbs…the actual weight was 198 lbs.  The range of guesses was widely dispersed.  The conclusion of the expert was that in a group situation (with a few exceptions) the combined “intelligence” and “perspective” often gives the most accurate result.

Another point to consider is that “facts” are subject to interpretation.  Another example – the U.S. Constitution is relatively short and contains a limited amount of “facts” and “statements”, yet is widely “interpreted” and “imputed” to have broader meaning.

Legal agreements become tomes because of the desire to leave nothing open to interpretation.  Unfortunately, even the best legal documents can’t fully protect you from misunderstandings, differences in perceptions, and just plain ignorance about where lines are drawn.

There are many instances in which people go into business together. What each party is intended to contribute, what is legally proscribed as contributions, and what can legally be contributed can be confused.  For instance, say you are an educational institution.  A not-for-profit corporation is created as a result of some endeavor the school has undertaken.  The not-for-profit is a separate legal entity and the activities it can engage in are restricted to its “charter”.  The school and the not-for-profit share resources and people – that is they have employees who work for both organizations.  The lines begin to blur for the people involved…one big happy family right?  The reality is that these are separate and distinct entities regardless of how those involved perceive them.

The same situation often occurs with for-profit entities.  A person may own more than one company.  The different companies may engage in substantially different activities or substantially the same activities.  The “purpose” of all these entities may be the same in the mind of the owner. That perception, however, would be challenged under legal and tax entity rules.

The mindset of the owner may actually cause the liability protection of separate legal and tax entities to be pierced, but in the beginning the entities are different.  Furthermore, the expenses and revenues of the separate entities are distinct.  To use another example, if you established a for-profit business (C corporation) in 1998, perhaps a consulting firm with the intention of using the profits for some charitable cause, then the expenses of that business and the revenues, the assets and the liabilities belong to that business.  If you start another for-profit business five years later, again for generating funds for the same charitable cause, then those activities while the “same” in your perception, are not legally the same IF the companies are formed as independent entities.  You don’t get to count the expenses in the first company as part of the capitalization of the second company just because, from your perspective, you spent them for the same “purpose.”

Understanding what perspective to take in analyzing and framing your business activities makes a tremendous difference.  In closely-owned and family-owned (and managed) businesses, you often see the roles become confused – when is someone acting as an owner and when is the person acting as an employee.  Who gets to make decisions?

Legal agreements such as articles of organization, operating agreements, partnership agreements, employment contracts, job descriptions, accounting and tax records become critical when trying to distinguish “what you believe or perceive” from what is “legal and a finding of facts”.  Getting them signed and in-place – and making them specific and comprehensive – leaves less up to “perception” and more as defined.  Take the time to clarify, document, and refine agreements.  Get signatures!!!

It is almost inevitable that something will be left up to interpretation.  It is also inevitable that “perceptions” and memory will differ.  While it may not seem like justice, sometimes the best thing to do is walk away when there are differing perspectives.  It is a rare occasion when you can change another person’s recollections of events – even with documentation.  It may not be “fair”, but the reality is that it will often cost you more in time and energy (and money) to pursue your documented claim than you will net.

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