View Full Version : Still working on partnership
01-04-2006, 08:58 PM
I was working on a new way to go about my partnership. I was thinking about having the guy who is planning on buying half the company out, working as an employee instead. He will be making 10 bucks an hour or somewhere around that. He will then gain a percentage of the company at the end of each year. He will help in the shop and with all the advertising and such. This will all be done on his own time. What would be a good percentage each year eventually working up to 51-49. I would imagine it should take atleast 5 years or so before he is half and half with me.
Also, what do I do in year 2, if he owns 5% plus is making 10/hour?
A lot of confusion there. Sorry about that. Any input will be appreciated.
01-04-2006, 09:08 PM
so your allowing someone to earn part owner ship for a little sweat equity? Be careful, if you give him 5% remember he owns 5% you may want to establish something of a profit sharing percentage without any legal control. What if he gets to 49 percent and wants to be bought out? That would stink. Or he is part owner only as long as he works there, meaning he leaves he leaves everything. I would never give up a portion of my compnay unless a considerable payment was made to me. Then I dont think I would still go for it. Partnership one of two thing happen. Problems when the money comes in or when it doesnt come in. Seek out legal advise..
Envy Lawn Service
01-05-2006, 04:26 AM
Yes, you need to seek professional consultation on partnerships.
Consult an attorney for legal info.
Then consult a full service financial professional.
By financial professional I don't mean just some guy who just calls himself that when in reality his core business is stocks, bonds and mutual funds. Instead you need a truely full service firm that is also licensed in insurance and does a lot of business planning, partnerships, trusts, estate planning, ect.
I'm telling you as someone who has personally been in the field and done the work.
Partnerships are EXTREMELY COMPLICATED agreements and business entities.
Anyone who would advise you otherwise is either an idiot or a crook.
01-05-2006, 10:07 AM
How about the best advice of all: "Don't do partnerships!"
Have you not read all the horror stories here? It just ain't worth it. For every time it turned out well, there are probably 8 that turned out crappy. If your prospective partner is a friend or relative, you will lose that relationship. If you're the hardworking half of the partnership, you'll lose money. Unless it's a legal partnership with signed documents all the way around, it WILL be a nightmare. Even WITH the proper documents, it will likely be a nightmare.
01-05-2006, 12:26 PM
It is going to be well planned out. I have a law prof. at school that I will be working with to make sure everything is documented.
I am going to the route of having him work as an employee for a couple reasons. This gives me a chance to make sure he really wants to do this and work hard at it. It will also give him all the incentive as he would if he owned half now because every job he picks up or every customer he keeps happy will in time be his.
I plan to have all the agreements neccessary and in that, I plan on having a clause on selling the business. He would not be allowed to sell his half to someone outside the business.
I know a lot of partnerships don't work out well. But, I would also say most are not planned at all! They prolly just start working together and call it a partnership. I am in a different situation that most and with all my planning ahead I believe the partnership will help me out the best.
I will prolly get the answer from my law prof. but, just in advance. How would I go about paying him if he is making 10 bucks an hour and owns 10% of the company. Would he get his 10 bucks an hour and then at the end of the year get 10% of net profits.
One last thing. I may have him pay a smaller amount still to buy in after the sweat equity....still something we have to work out.
Thanks for all the help.
01-05-2006, 12:32 PM
OK, being as though you are 19. I am assuming that your prospective partner is a close friend.
01-05-2006, 12:32 PM
What is your reasoning for adding a partner??? You're already not sure if he is really into this line of work. So what's this guy bringing to the table???
01-05-2006, 09:57 PM
He is in a horticulture program. He will add a lot of diversity.
I didn't mean that he wouldn't like to do this line of work. More of a trial period to make sure a partnership is going to work. I don't have enough time and also want to get into other things are some reasons for wanting a partner. I have tried to past couple years to manage from school, but its too much of a headache.
01-06-2006, 11:57 AM
Has anyone done this type of buy in?
I'm just curious as to how to pay him once he starts owning part of the business.
01-06-2006, 06:47 PM
Another option I am now looking into would be after 2nd or 3rd year giving him the option to buy out 49%. To me, that seems to be less hassle than the previous thought.
01-07-2006, 11:06 PM
When I was in college, I had a Business Law Professor start out the chapter on partnerships with this phrase, "This is what you need to know about partnerships, DON'T DO IT !!". Next chapter!
That said, from what you are saying, you own the business and he is going to work for you, get paid $10.00 per hour, and not put anything into the business other than work. What is in it for you? You said he is in a Horticulture program, So what!! I wouldn't give a graduate of any program part of my company because I am still going to have to train them, regardless of what school they went to and how good a program it is. It's just not the same, school, and the real world. I don't have anything against College graduates or Hort programs, I put my nephew through school, Landscape Design at UTK, he done very well. Graduated half a year early, 2nd in class. Would I give him half my business?.................NO I still have to train him in how everything gets done. Just because you know the name of a plant doesn't mean squat.
If I did have to , and really have to, add a partner, they would pay in cash or equipment what ever percentage you are selling/giving up each year. If your business is worth 100,000 K, he needs to have 5K on the table, or at least a mower or other equipment worth 5 K. After you have done this, he should get 5% of PROFITS at the end of each Quarter. Don't wait until the end of the year. Next year if he goes to 10%, he needs another 5% of what the CURRENT value of the company is.
Don't give away anything.
01-08-2006, 07:34 PM
I will give you my 20 years of advice in the service oriented field. Don't do it! Period! Have him as a high up foreman for you, or have him start his own business and work that way. But you are in for a legal $$$ battle down the road, not tomorrow, not next week, maybe not even in 5 years, but it will come. No disrespect intended at all towards either one of you, but in my business past expierence, partnerships burn out like a candle.
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