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Still working on partnership

Discussion in 'Business Operations' started by The landscaper, Jan 4, 2006.

  1. The landscaper

    The landscaper LawnSite Senior Member
    Posts: 845

    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.
  2. J Hisch

    J Hisch LawnSite Senior Member
    Posts: 952

    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..
  3. Envy Lawn Service

    Envy Lawn Service LawnSite Fanatic
    Posts: 11,062

    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.
  4. eruuska

    eruuska LawnSite Senior Member
    Posts: 454

    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.
  5. The landscaper

    The landscaper LawnSite Senior Member
    Posts: 845

    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.
  6. chimmygew

    chimmygew LawnSite Senior Member
    Posts: 576

    OK, being as though you are 19. I am assuming that your prospective partner is a close friend.

    HOOLIE LawnSite Gold Member
    Posts: 3,981

    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???
  8. The landscaper

    The landscaper LawnSite Senior Member
    Posts: 845

    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.
  9. The landscaper

    The landscaper LawnSite Senior Member
    Posts: 845

    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.
  10. The landscaper

    The landscaper LawnSite Senior Member
    Posts: 845

    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.

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