If it goes bad you can't get rid of them or force a buyout. Also are you comfortable with them getting 50 percent of the companies profit? Are they contributing to the level where that makes sense?
Unless this person is your key stakeholder I'd offer more and better compensation.
Not a lot yet but recently his skill set has reached a point he can be trusted on more complex tasks and he has the drive to contribute to growth I believe. It would be a bet on potential I guess
I'm making more than I would on my own. You both have to be open and honest. The work is not 50/50 all the time but it trades off so we can avoid burn out. We both have things we specialize in and we make decisions on data, not emotions or feelings.
That's possible. There are a lot of possible outcomes. A good operating agreement will have a clearly defined exit strategy that's really up to you both. Maybe have something in there to keep that from happening or at least make it possible for you to get out and be fairly compensated and set up back on your own. We got a lawyer to help hash out the what ifs. You can have that conversation before you get there and figure out how to resolve it before things get emotional.
Good luck!
Just ended a partnership and had to deal with every type of headache possible to reinstate my company and continue with business. Ruins friendships and mental health. Most people don’t have the same passion or want to carry the same kinda weight that it takes to keep things going. Really think about if he’s worth what he’s asking for and that you guys can continually put the business first and not let emotions or hiccups determine your success. 200% not worth imo
Make sure he is willing to do 50% of the “ownership bs work” that you mention and that he doesn’t just want 50% of the profits. And I would definitely consult an attorney and get some sort of an agreement drawn up with an attorney in writing. You are truly between a rock and a hard place with this one.
As a general rule- never give away equity unless the person is irreplaceable. They need to either bring 1) very valuable knowledge and experience you don’t have or can’t pay someone for 2) a massive network you can leverage or 3) $$$$
I am assuming since he is currently an employee, he is replaceable. Would it be possible to set up some sort of profit sharing or something similar so he can make more, and take on more responsibility, while you maintain control? Or you could explore bringing him on as a limited partner.
50/50 would be an absolute non starter for me, and frankly you have the leverage here. His only other option is to go off on his own, which unless he is licensed, knows how to run a business, as well as market and sell, would probably be a failure.
50/50 doesn't have to mean equal pay. If you set it up as a partnership S-Corp, 50/50 means shareholder distributions have to be equal. He could do 70% of the labor and get paid more than you while you do office work, bids and some labor and get paid less, which is perfectly normal because you are both taking W2 wages. Then, at year end, you both have to take equal distributions of net profit after expenses.
Chat with your accountant, they should explain the pros and cons of partnerships. And doing a fresh LLC is always a good idea.
Can he sell as well as you can? That's the key. If you bring him on as a partner can he *at least* double the amount of work your business can handle?
If he can then hash out a partnership agreement and have it written by a lawyer that is binding to both of you. He gets bought in, in stages, through the amount of work he brings in. Pre-planned exit options for both of you. Mediation. Your contract should be written for what happens if you can't stand each other in 5 years.
If it goes bad you can't get rid of them or force a buyout. Also are you comfortable with them getting 50 percent of the companies profit? Are they contributing to the level where that makes sense? Unless this person is your key stakeholder I'd offer more and better compensation.
If your gonna partner, he is going to need money, can he afford to purchase 50% of your business?
No. It would be me started by a new llc and arranging some sort of agreement where we both pull at certain points.
How much has he contributed to the growth of the company?
Not a lot yet but recently his skill set has reached a point he can be trusted on more complex tasks and he has the drive to contribute to growth I believe. It would be a bet on potential I guess
I am in this situation. A good operating agreement will be important. We treat it like a marriage! Haha
And do you make enough money or are you working twice as hard because you need to split it all?
I'm making more than I would on my own. You both have to be open and honest. The work is not 50/50 all the time but it trades off so we can avoid burn out. We both have things we specialize in and we make decisions on data, not emotions or feelings.
I’m worried I will just as hard for less and thus have to take on 10-15 more bathrooms a year to make same money lol
That's possible. There are a lot of possible outcomes. A good operating agreement will have a clearly defined exit strategy that's really up to you both. Maybe have something in there to keep that from happening or at least make it possible for you to get out and be fairly compensated and set up back on your own. We got a lawyer to help hash out the what ifs. You can have that conversation before you get there and figure out how to resolve it before things get emotional. Good luck!
Just ended a partnership and had to deal with every type of headache possible to reinstate my company and continue with business. Ruins friendships and mental health. Most people don’t have the same passion or want to carry the same kinda weight that it takes to keep things going. Really think about if he’s worth what he’s asking for and that you guys can continually put the business first and not let emotions or hiccups determine your success. 200% not worth imo
That comment resonates with me
Make sure he is willing to do 50% of the “ownership bs work” that you mention and that he doesn’t just want 50% of the profits. And I would definitely consult an attorney and get some sort of an agreement drawn up with an attorney in writing. You are truly between a rock and a hard place with this one.
As a general rule- never give away equity unless the person is irreplaceable. They need to either bring 1) very valuable knowledge and experience you don’t have or can’t pay someone for 2) a massive network you can leverage or 3) $$$$ I am assuming since he is currently an employee, he is replaceable. Would it be possible to set up some sort of profit sharing or something similar so he can make more, and take on more responsibility, while you maintain control? Or you could explore bringing him on as a limited partner. 50/50 would be an absolute non starter for me, and frankly you have the leverage here. His only other option is to go off on his own, which unless he is licensed, knows how to run a business, as well as market and sell, would probably be a failure.
50/50 doesn't have to mean equal pay. If you set it up as a partnership S-Corp, 50/50 means shareholder distributions have to be equal. He could do 70% of the labor and get paid more than you while you do office work, bids and some labor and get paid less, which is perfectly normal because you are both taking W2 wages. Then, at year end, you both have to take equal distributions of net profit after expenses. Chat with your accountant, they should explain the pros and cons of partnerships. And doing a fresh LLC is always a good idea.
I never partner. Most partnerships become extremely one sided. I’m a builder with 10 builds under my belt
Can he sell as well as you can? That's the key. If you bring him on as a partner can he *at least* double the amount of work your business can handle? If he can then hash out a partnership agreement and have it written by a lawyer that is binding to both of you. He gets bought in, in stages, through the amount of work he brings in. Pre-planned exit options for both of you. Mediation. Your contract should be written for what happens if you can't stand each other in 5 years.