Buisness Partners

Subia29

i need information on parternship 50/50 base. I' m recenting in the homeowners market ,trying to break away and get into small commercial & work with residential builders.A friend of mine has been encouraging me to take that leap.I supply a registured buisness under my name and license, he supplies the captial,and know's many G'cs. His proposal is a 50/50 profit share. He's also good w/ his tools and reads plans well.I know alot companies start off this way to get bigger jobs. The way i see it ,I'm getting the upper hand , but still thinking about the cons, Im already starting my buisness plan ,but need info ,Maybe some tips on buy/ sell agreement or other info . oh yeah Besides proper insurances, he mentions corperation is a must.

send_it_all

Get a lawyer...no matter how good a friend he is. DO NOT DO THIS WITHOUT AN ATTORNEY!!!!!!!!!!














I REPEAT......DO NOT DO THIS WITHOUT AN ATTORNEY!!!!!!1

Mike Finley

The best advice you will never follow -

Don't do a 50/50 partnership.

Business by committee is a disaster.

55/45 - somebody has to be in control.

Subia29

Already in the plan . Good advice. anything else?

Vermaraj

If you already have an established business keep it seperate. Your partner can start his own business and the two of you can enter into a partnership as two businesses engaged in a jont venture.

Under this scenario whatever protections your corporate structure has (llc, llp, s corp) remain intact. Also if your future partner has had any problems in the past they remain with his company and do not infect your company. Your license remains your own and cannot be tainted by any past or future problems.

Should things not work out as planned you are back in business just as before the venture. Should things workout well you can have the two businesses merge at anytime.

A lawyer can setup this agreement for about $500

When we enter into a joint venture with a developer we always start a new llc for each property. Our original llc owns a piece and the developer's original llc owns a piece (amounts vary on each project). Whatever happens on the project the original llcs are completely isolated. Costs about $1500 to setup the new llc + accounting costs during the project.

Mike Finley

How is it in the plan when you started your thread with:

You'll also have a real hard time legally doing a 50/50 profit in a business structure where one of you owns a higher percentage of the business, since you did mention a corporation which I am assuming would be a s-corp which is a 'flow through' entity for profits. The IRS won't be too happy with that.

Vermaraj's advice to you should be heeded, especially if you are going to be 50/50 partners which will almost certainly end in crying, yelling and probably a fist fight.

AmeliaP

We tested those waters twice and both times it didn't work out. The 2 business plan is the way to go.

SeanATL

I think just about all partnerships suck. I can certainly say a partnership without a clear boss will definitely suck.....and when I mean clear, I mean like 80/20 or better, not 55/45......45 always thinks he still has a say so.

If you just need the guys contacts, pay him a refural fee. If you need to capital, you might not be ready or just borrow it if you're so confident this will work.

Chris Johnson

I've had a few 50/50 deals and they never work out, someone needs better than 1/2, someone has to make the final decision. I would suggest that if you hold the license you have more at risk than the guy with the capitol. Capitol can be replaced, a black mark on your license is permanent, why would you risk that with someone who has no risk to the license.

If you 'partner' is putting in capitol to fund the jobs, keep a separate agreement with him for interest earned on his funds when in the project. If he's bringing in business I guess you can pay him a referal fee but eventually this company is going to generate it's own business and it may be a referal from one of the jobs he originally brought in, is that going to require him to receive a referal fee again? Maybe the best thing to do is pay a little extra on his capitol and call it good, meaning no referal fees.

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Chris

Subia29

Vermaraj,Chrisj and mike Thank you for those piece of words From your posts, I am a bit leary in stepping into partnership 50/50. My business plan has'nt follow through yet but learning from others will make my decision wise. thanks

GregS

Never ever get into a partnership. I'm still a partner in a corporation I resigned my status from 7 years ago. I left over the whole comittee thing.

Just don't do it. And if you do, then get a lawyer to tell you all the ins and outs of the partnership, and make sure it is NOT the same lawyer as the other guy.

Susan Betz

My partner sleeps with me. That's the only partner I'll ever have.

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Fences of Distinction, Ocala, FL
http://www.fencesofdistinction.com

PressurePros

I agree.. never go into business with someone. 50/50 looks great on paper and sounds amicable in concept. The inevitable reality is bitterness from both parties. He will complain that without his financing and GC leads you'd be twisitng in the wind. You'll be pissed because you are the one doing the lion's share of the work.

A friend from college is an attorney that handles partnership litigation and from the stories he tells me, its never pleasant. Stay on your own and develop a longer term business plan that finances your growth.

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Ken Fenner
Pressure Washing PA
Roof Cleaning Services PA

BKA

Formalize it. Do it now. I just got burned to the tune of more than $100K personal income a year because it had not been formalized.

cbtexas

I would steer clear of partnerships if at all possible. Maybe try a LLC or S-corp.

See your attorney and CPA ASAP

woodmagman

Partnerships are like marriages. A prenup is cructial...The difference is in a marriage the roll of boss changes from time to time. At certain times of the month it can change hourly.... Get a lawyer and save a friendship. Business kills relationships more then it builds them...

Brian

I agree. Except in a partnership, usually in the end only one person gets screwed.

Brian Phillips

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Houston Interior Painting
Houston Exterior Painting
Houston Painting Contractor

Subia29

Thanks for your response and very well apreciated . From your posts and many others advice is that partnerships are very well indeed like marriages& also end in disaster . My thoughts are very clear that partners 50/50 is not the way to go. Theres always someone envious about whose making more money.plus lawsuits& bad reputation on the license holder if plan fails. One question is '' what are your advantages of partnership?,What are the positive experiences do you have?Majority probably'most of been screwed'or just disagree. But how many of you are satisfied with your Buisness partnership?

Susan Betz

If you really need the financing, why not set up a financing deal? Finders fees on GC referrals? Seriously, I'd do an SBA loan before I'd go into a partnership. I'd work my way into the business before I'd take someone's word that they can get me referrals. It sounds like the path to disaster to me.

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Fences of Distinction, Ocala, FL
http://www.fencesofdistinction.com

Danahy

A 50/50 profit share is brutal. Who ever's in charge of the expenses, will ultimately be in control of the profit. 50% of nothing, is nothing.
A GC will know all kinds of ways of billing extra for his expense, or expenses out to people he knows, and let's say the subs shoot him a kick back for inflating there invoices (on paper only) which doesn't get split with you.... This could get so, ugly...

I agree a joint venture is best.... Set it up with a Lawyer & CGA first. If he's got the capital let him put his name on it for now... You own the intelectual rights to whatever it is that you do, that he pays you for...

honestly, I don't know what's best for you, I don't know you. I know that in my world, no partnership ever lasts... and all it takes is one person to have bad day to turn your life upside down....

I am a sole & a partner for two companies. My sole does alot better.