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-   -   Money Buying out a Business Partner? (http://www.chiefsplanet.com/BB/showthread.php?t=267106)

NewChief 11-26-2012 09:45 PM

Buying out a Business Partner?
 
Okay,

My wife and her friend went into business together about 6 months ago. My wife supplied the design/buying/art, and the partner was supposed to handle the store front and books.

The partnership has soured (I don't even want to go into it). The partner and her husband are moving to a different town and wanting us to buy them out of the business. They claim that they have $11,000 in it (which we don't believe). We also suspect that there has been quite a bit of freewheeling with the books and her "paying" herself when she claims she hasn't drawn a dime, saying she's only put more and more of her own money into the business (while not documenting the shit in any meaningful way).

She says she wants their money back, and they'll be out. Here's the deal: The business hasn't made a profit yet. We're only 6 month in.

Some options:
1) Pay them and be done, but saddle ourselves with more debt.
2) Try to value the business, looking at assets and such, then decide on a price to pay them.
3) Have a CPA (or someone) go over the books to try to give an accurate picture of what's gone wrong in the first six months. Then tell them to get bent because there was unethical shit occurring.

Other ideas? I'm stressed as hell about this right now, and we plan on hiring a CPA once the partner is gone. The business model is solid, and sales are good. We just suspect that we're not doing well because of poor book keeping and money "leakages." We do feel like the business is a liability, and few investors in a business would expect to be able to get their full money back in 6 months of doing business.

WV 11-26-2012 09:49 PM

Option 3 no doubt. Unfortunately I don't see a good ending with the former partner. Hopefully not, but you may be better off closing the whole deal and cutting your loses. By the time you most likely have to go to court and the time involved.

DenverDanChiefsFan 11-26-2012 09:50 PM

I would have an independent audit conducted and come to a settlement based on that. So, I guess a version of 3.

Reerun_KC 11-26-2012 09:50 PM

Option 3

Dayze 11-26-2012 09:50 PM

That blows dude. Hope it works out in your favor

Saul Good 11-26-2012 09:51 PM

Quote:

Originally Posted by NewChief (Post 9155584)
Okay,

My wife and her friend went into business together about 6 months ago. My wife supplied the design/buying/art, and the partner was supposed to handle the store front and books.

The partnership has soured (I don't even want to go into it). The partner and her husband are moving to a different town and wanting us to buy them out of the business. They claim that they have $11,000 in it (which we don't believe). We also suspect that there has been quite a bit of freewheeling with the books and her "paying" herself when she claims she hasn't drawn a dime, saying she's only put more and more of her own money into the business (while not documenting the shit in any meaningful way).

She says she wants their money back, and they'll be out. Here's the deal: The business hasn't made a profit yet. We're only 6 month in.

Some options:
1) Pay them and be done, but saddle ourselves with more debt.
2) Try to value the business, looking at assets and such, then decide on a price to pay them.
3) Have a CPA (or someone) go over the books to try to give an accurate picture of what's gone wrong in the first six months. Then tell them to get bent because there was unethical shit occurring.

Other ideas? I'm stressed as hell about this right now, and we plan on hiring a CPA once the partner is gone. The business model is solid, and sales are good. We just suspect that we're not doing well because of poor book keeping and money "leakages." We do feel like the business is a liability, and few investors in a business would expect to be able to get their full money back in 6 months of doing business.

What are you actually buying?

DaneMcCloud 11-26-2012 09:52 PM

Hiring a CPA to "go over the books" is meaningless.

What you need is a valuation of the business. It doesn't matter if they put $100k into the business if it's worth $5k.

Good luck!

NewChief 11-26-2012 09:53 PM

Quote:

Originally Posted by Saul Good (Post 9155601)
What are you actually buying?

That's a good point, and we've been told to just go that route (dissolve the business, then reform it as something else under our sole ownership). The main thing we're buying at this point is the brand/identity and, I suppose, the assets in the storefront.

Saul Good 11-26-2012 09:54 PM

Quote:

Originally Posted by DaneMcCloud (Post 9155610)
Hiring a CPA to "go over the book" is meaningless.

What you need is a valuation of the business. It doesn't matter if they put $100k into the business if it's worth $5k.

Good luck!

Agreed. As you're describing it, "buying them out" sounds like paying them to go away. That isn't worth anything.

Hoover 11-26-2012 09:55 PM

Option 4: Tell them to F off, end the lease and open under a new name.

Seriously, she's a book keeper and store manager.

Saul Good 11-26-2012 09:57 PM

Quote:

Originally Posted by NewChief (Post 9155613)
That's a good point, and we've been told to just go that route (dissolve the business, then reform it as something else under our sole ownership). The main thing we're buying at this point is the brand/identity and, I suppose, the assets in the storefront.

I will value the brand identity of a sixth month old unprofitable business at $0.25 (give or take $0.25). Figure out what the hard assets are worth and offer half (or less if you want to stick it to them. It's not like they can likely take these assets with them or sell them to someone else for much.)

Hoover 11-26-2012 09:58 PM

Quote:

Originally Posted by Saul Good (Post 9155627)
I will value the brand identity of an unprofitable business at $0.25 (give or take $0.25). Figure out what the hard assets are worth and offer half (or less if you want to stick it to them. It's not like they can likely take these assets with them or sell them to someone else for much.)

Good advice.

Saul Good 11-26-2012 09:58 PM

Quote:

Originally Posted by Hoover (Post 9155621)
Option 4: Tell them to F off, end the lease and open under a new name.

Seriously, she's a book keeper and store manager.

Yep. There's a word for what she is doing. It's called "quitting".

Ebolapox 11-26-2012 09:59 PM

how much does she value the friendship? because honestly, she's owed almost nothing as far as I'm concerned--if you want to be on the up and up and maintain what's still there, get the business valued and offer her half of the value. otherwise, hoover's solution is what I would do.

J Diddy 11-26-2012 10:06 PM

Quote:

Originally Posted by NewChief (Post 9155613)
That's a good point, and we've been told to just go that route (dissolve the business, then reform it as something else under our sole ownership). The main thing we're buying at this point is the brand/identity and, I suppose, the assets in the storefront.

Are you going to retain location? What's the value of the assets? How attached to the store name?

Just my simple opinion but it seems to me regardless of who has put in what, unless a stipulation of ownership based on percentage invested was involved, a liquidation should be 50-50. I would think if you're trying to retain location, agreeing to get their name off the lease would be sufficient to buy out the name and pay 50% on all physical assets.


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