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Old 11-26-2012, 09:45 PM  
NewChief NewChief is offline
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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.
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Old 11-26-2012, 10:54 PM   #31
Groves Groves is offline
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A business is worth roughly twice its annual profit. If the profit is $30k, by all means give them $15k. Otherwise, they made a bad investment and they should learn from it. They're the ones moving. If they want to stay and work the business into profitability then they should do that. Otherwise they should spend $300 on a community college business course.
or a Math course, apparently.
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Old 11-26-2012, 10:59 PM   #32
MOhillbilly MOhillbilly is offline
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Read the book Sammy the Bull put out. It's full of hostile takeover tactics.
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Old 11-26-2012, 11:12 PM   #33
Phobia Phobia is offline
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or a Math course, apparently.
They have to account for the money the lady is skimming.
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Old 11-26-2012, 11:16 PM   #34
Simply Red Simply Red is offline
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i think you should ask PostalChief.
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Old 11-26-2012, 11:20 PM   #35
Phobia Phobia is offline
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Heh. I realize my math was hasty (and backwards) but the point was that the business is not profitable. Zero x 2 is still zero.
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Old 11-26-2012, 11:26 PM   #36
DJKid DJKid is offline
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Seperate yourself, have an independant consultant look over the financials, separte yourself, get advice from a proffesional in the field, seperate yourself, go over results from the financials/professional.

It's business, shit happens.......get professional advice and make a decision from there.
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Old 11-26-2012, 11:32 PM   #37
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Old 11-26-2012, 11:39 PM   #38
Simply Red Simply Red is offline
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I'd definitely consider murder here. Do you have a chainsaw NewChief?
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Old 11-26-2012, 11:39 PM   #39
Buehler445 Buehler445 is offline
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If it were me I'd offer what you think you can make work. If that's $14, offer $14. If they don't want it, liquidate. You can always start your own business. That's basically what you're doing anyway. Unless it is a legal entity and the name is filed with the state, you can even use the name.

Operate it like a business, don't get married to it.
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Old 11-26-2012, 11:42 PM   #40
DaneMcCloud DaneMcCloud is offline
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Quote:
Originally Posted by Buehler445 View Post
If it were me I'd offer what you think you can make work. If that's $14, offer $14. If they don't want it, liquidate. You can always start your own business. That's basically what you're doing anyway. Unless it is a legal entity and the name is filed with the state, you can even use the name.

Operate it like a business, don't get married to it.
In California, you can't you start a business without a DBA or LLC. I have city permit filed as well.

Is that not necessary in other states?
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Old 11-27-2012, 12:04 AM   #41
Buehler445 Buehler445 is offline
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In California, you can't you start a business without a DBA or LLC. I have city permit filed as well.

Is that not necessary in other states?
Not necessarily. My person farm doesn't. Lots of schedule C type enterprises don't. Only if it is a separate entity.
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Old 11-27-2012, 05:19 AM   #42
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Not necessarily. My person farm doesn't. Lots of schedule C type enterprises don't. Only if it is a separate entity.
What's a "person farm"? Is that like pizza on a plant?
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Old 11-27-2012, 06:17 AM   #43
La literatura La literatura is offline
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Yep. There's a word for what she is doing. It's called "quitting".
Quitting Advantage Plan. All the benefits of quitting, plus no monetary loss. Partner seems to want a pretty nice bailout.
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Old 11-27-2012, 06:33 AM   #44
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Wait until after the tax year ends (one month away).

Liquidate, and buy back the items that you want at a reduced rate.

You are in the position of power. There is no such thing as "nice" in business, and chances are the relationship is already ruined anyway.
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Old 11-27-2012, 06:40 AM   #45
Mr. Flopnuts Mr. Flopnuts is offline
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Wait until after the tax year ends (one month away).

Liquidate, and buy back the items that you want at a reduced rate.

You are in the position of power. There is no such thing as "nice" in business, and chances are the relationship is already ruined anyway.
This is about all I've got in addition to what others have said. So, this!
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