Money Buying out a Business Partner? - Page 4

NewChief · 11-26-2012, 10:45 PM

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.

**Iowanian** · 11-27-2012, 07:51 AM

Quote:

Originally Posted by Saul Good

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.)

I agree with this and with Hoover's assessment.

Your wife is the creative talent and the brains of the operation, the other partner is a clerk.
At 6 months, if the store front isn't opened and you don't have brand identity the business isn't worth anything.

That can be very frustrating to hear as a person whom has sunken significant finance, time, heart and soul into a business venture. I was approached about my company a couple of times around my 3rd year and when it came to pricing, the comment was "what is this business worth if you die tomorrow". Were my clients and contracts loyal to ME or to my brand name?

A rough question, but if your wife is the brains and the creative talent, would the business have any wholesale value if something terrible happened to her? Would there be anything more to sell than the office supplies and start up materials?

If so....the value of the business to me is the cost of what those items would bring.

If they're peckerheads about it, shut the door, fire up a new LLC and switch over what you have to that Brand.

**Iowanian** · 11-27-2012, 07:54 AM

In short, I'd tell the partner to pump aids gas up her hatchet wound and piss on a brush fire.

**notorious** · 11-27-2012, 08:06 AM

Assets-Liability= What the company is worth if you don't want to liquidate

They are absolute morons if they think they will get the money back that they have put in this early, and since there are two women involved this is going to have several meltdown moments.

I have heard stories that early partnership problems like this have a common theme: The seller thinks they are entitled to getting paid for their time, just like an employee.

Good luck.

Great Expectations · 11-27-2012, 08:42 AM

If you offer them some money, also offer them the opportunity to purchase the business from you for the same amount.

Are you personally guaranteeing the lease?

Dayze · 11-27-2012, 08:52 AM

Quote:

Originally Posted by Iowanian

In short, I'd tell the partner to pump aids gas up her hatchet wound and piss on a brush fire.

"Hatchet Wound"

**the Talking Can** · 11-27-2012, 08:58 AM

and don't go into business with friends...

**luv** · 11-27-2012, 09:05 AM

What kind of business (LLP, LLC, etc?). Is there an operating agreement with buyout provisions? Before any buyout, I would definitely value the business, assets, etc. She shouldn't be able to get any more out of it than what she can prove she put into it. Sounds like you need a good attorney as well. These types of transactions are part of the types of things that my attorney handles (checking for loopholes, legalities, drawing up contracts and agreements, etc.).

**BigMeatballDave** · 11-27-2012, 09:08 AM

Quote:

Originally Posted by Iowanian

In short, I'd tell the partner to pump aids gas up her hatchet wound and piss on a brush fire.

**notorious** · 11-27-2012, 09:19 AM

Quote:

Originally Posted by the Talking Can

and don't go into business with friends...

This.

Especially if there are two females involved.

el borracho · 11-27-2012, 09:30 AM

If you suspect "freewheeling with the books" then you would be better off terminating this business and starting fresh. Business entities need to be separate from personal holdings- this is what protects your stuff in the case of audit or litigation. I wouldn't want to be the only one holding the bag some years from now trying to explain that the freewheeling that occurred with the business I now solely own was not my fault.

R8RFAN · 11-27-2012, 09:38 AM

Option 3

Never go into a partnership with anyone in business... Messy Messy Messy

Jenson71 · 11-27-2012, 09:42 AM

Quote:

Originally Posted by R8ers

Option 3

Never go into a partnership with anyone in business... Messy Messy Messy

Well, I wouldn't go that far . . .

Bill Lundberg · 11-27-2012, 09:49 AM

Quote:

Originally Posted by DaneMcCloud

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!

Dane is wise. Having been through this myself, he's absolutely correct. Don't forget, you're not only buying their share of the business. You're also buying their share of the debt and liability/risk, it is absolutely crazy to think you can get $ for $ that soon after starting a business.

Codered · 11-27-2012, 09:52 AM

I agree with a lot that has been said already. It's almost laughable that they expect money at this point in the business juncture.

Molitoth · 11-27-2012, 09:55 AM

Quote:

Originally Posted by the Talking Can

and don't go into business with friends...

friends + money = enemies

11-26-2012, 10:45 PM
NewChief In Search of a Life Join Date: Aug 2001 Location: Fayetteville, AR Casino cash: $7200204	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.
Posts: 21,845

11-27-2012, 07:54 AM	#47
Iowanian Supporter Join Date: Aug 2000 Location: Utopia Casino cash: $1708454	In short, I'd tell the partner to pump aids gas up her hatchet wound and piss on a brush fire.
Posts: 62,941

11-27-2012, 08:06 AM	#48
notorious Supporter Join Date: May 2005 Location: Who knows? Casino cash: $-914116	Assets-Liability= What the company is worth if you don't want to liquidate They are absolute morons if they think they will get the money back that they have put in this early, and since there are two women involved this is going to have several meltdown moments. I have heard stories that early partnership problems like this have a common theme: The seller thinks they are entitled to getting paid for their time, just like an employee. Good luck.
Posts: 88,575

11-27-2012, 08:42 AM	#49
Great Expectations MVP Join Date: Dec 2008 Location: Joplin, MO Casino cash: $10782338	If you offer them some money, also offer them the opportunity to purchase the business from you for the same amount. Are you personally guaranteeing the lease? __________________
Posts: 7,307

11-27-2012, 08:58 AM	#51
the Talking Can Supporter Join Date: Aug 2001 Location: street Casino cash: $9222208	and don't go into business with friends... __________________ Clark Hunt: "Thank god for the Dominican pool boy"
Posts: 51,585

11-27-2012, 09:05 AM	#52
luv You think you can get by this? Join Date: Dec 2004 Location: Springfield, MO Casino cash: $-1240000	What kind of business (LLP, LLC, etc?). Is there an operating agreement with buyout provisions? Before any buyout, I would definitely value the business, assets, etc. She shouldn't be able to get any more out of it than what she can prove she put into it. Sounds like you need a good attorney as well. These types of transactions are part of the types of things that my attorney handles (checking for loopholes, legalities, drawing up contracts and agreements, etc.).
Posts: 63,563

11-27-2012, 09:30 AM	#55
el borracho In Pat We Trust Join Date: Sep 2001 Location: Albuquerque, NM Casino cash: $2569148	If you suspect "freewheeling with the books" then you would be better off terminating this business and starting fresh. Business entities need to be separate from personal holdings- this is what protects your stuff in the case of audit or litigation. I wouldn't want to be the only one holding the bag some years from now trying to explain that the freewheeling that occurred with the business I now solely own was not my fault.
Posts: 12,261

11-27-2012, 09:38 AM	#56
R8RFAN Molôn Labé Join Date: Sep 2001 Location: North Carolina Casino cash: $8466872	Option 3 Never go into a partnership with anyone in business... Messy Messy Messy
Posts: 23,182

11-27-2012, 09:52 AM	#59
Codered Starter Join Date: Dec 2003 Casino cash: $8878190	I agree with a lot that has been said already. It's almost laughable that they expect money at this point in the business juncture.
Posts: 761