Home – New Forums Starting your journey Business Started, I’ve hit a speedhump… advice ?

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  • #975893
    Tedious
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    I’m facing an issue which I’m sure has been a subject of debate since the beginning of time.

    Started a business 14 months ago with a mate ( big mistake yes please dont go on about it ) advantage is he wants to go which makes my life simpler the trick is how…

    Now the details here are important i suppose so i’ll explain in full.

    its a mechanical repairs business / spare parts, on set-up of the business my business partner had a mediocre tow truck and tandem as well as a collection of tools that was his ( in ) part of the business start-up, I fronted the cash for the premisies, bond, rent etc etc… full P.O.S setup computer & all the major plant like hoists and tyre machines.

    close if not equal capital up front on both our parts, i own more shares then him in the company mainly so if choices had to be made it was on my neck to make them.

    now since day one he’s been happy just making enough to get by and never does more then he has to, if anything at all !

    I’ve recently found out he’s collecting the dole on the side which i didnt know about untill recently not sure if this affects anything.

    now since day one ive been pooring in lots of time with marketing and adversing i’ve built websites cold called people and really got things pumping i can assure you the work load and commitment is shared say me 80%- him 20% . . .

    anyway the long and short of it is he seems to think hes taking the stuff that was the original startup input I.e. his truck, trailer and tools … then still expects me to pay him $15,000 for his shares.

    now considering the business is $7000 in debt which i have the ability to zero out of my own pocket in a heart beat.

    and to be dead honest if i decided to walk away tomorrow the business would die in about 2 months.

    does anyone have any suggestions on how to handle this ?

    in my opinion he can just take his stuff and leave i’ll bankroll the debt and i never want to see him again !

    #1077200
    CubeTech
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    Professionally, I don’t think the dole should come into play and I also think to a certain extent that you knew his business “enthusiasm” for work prior also. If not you would of learnt possibly.

    My feeling is this look at what you both brought to the table at the beginning. You handle the premises setup plus equipment this should all be in the business name.

    He brought his truck and kit. Which I would assume also that if he left you knew he would take it with him. Was anything signed agreeing to this?

    So you both threw in 15K to begin with and the business has 7K in debt. I am assuming the business has more value than that at this stage.

    If he walked I would say, 15K minus half the debt. I would also say that if part of the business was towing, he should looking to fronting some cash to cover that. Check if the truck is under business name and insurance for some leverage here.

    If the business doesn’t need the towing, give him 15 minus the 50% of the debt.

    It seems you are going to lose out on this. But the hassle of ridding the partner who is simply excess weight will prove to be a much larger pro than the con of the payout.

    That is my advice but also look into making him sign something when departing including witnesses from both sides. This should state he is no longer associated with the business has no operational, financial or managerial control and dated.

    This is going on what was written and im sure there is more to the story like formal agreements, contracts, insurance and the likes.

    Hope this helps mate,

    #1077201
    NathanB
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    I would suggest you be as direct as possible with him

    Try to give him a handful of options (that you have designed) and see if he accepts. For example;

    1. He is out, his stuff stays in = you give him the $15,000 he wants.
    2. He is out, his stuff is out = he pays you his share of your current debt.
    3. He is out, his stuff is bargained for to equal a payout of your choosing.

    Provided you have well documented history of you relationship with this partner, I see no major issues for you. Even with out well documented history, if he is assigned as a director of the company he is still liable for much you can negotiate with he on.

    Best of luck. Don’t sell yourself short would be my over all advice. Demand the best arrangement for yourself moving forward.

    #1077202
    dextereugenio
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    my advice.

    talk to an accountant (your accountant or if the business has one) and get them to mediate. If your accountant does not do this, find out who does on here, or message me and I will give you some details.

    you need to sort this out as quickly as possible. if you dont, the business will fail over time which will make you a sad, miserable, and potentially poor old sod. get it fixed ASAP and move on with your life (as you obviously have higher aspirations than your partner, dont let him hold you back).

    it may even be best to close the whole operation down, and re-open with a new image, new name, new lease on life (i think we all gave you stick about the business name when you posted a while back :) )

    BUT

    talk to your business accountant first.

    all the best mate, i know exactly how you feel in your situation.

    #1077203
    Corey
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    a very simple solution…

    bide your time & wait until Centrelink catches up with him, given he was collecting the dole as well as being in business, he can’t profit from both activities.

    Keep us posted.

    Cheers
    Corey

    #1077204
    dextereugenio
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    Corey, post: 97393 wrote:
    a very simple solution…

    bide your time & wait until Centrelink catches up with him, given he was collecting the dole as well as being in business, he can’t profit from both activities.

    Keep us posted.

    Cheers
    Corey

    if only it were that easy

    paging “A Current Affair”

    #1077205
    SamanthaE
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    I think that you should talk with your accountant.

    Unfortunately I have seen quite a few partnerships breakdown and it is always very stressful on everyone :(

    Just because your partner says he wants something doesn’t mean that he is entitled to it.

    I say that you should liquidate the existing business and restart with a new name and image as gossipim suggested. If you stay the same you may always have a bad taste in your mouth.

    During the liquidation process, your partner can’t demand anything – he will only get what he is entitled to after all existing debts have been paid. The one thing that you will have to consider is the transfer (or purchase) of the existng equipment – but I believe that you would also benefit from the sale (if that makes sense).

    I am sorry that you are in this situation but the best of luck – most times the one partner who continues on (under another name or the same) is always much more successful.

    But go see your accountant ASAP :)

    #1077206
    PerfectNotes-Kathy
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    Hi,

    So sorry to hear that the partnership is going south… always an unhappy situation.

    I totally agree that you need professional advice – whether it’s from your accountant or a commercial lawyer, I don’t know – but try your accountant first, as they know you and at least some of your situation.

    Question – was there some sort of partnership agreement written up to start with? This would hopefully at least clarify what the initial setup split was, even if it doesn’t cover dissolving the partnership.

    I totally disagree with the (hopefully tongue in cheek!) comment that you should wait for Centrelink to catch up – or keep the business going until it dies – neither of them benefit you in the slightest…

    Best of luck with sorting it out – quickly!

    Kathy

    #1077207
    Steve_Minshall
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    You have a business that has ownership allocated by shares.

    Therefore the long and the short of it in my mind is that the business gets valued by an accountant of your choice and an accountant of his choice. It shouldn’t be too hard too agree a value on just 14 months trading and then he is entitled to his share based on share ownership.

    The $7000 debt is irrelevant to negotiations as it is simply a negative asset in the valuation.

    The fact that he has not contributed effort is also unfortunately irrelevant. It does not have bearing on ownership and to be harsh is your fault for not nipping it in the bud 12 months ago.

    Who contributed what is irrelevant because the equipment/cash became the partnerships assets. All that is really relevant is what share entitlement you agreed up front and current value of the business. Hopefully that corresponds with an equitable division. If not then unfortunately the issue is the consequences of a poor agreement up front which you may well have to wear. It is not the consequences of someone riding your coat tales, being on the dole, debts in the business, the state of the tow truck, etc.

    Sorry to be harsh, but also bear in mind I am neither a lawyer or accountant.

    Good luck and I hope you can put this behind you quickly with as little pain as possible.

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