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Partnership Gurus need your help ASAP!

Discussion in 'Business Fundamentals' started by Craftybigdog, Feb 27, 2003.

  1. Craftybigdog

    Craftybigdog Senior Member
    Messages: 238

    Hello, heres the situation, I started a lawn care and snow removal business with a friend of mine. Ill set the stage with whats going on first. We went into business Feb. of this year and I cam to the table with all the equipment the lawnmower and the snowplow all the accounts. Well we decided to split everything 50/50 right now the business is paying the lawnmower payment and thats all I owe on. My problem is I went into business with him because hes a great guy and I fly in the air force so if Im gone he can cover everything. Well up here in the northeast we are suppost to get another snow storm, and hes gone so what Im getting at is Im providing all the snow removal equipment and accounts and all the labor and when he gets back Im suppost to give him half and thats hard to do. Should we set up a wage system or something. Because the last storm we had he helped me remove the snow but the one before that he slept in and I put in about 13hrs while he put in 3hrs and we split the profits that was hard. He said he couldnt hear the phone when I tried to call him. Im just really confused, if it was me and I was gone on a mission I would have a hard time coming back and collecting half the profits and not doing anything. We agreed he would take care of the paper work and I would take care of the maintence side of the house well Im finding that Im putting in alot of time doing maintence. Its like he left this morning to go to a conference and will be back monday night and he didnt call to see if I had everything did I need to go get gas anything. And another thing everything is stored at my house I have the computer the garage all the tools and in my heart it doesnt seem fair. Somebody that has experience with this help me to find a solution I want this to work but also I dont want to be taken advantage of. I tried talking to him about lets pay each other an hourly wage that way its motivation to work but his reply was I like it 50/50 because he wants to pay off alot of bills this year the guy is a great guy, but I dont feel its fair the setup right now. Thank you so much for your help and tell me what you feel. Thanks
     
  2. Lawn Lad

    Lawn Lad Senior Member
    Messages: 407

    Being in a partnership is difficult, let alone where the business is split 50/50. The problems is that you don't have one person calling the shots and taking ultimate responsibility for the business. Should one of you take on more than half of the responsibilities in your own opinion resentment will build and soil the relationship. Unequal partnership is often a better way to go.

    Often you need a partnership to spread risk or get into business because you don't the have captial to do it yourself. As well, a partner can back you up if you're not available or you can grow the business if the two partners focus on different areas of the bsuiness and work together. Whatever the reasons you join up, the most important thing to do is to clearly define the roles each of you have in your business and how you will be compensated.

    Are you legally defined as partners? Do you have a buy/sell agreement in place? Being partners is a legal ownership issue when it comes to dealing with profits/losses. When you're working, you're an employee of the company which means you should get paid for the hours you work, whether by salary or by the hour. The 50/50 split comes into play after you've been paid along with the rest of the bills and then you have to split the profits. Being partners does not mean that you get paid equally since you may put in unequal time when doing the work.

    Since I don't know more about your situation, I can't say much more than this. If you have more specific questions, please clarify.

    A PS after rereading your post. If you do not deem your partner to be reliable (not hearing his phone, etc.) - start reading the writing on the walls. Partners don't have room for excuses - in my opinion he's letting you tow the line.
     
  3. Lazer Man

    Lazer Man Senior Member
    from SW Pa.
    Messages: 139

    Let me understand, all the equipment is or was owned by you ie; mowers, pick-up and plow, and I'm assuming here salt spreader. What if anything did your "partner" bring to the table? In my mind your getting the raw end of the deal. Sure he doesn't want things to change, if I was him I wouldn't either. Getting paid for mostly doing nothing. In my mind he showed his true colors durring the last storm by not "hearing" the phone. This is always the big danger in having partnerships with "friends" most of the time things don't workout. Especially if said partner didn't even bring anything to the business to start with. IMHO sounds like you got a problem on your hands. The big question is how do you get out of this situation and remain friends?

    Bob
     
  4. Craftybigdog

    Craftybigdog Senior Member
    Messages: 238

    Well I talked to him about paying ourselves an hourly wage and he didnt really like that. Yes I did come to the table with everything even all the accounts. He takes care of the paperwork side of the house but we are so small that isn't really alot. I talked to a friend and he said you can't split everything down the middle you have to pay yourself a wage.
    Here's my situtation: he just left on a trip and will be back Saturday. We have a storm coming in tonight (thursday), and I will be doing all the plowing. When he gets back, he'll want half the $$ and I have a hard time accepting that. He never called to ask if the business needed anything before he left, but he will be expecting a check for it. How do I go about telling him I want to revamp our pay system? Should we do a percentage split or get paid by the job, hour, etc?
     
  5. Lawn Lad

    Lawn Lad Senior Member
    Messages: 407

    How are you legally bound to this agreement? What type of paperwork is in place? It sounds like you guys need to figure out how to get out of this deal. More for your sake.

    You do need to pay yourself a wage and your "partner" is going to need to understand that it's got to be equated to something, as in hours worked. You don't just write a check out to him when he returns... that doesn't make sense.

    Remember, partnership and sharing of profits is return on investment. Not related to how many hours you've worked. So for your partner to expect a check when he returns is out of the question. You won't know the company profits until the end of the quarter/half/year. Are you set up as a corporation or a partnership for taxes? How are taxes to be paid?

    To answer your question in the other thread about how much to pay yourself, in this situation I would recommend setting a high dollar amount - short of creating a loss. This way most of the money is paid to you in the form of payroll dollars and very little is left after wards to pay out in profits to you and your partner. The downside of this is that you increase you payroll taxes - but the arrangement is more equitable in the short term until you get things hammered out in terms of how you will distribute profits. Another note on this, if you brought in the equipment/customers and he brought in next to nothing, then why is he a partner? Have some confidence in yourself - you don't need a partner, and certainly not like him. It sounds like he's more like an employee. And if you're trusting him to do your paperwork with all of your assets/customers, he's in a real position if you're not watching to ruin your investment. That should be something you're watching like a hawk. Just my $.02.
     
  6. Craftybigdog

    Craftybigdog Senior Member
    Messages: 238

    We are a Incorporated, right now and we are waiting to get in to see the accountant as so as she gets a break and shes gonna help us set it up properly. The reason I went into business with someone is if I go fly they can cover the work that we have and I wont have to worry, like March 7 I have to go fly for 2wks thats the only thing I hate. I can do it myself and all of it and more but I have to have someone cover my butt if I go fly do you know of any other alternatives and since Im already in this business how do I get out if need be.
     
  7. gslam88

    gslam88 Senior Member
    Messages: 168

    BigDog,

    I see your inc in biz. Are you set up a a inc, or a llc, partnership?
    your brougt it all to the table and he just does the paperwork and works when he feels like it? humm.. sounds like to got together with a friend in business in this fashion is a big mistake. If you have an agreement other than the 50/50 split of profits, then it sounds like a win/win situation for him,. no cost to him, little expense to him, little work to him, but a great guy..... it can ruin a friendship and business ..... I think you need to alter the agreement at a worst case senario and make it something like a 70/30 or 65/35 at best in your favor. You put up the cost of equipemnt, accounts, reputation.

    I would look for a trusted supervisor person, someone you can trust to be left alone for a week or 2 if you have to fly... this probably is very hard to find, but look for the right person. While you are away look for a sub. Do you have a wife or girlfriend that you can have help you while away... if so just give a list of customers and a good relieable sub to do them for now.... someone who will be around when is needed.


    Just my .02



    Pete
     
  8. Chief Plow

    Chief Plow Senior Member
    Messages: 201

    Tough situation. For me, there are no partners, will never be. Also, cardinal rule # 1... Never go into a business situation with a friend, they always end up bad. I don't know what you can do to remedy this, but it would have drove me nuts by now.

    Rick
     
  9. Highpoint

    Highpoint Senior Member
    Messages: 241

    Dude, you're getting screwed! You need to either go to an attorney and have them give a "explaination" of what a partnership is or get out NOW. You need to figure out someway to set up this person or another as a SUB to take care of your accounts while you are away and pay them a wage. Paper work is not all that difficult. Really. You can do it! No freaking way would I do what you have done and then write a check for 1/2 the income. It does not work that way. No No NO. You each get a wage and are paid based on hours worked. The 50/50 comes in at the end of the year. You will either split the income or split the loss. These come into play on each of your PERSONAL taxes. Say you go out and work 13 hours pushing snow and make 2 grand. You pay your boy 1 grand. Out of whos pocket does the expenses come out of? Yours? He just made 1 grand and you just make 300 buck since you had to pay for the fuel, salt, etc. etc.. What is wrong with this picture? I'm getting PISSED just typing this. I feel for ya guy. You gotta nip this in the bud NOW. Good luck.
     
  10. Highpoint

    Highpoint Senior Member
    Messages: 241

    Part 2

    Ok, I took a shower and cooled off. Now. If I got outta hand on my previous post, I apologize. From what you have said so far. You only got into this to cover your accounts while you were away. Are you away that often and for such long periods of time? If so, It would seem to be in your best interest to set you pal up as a part time employee. Pay him a wage for only the work he does. DO NOT let him do the paperwork. YOU can do it. I have been in business since 1989. I do it all! The only thing I have help with is the payroll. That is it. I have had up to 16 employees and oversaw everything they did. Some cut grass, some installed landscapes, etc. I did have some key employees that helped but when it came right down to it. I was the man with the plan. And if you can believe it, my stress level is not that high. I know from personal expereince that friends don't let friends drive drunk and friends don't get into partnerships. HAHA. Been there, lost a friend.

    Again from personal experience and on a slightly different subject. My self and 2 others started a computer related business. I supplied the capitol, parnter 1 supplied the real estate and partner 2 supplied the computer knowledge. I was basically a silent partner. I provided the means to get the business off the ground with the intention of letting the other two partners do the work. Long story short. Parnter 1 was a drunk and did very little and parnter 2 spent all our money and then disspeared leaving me to hold the bag. BAD deal. I made the mistake of not keeping track of what was going on with the books and ended up getting majorily screwd. THIS could happen to you! Even though your friend is a good guy. HE will most likely end up cooking the books or something to that affect. All this boils down to 1 thing. YOU can do it all! You just need to find some one to cover you while away.
     
  11. digger242j

    digger242j Senior Member
    Messages: 672

    It wasn't the way he operated--actually he was more often on the receiving end--but here's what my Dad used to say: If you've got a buddy so good and true, screw your buddy before he screws you...
     
  12. fordman

    fordman Senior Member
    Messages: 327

    I think a 70/30 split would be one option. However with the small amount of work he does I think you should take charge of the business and just make him more of an employee that gets a set hourly rate. If he doesn't want to agree to this put your foot down and say well there's plenty of other people who would and you're not exactly irreplaceable.

    I don't like mixing business with friendship however I've had some of my friends work for me the odd time. I never ran into any problems though because they were just given a set hourly rate and weren't involved in any aspect of operating the business.
     
  13. Tommy10plows

    Tommy10plows Senior Member
    Messages: 345

    Death of a friendship

    This is not a good partnership. Break it up, dissolve it, and go on with your life. In my experience in llife, the earliest loss it the least loss. Cut your losses now, go see an attorney and find out what you need to do to break this up. This man is stealing from you, just as sure as if he walked into your house in the middle of the night and stole that antique lamp your aunt left you.

    YOU cannot understand how anyone would do this because you have ethics, this person has none and will sink to the lowest level to cheat you.

    Get out now,go your own way, you will be fine. You don't need him, you cannot be his mother in life, let him get his own job, surely the cash he is draining from the partnership can be better used to HIRE reliable people to fill in for you
     
  14. wyldman

    wyldman Member
    Messages: 3,265

    I hate partnerships too,never had one,never will.

    If you brought most of the stuff into the biz,then you either need to be compensated directly (ie the company buys everything from you,or owes you for it),or it should be reflected in the split of the profits.
     
  15. Temco

    Temco Member
    Messages: 66

    Against all advice, when I first started my business, I had a friend as a partner. Absolute worst thing you can get involved in. Mine ended very bitterly and lost a friend too.
     
  16. jj112

    jj112 Junior Member
    Messages: 26

    Get out now while you can, while your new partnership is young. You are getting screwed. If you get called up for two weeks of reserves find a friend or family member that can cover your accounts while you are gone. PARTNERSHIPS NEVER WORK!!!
    Who in their right mind that was a 50/50 partner would go away with snow in the forecast?
    JJ
     
  17. seville009

    seville009 Senior Member
    from CNY
    Messages: 733

    If this is all done through a corporation, as you state in one of your latter posts, and you have set up the corporation properly and have legally contributed the assets to the corporation (such as transfering title to the equipment, getting insurance in the corporation's name, etc), then you have a big mess.

    If you have just a partnership, it's simply - you just walk away.

    In most cases, there's no real reason to use a corporation anymore. An LLC (limited liability company) will give you the same liability protection than a corporation will, but with less headaches, both from a general operating and taxation standpoint.

    You mentioned that your accountant will set things up properly when she has time. If that means that you have not actually formed the corporation by filing the necessary paperwork with the State, then you should not (in my opinion) go through with it.

    Simply take your equipment and accounts and walk away. You cannot mix business and pleasure - in this case, your friend sounds like he is taking advantage of you and will continue to do so until you put a stop to it.
     
  18. ToyotaPower

    ToyotaPower Senior Member
    Messages: 129

    Never had a partner... never will.

    There always one partner that doing more then the other and that when the bad feeling come in and tare apart the business.

    If you can do it yourself sub-out the work when your making those 2 week trips. Train someone to do the work and get out of your business dealing with your friend.:waving:
     
  19. PSDF350

    PSDF350 Senior Member
    Messages: 577

    just curious (nosey i quess) but what ever happend? i need closer
     
  20. SCSIndust

    SCSIndust Senior Member
    Messages: 280

    Yea...really. Did you give a size 10 out the door? Or did you work it out?