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Old 9th April 2010, 11:39 AM   #1

Join Date: Apr 2010
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Default Advice urgently required


I am a 50% share owner in a company. Over the last 3 years I have had issues with an ex-wife who has caused no end of problems emotionally and professionally. This hasnt been helped by the fact that my son has been quite ill over this period. I am now in a situation where my business partner is now looking for 60% of the business. He is putting pressure on me to hand over the 10% saying he will leave otherwise. I see this as a shame as we have developed a small relatively successful business. Can someone please give me some advice on what the implications could be if I hand over the 10% or some advice on whether it might be a good thing to just go out on my own. At the moment my head is totally in a mess.

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Old 9th April 2010, 11:48 AM   #2

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Location: Colorado
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When your heads a mess like that, the best advice is to keep the status quo in place for awhile. If you give up 10% he will have control of decision making, based on my understanding of the situation. How will you handle things when you don't agree?

Of course, it may be best to go out on your own. But all of these decisions will be true a few months from now if the case. Take a deep breath, and get your head clear first before making decisions like this. When you can't do that, go pay an accountant $100 to do it for you. You should probably do that.

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Old 12th April 2010, 07:39 PM   #3

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Location: Charlotte, NC
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Excellent advice from Logan re getting and keeping a clear head, and considering the idea of renting some professional guidance. In a partnership bust-up it's almost always a valuable investment to have an accountant and an attorney at your elbow.

You also want to get clear on exactly what the ramifications are if you don't hand over the 10%, and your partner bails. Most likely you have a written partnership agreement that spells it all out in some detail. Is he allowed to sell his 50% to another party? Does he have to offer it to you first? At what price? Most partnership agreements have "divorce" provisions--study yours carefully.

Depending on those answers, you may then segue into a basic question: Which arrangement has more value to you (and not just in terms of economic value): You owning 40% of the biz, with the partner still on board, or you owning the whole thing (after having bought him out)?

While you're studying the partnership agreement, also get up to speed on how your 10% would be priced in the event you agreed to sell that portion to him. But as Logan pointed out, the selling price as spelled out in the PA must be balanced against the intangible cost of ceding control of the biz to your partner.

There are a number of possibilities and variations (e.g., instead of becoming a minority-interest partner, you dig up a third party to buy out your current partner -- a new partner who's got the chops to really help you run the show, and with whom you could have a productive working relationship). An experienced advisor could really help you identify and evaluate the spectrum of possibilities.

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Old 12th April 2010, 11:08 PM   #4
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First of all, I agree with the professional help. Accountant; Lawyer; Either way, they are taking a step back to look at the problem.

Second suggestion; Take a page of paper with a line down the center and put "PROS" on one side and "CONS" on the other. Believe it or not, when you write things down, you get a much clearer picture. Use your head for thinking... not for storing! Ok?

Now, you should have a partnership agreement with a clause (typically called a shotgun clause) which provides details about how you can or your partner can proceed when you want out.

Now, I can't speak for yours, but typically the agreement would like this:

I am so upset that I want out, I set a price. I will BUY YOU OUT for that price or I WILL SELL MY SHARE TO YOU for the same price. The reason it's called a shotgun is that the person who starts it HAS NO CONTROL over how it ends. He is willing to buy or be bought. If you have that in your PA, then you simply operate by those rules.

Why does he want 10%?? What's that going to do for HIM according to HIM?? That would be worth knowing.

Also, you didn't mention the type of business, not that it makes a huge difference, but if it's like a sales agency where there are not a lot of assets, you may decide you can go it alone. If there are a lot of assets and equipment, that could be a little different.

I don't know if this helps, but I hope it does. I am following this post if you respond.

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