I was interested in possibly forming a partnership with a couple of electrical contractors in my area. We would cover Residential, Commercial, and Industrial (3 companies merging to start). We would have partners both equity and non equity based. This is not nothing new, but this may help to form a more full service company covering all the bases while sharing/pooling labor and expenses. All the 3 divisions would keep seperate books and be totally autonomous yet appear to work as one company with one new company name and share the profits/liability with some sort bonus plans based on each division. Has anyone tried this or heard of any electrical contractors doing this yet and how did it work out ?
Forming a Partnership
- Thread starter Cletis
- Start date
- Status
petersonra
Senior Member
- Location
- Northern illinois
- Occupation
- engineer
Ask your lawyer. Partnerships have most of the problems of sole proprietorship with few of the advantages of incorporation.
John120/240
Senior Member
- Location
- Olathe, Kansas
How well do you like these other two guys ? Well enough to MARRY both at the same time ? Your plan is to share labor/expenses then to share profits/liability with a bonus plan ? Will there be jealousy & resentment when your division exceeds expectations & one of the others falls below expectations ?
iceworm
Curmudgeon still using printed IEEE Color Books
- Location
- North of the 65 parallel
- Occupation
- EE (Field - as little design as possible)
To quote my buddy - the retired legal aid, "The first thing you need to do is figure out an exit strategy."
The only ship that doesn't sail "partnership" I would stick it out myself. Good luck either way you decide
kwired
Electron manager
- Location
- NE Nebraska
A sole proprietor however doesn't have anyone to blame when things go wrong, but also has no one else to help when he can't pull his own weight either.
Like others have suggested, this partnership is going to be a lot like a marriage - and when things go bad will be as ugly as a bad marriage can be.
In general I would lean more towards corporation, LLC, etc. (LLC may not be possible with this many "owners") but I think there needs to be clear division of ownership, and some kind of higher level of organization governing actions of all the separate divisions, or you will still have a "bad marriage" when one division doesn't meet the expectations of the others. Each original entity can still operate somewhat on their own, but must adhere to any standards set by the higher organization or things will start to get sour.
Having a corporation or other higher level of organization can still lead to people not getting along when they don't like how things are going, but that higher level of organization is more of a commitment to do things a particular way and those policies and procedures are more formal and even contractual then they typically are with a partnership. If one owner wants out it is usually more clear what consequences may be when he leaves with the corporation then it is with a partnership. The partners of a partnership sort of still own whatever they bring to the partnership - and that can be debatable after several years. 'With the corporation all property belongs to the corporation, if you want out you sell your equity value in ownership to the other owners - or potential owners instead of taking equity items you possibly contributed at one time. If you want to sell your ownership and want an asset that maybe you sold to the company at one time for yourself there are two transactions, selling your ownership, and purchasing the asset to gain it back for yourself.
Fulthrotl
~Autocorrect is My Worst Enema.~
- Occupation
- E
to be honest, i'd keep all three companies separate and "pack hunt"
stuff that is too big for one shop to handle alone. work it out on a job by job basis.
this way, everyone keeps their labor and personnel stuff straight. and if things don't
go well, everyone continues on their own path.
unless you are looking to go after large work, and that is usually the purview
of already large shops. i've done project management under a corporate umbrella
of two large union shops, who formed a joint corporation for a single large project.
both of the shops in question were already above 200 field hands each, and the
entire contract was $88M. the second time, different company, was $26M.
profit and loss on both of them was finally decided years later, in court. lotta
gnashing of teeth.
ceb58
Senior Member
- Location
- Raeford, NC
What happened to invading and taking over all of the electrical work in western NC?
growler
Senior Member
- Location
- Atlanta,GA
I think a corportation would be the to go for something like this. But even a corporation may not work if all the memebers don't understand what they are getting involved in.
kwired
Electron manager
- Location
- NE Nebraska
That is why you hire a CEO - so he can manage everything while he eats up his share of profits:happyyes:
But if he does a good enough job every one gets more money in their pocket then they would have without the CEO.
Ok Ok. I think you all talked me out of it. Does a CEO of an electrical contracting company typically need any knowledge whatsoever of electric ?
stevenje
Senior Member
- Location
- Yachats Oregon
Bigger isn't always better. The saying "Too many cooks in the kitchen" comes to mind when I think about partnerships.
kwired
Electron manager
- Location
- NE Nebraska
Might depend on local rules in some places as far as business licensing goes, typically there needs to be someone within the company that holds a contractor license, but it wouldn't necessarily need to be a person who primarily is the general business manager. But at same time any general business manager needs to know some of the basic details of the business they are managing to be better at managing the needs of that business.
- Status