Partnerships

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bpk

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Has anyone had a good experience with running a business as partners? I work as a maintenance electrician at an Industrial plant and hold a contractors license doing smaller jobs on the side, all of my work is from word of mouth and is pretty low risk as far as bidding. My brother in law is moveing to our area and is a foreman for a fairly large contractor, he has a lot of connections and knows a lot of GC's that he has done jobs for in the past. He has asked about being a partnership, but I dont really know what to do. I dont really want to have an employee due to work comp, unemployment, insurance,ect.,but I also know he has a lot to offer. Does anyone have advice for how to split job profit, what percent goes back into the business, how to split vehicle costs,ect. I would'nt mind quitting my current job if things go well but I have a family and I get really good benefits now that are worth a lot to me. Any advice is greatly appreciated, there is a lot of knowledge and experience in these forums that I have already learned alot from.
 
I've always felt that partners are for dancing.

That being said, if you feel that this may be a beneficial arrangement (and who knows... it just may be) then you should direct most of your questions to an attorney.
 
I could go on for pages but will try to keep it brief.

I've only known one company that had equal partners as owners where bothe the company and the friendship survived.

Before you get anywhere near serious have multiple sit downs to discuss work sharing, profit sharing, financing, goals, type of work you'll do, advertising, where the "office" will be, what software you'll be using, who will do the bidding and there are many more items that I could list that feel small until you realize you've ignored them and aren't sure how to handle them. Get all of this stuff on paper. First just between the two of you so you know where you stand and if things progress than a lawyer is recommended.

Remember that you will spend at least as much time with this person as you spend with your wife. You need to be very confident that the two of you can do this without wanting to rip the other's throat out.

The majority of people I've talked to and a lot of what I've read gives about 5 years as the time it will take to turn a profit.
 
Partnerships are full of potholes and unknowns. Personally I can't share the responsibility, blame or glory with anyone (that's why I'm self employed):grin: I agree that the deal should be in writing down to the last detail (esp w/a relative). Mine is a family business but my wife and son make sure that I always think that I'm in charge.;)

As far as your day job and benefits go; I quit my last real job in Feb 1978 to open my own shop. I gave up all the great benefits (heath ins, holidays, vacation pay, retirement acct etc.) and I've never looked back. Those benefits are probably worth $15k-$20k/year but with some hustle and discipline you can fund those things (and should) by pricing your work properly.
 
Hi,
I own a small business and with all the decisions that one has to make during the course of a day, I find me arguing with myself lots of times :) Knowing me, it will probably never work for me if I did have a partner, but everyone is different. I think having a spouse or an adult child to share responsibilities with in buisness can be a great asset, but that is totally different. That said (I know you were probably not looking for all these negatives, when you posted your question), if you do go through with your partnership, I would say front load it with a lot of time spent on putting down the expectations and the rules of the game, you will be happy you did. That's my 2 cents. e/m.
 
I would generally advise against going into business with a relative. He may indeed have all kinds of contacts with GCs but it may mean almost nothing as far as getting you business.

If he actually had the capability of getting the business he is trying to make you believe he can get why does he need you?

Nothing against foremen, but in reality most GCs probably think of them as little more than interchangeable cogs in the electrician wheel. And that is mostly probably true, especially in certain environments.
 
A "foreman for a large contractor" I take it he is a electrician? Don't quit your day job unless he has a string of jobs lined up. Here's the next thing to consider.. Why does he need you? Is it because he has the contacts and you have the contractors license? I'm just trying to get you to think. I would also do some jobs with him and see how you like working with him. Are both of you working in the field or is one guy jerking off in the office? : )
 
I could go on for a hour about this. But to sum it up I would say don't do it. It's like being married whithout benifits. Everything you earn he may be entitled to 50%.

If you did have a business relationship don't do a partnership or 50/50 split ownership in a corp. Bottom line is one person has to make the big decisions in a small company.

Also if you start a business with someone elce, make a buy / sell agreement with an attorny while your still in the honeymoon phase. This is an agreement on how things would be devided up or sold if you decide to go seperate ways.

I don't know anything about this person but be carefull of this:
The other person may talk of all the contacts and work they will get. Maybe they know some people which is good, but that does not mean you will have paying work. If all this work he talks of does not come thru where will you be?

Also workers comp, unemployment, and payroll taxes are a pain and a cost but in the big picture it is no big deal. It is a lot easier to get rid of an employee with problems then a partner.
 
I would suggest that you setup some type of business alliance that would keep your business your business and the new venture a seperate entity.
Work a few small jobs together and see how he handles the work, cashflow and customers. Kind of like courting eachother.
Will your work habits complement each other? Best not to have two slobs or two overkill types, if either of you are one or the other extream you might not have much success.
Lots of small contractors help each other out from time to time sharing tools and labor. I see our trade becoming like a medical practice with an office and one or more contractors working their own customers using eachother as backup. Large contractors more like hospitals.

BTW
I have a policy against working for GCs but I do that by choice.
 
I am also in the camp of staying away from business partners.

If you are going to have a partner, one person needs to be in control. A 50/50 split can cause the business to stop with a difficult decision.

It seems to me that one partner will wind up doing more than their fair share of the work and then the attitudes start.
 
I agree with all the good advice above. adding my 2 cents:

there are 4 outcomes from a partnership: good for both, good for one but not the other (and vice versa), or bad for both. everything ( I mean everything) should be discussed prior to any formal arrangement being made (this doesn't mean you can't start working together as a trial period though, sometimes that in and of itself is a good thing cause if things don't mesh right away it may tell you something.

if you do decide to work together, make an agreement that includes every possible thing you can think of. some things to include:

how much you will be paid, how profit split, how debt split, how much profit stays in company, how and when profits or coffers will be disbursed (ie, say if both parties don't agree to take money out of company then money stays in company by default)

exit strategy (including all possibilities): if one decides to leave, how company shall pay him off (over the period of a year ?), how much notice one has to decide to leave (6 mos ?), if one dies - stipulations (his relatives can get paid off over period of a year and do not have any say or voting rights or right to work at company etc)

bottom line: you never know how good a partner, insurance company, or your friends are until things are at their worst, so plan ahead as much as possible for the worst, but try your best to make it work, because a good partner can be a godsend - there's nothing like having someone you can trust and depend on at that level. however, all books, contacts, agreements, etc should be known by all at all times (make a point of meeting every 2 weeks and taking time to go over every job, and all money,all prospects, and all jobs so everyone knows everything at all times and trust is maintained)

if upfront money is part of the plan, and one person has business in place, then voting might be 51/49 for the in place partner, and profits shared on basis of the money put in to company (profits shared at 30/70 until new guy presumably pays for himself in say 2 yrs and profit gradually increases to 50/50 ).

good luck - hope it works out for you
 
I have to agree allot of good advice here..my 2-cents..never mix family and money unless you are willing to loss money and smile and never bring up the topic again..any business with more than one person involved in owner ship should have legal council and an accountant who are not friends with either owner..I would stay working and do no more than you do now and smile every time you use your insurance..as that is the first thing to go..
 
The only ship that is guaranteed to sink - is a partner-ship. Been there, done that - didn't work. As others have said, if you insist on doing this EVERYTHING must be worked out in advance. What happens if one partner dies or your brother-in-law divorces your sister? I have heard of a situation where Brother-in-law (partner) divorces sister and then remarries and then dies. Original partner ended up in 50/50 partnership with a person he did not know, knew nothing about the business, etc.
Stuff happens. This is a sure recipe for disaster.
 
my little league coach was an attorney--he once told me "having a partner in business is more binding than marriage"!! some twenty years later i found out he was correct!

i was all set up to go into business in 1978, had a service truck set up, accounts, funds, but my partner at that time wanted to use half the shop to manufacture custom mailboxes??? his theory was if the electrical business slowed down, we could always make mailboxes???? i changed my mind and continued to work for contractors making a very good living and full benefits for my family.

in 1989 this same guy and myself had a golden offer to take over some very good commercial accounts. understand we were very good friends at the time and he was more into the estimating and paper work, while i am a hands "on guy" and enjoy working in the field. we started out mainly service work in commercial buildings and soon found ourselves bidding large office buildouts. we were growing at such a fast rate, we never realized our company's true worth. his marriage was troubled--kids out of control--wife spending more money than he had and then complaining he wasn't taking enough money from the company. and his biggest problem was his father-in-law was an ex-electrical contractor, who had two partners that cut him out of the business(i found out later,for very good reasons). his father-in-law convinced him that he should be on his own. we split the business and went our separate ways. he tried to come back and secure some of our original accounts -- that didn't work --they were happy with our service. two years later he went bankrupt and owed the local supply houses over $80,000.. i continued in my business for the next 23 years. it was a little hecktick at first learning the estimating---actually flying by the seat of my pants!!! but i had a very good customer base with little problem getting payed. i had a reputation about getting payed on time --and that worked out for me.

now, i think you have a double problem with this guy being your brother-in-law. the first thing you need to think about is your family--health care benefits. right now, you have your cake and eating too!! no worries, benefits,steady income. then you consider the partnership-- "you" will have the burden to provide these services to two(2) families!!! and the rest of the family will look to you for this issue......
 
I just tried to google Psychiatrist's Limited Partnerships and couldn't find any. :smile: So if you're thinking of going into business with some one else and you take someone's advice to see a psychiatrist, don't look for a partnership.....lol :grin:

Seriously, though. I've been in two over the years.....never again. :mad:
 
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