Husband/Wife Company... (employees, 2014, bankrupt, work)

[HollaGeo]

I have been working part-time for a husband/wife company for little over a year. The husband has mentioned he is looking for a partner down the road. When is it professional to sit down with them and discuss the future?

[Hemlock140]

Seems like a year is plenty of time, especially since he brought it up. I'd go into this carefully, however. Husband/wife businesses are subject to the success of the personal relationship. In other words, many have gone under prior to or after a divorce, where either it's sold and the proceeds divided up, or one buys out the other. Worse, the relationship goes bad and the additional partner/employees have to deal with being caught in the middle.

[vision33r]

I would avoid, I went through a situation like this and didn't end very well. If the husband mentions they need a partner obviously this means one of them is incapable or they need more capital.

Most likely one of them wants out or to work less and need another to shoulder the responsibilities but they don't want to be removed from decision making.

I think if they started the company they're most likely not going to give you a fair deal why would they let you reap the benefits. The only way this works is they bring you in as an investor rather than a partner.

[nicet4]

Originally Posted by Hemlock140

Seems like a year is plenty of time, especially since he brought it up. I'd go into this carefully, however. Husband/wife businesses are subject to the success of the personal relationship. In other words, many have gone under prior to or after a divorce, where either it's sold and the proceeds divided up, or one buys out the other. Worse, the relationship goes bad and the additional partner/employees have to deal with being caught in the middle.

I've been down the road with partners before where I didn't own 51% and if you don't own 51% you are better off owning nothing.

I am speaking for myself, for others it might be different, but I owned 33% and for 10 years it was great. It was the 80's and for nearly all those years I earned the equivalent of a six figure salary and then there were perks most people can only dream about. My best year ever, and remains so to this day, was 1986 when I earned $106k which in 2014 dollars is equivalent to $227,069 in 2014 dollars so pay was never an issue. The company had 25 employees, I've never earned that much since and it was a time when I could literally have anything I wanted. In some ways I miss it.

Things I had:




My biggest regret is I didn't save anything like I should have but I was still in my 30's so it was a time when I didn't worry so much for the future.

Things happened that I won't get into other than to say the partners were non-working and getting what I got. It went downhill.

Father and son teamed up with 66% and I found out real quick if I didn't bail I could be very much in hurt city. For example, we were a sub-chapter S corporation so I was personally responsible for 33% of the taxes on money the corporation earned and if the company never paid me a dime I still was obligated to pay the taxes.

What happened if I quit or they, by vote of shareholders of course, cut my salary to $12k but the company earned $400k and I was obligated to pay taxes on the $133k I never got? This was the threat and it wasn't idle. From here it got really ugly for a while.

So I got out, my partners got a sweet deal but at least I wasn't left trying to pay a $40k tax bill on a total take home income of $10k. I was still young, moved on to a better life with the lesson learned if I ever had partners I would own 51% or own nothing.

My old partners went bankrupt eight years later.

If you know enough to be considered partner material why not start your own and own 100%?