@jag157 Beware as minority owner you'll essentially have no say. Furthermore, if you have to sign a non-compete, they are VERY enforceable when it results from selling a business and are well written. That will affect your future employment options and will certainly prevent you from operating your own business for a period of time.
@rolce Minority owners CAN definitely have a say… to a point. Depends on the agreement, if it’s well written, etc. don’t rely on attorney to cover everything you’d want. Make sure anything that’s a concern or a want, that’s covered. There’s minority clauses that can force a sale or a buyout & terms. Consider those things. I’d counter w/issues important to you, that protect you., & I’d try for 45/55% ownership. Look at things in a worse case scenario in an agreement & try to plan for that. GL!
@jag157 What is your boss' incentive to give you ownership?
Your boss just went bankrupt because a client didn't pay which means that your boss mismanaged the company and was robbing the company to pay themselves. If you get ownership of the next company you get to own the liability. Going bankrupt a second time can fall on you. So back to my question. Why does he want to give you ownership? Is there something industry-specific that I am missing?
@jag157 A great opportunity for you? More like he’s taking advantage of a young naive person for an opportunity for him. Why doesn’t he partner with someone experienced who has a track record of success? Because those ppl wouldn’t entertain that idea. Now ask yourself why. You don’t want to fuck yourself over like that.
@jag157 ‘Partnership’? As in 50% of company? Know the value of the company. Co/owner own any assets? Know this too. Have you seen the financials? (Definitely REVIEW them closely!). Do financials make sense? Get “in line” for these things in case things go sour. Chances are, sooner or later, there will be challenges w/your partner &/or biz. GL.
@lotw this is exactly what I think. He made one or more bad business decisions. He might make it sound simplified and put the responsibility on one customer, but he put himself in the position to somehow have his entire business fail, and have to declare bankruptcy because of whatever that situation actually is, if he is being truthful. I think this is just like someone reaching out and saying hey, I just need some more money to turn my business around it has all this potential… But you know they’re going to continue on the same way and any influx of capital will just be a temporary bailout. I would avoid going into business with him. Partnerships are already tricky, and I see at least one giant red flag.
@jag157 Check how many businesses he has. There might be a few connected ones. A bankrupt business can be turned into a phoenix company once the debts are gone. In the us he could have used bankruptcy protection. There are also things like debt insurance that could have been used as well as factoring. Ask him about the business. Then have a look at the audited accounts for the bankrupt business.
Some people have a habit of starting or buying businesses so they can have a large turnover, use that to borrow lots….then pay themselves a huge wage and leave the struggling business to someone else or to let it fail or both.
He is declaring bankruptcy due to financial mismanagement. What should happen now is that the equipment/equity in the business is sold to pay the debts.
But he isn't going to do that. Somehow he is going to steal that equity from his current creditors and set you up as the "business owner" because likely he can't because he is shady AF.
Then when you're in it he will use your credit for loans, which he will mismanage while you are out in the field working your butt off. Any money the place makes he will take rather than reinvest as thats what he has done already.
Then he will have you declare bankruptcy with some excuse.'
@myloveisforchrist This exact scenario happened to my brother ~25 years ago. OP, you need to RUN from this opportunity. Don't waste your time on an attorney, just trust that if something sounds too good to be true, it is. You're being manipulated by someone far more experienced than you, and he is ALWAYS going to have an excuse for why you need to ignore the red flags.
@jag157 I'm just the outside looking in here but you really have to ask yourself if you trust this person to be your business partner. Also, make sure you protect yourself where you can. If things go sideways and you're an owner debt/lawsuits could be on you personally as well depending on how the business is structured.
Another option you have is partnering business to business. His business contracts yours for the labor/skills, while he brings the existing customers. That way if you ever need to part ways, just terminate the contract. Take all this with a grain of salt though because I'm just a risk-averse stranger on the internet.
@jag157 OP. I made a very similar mistake when I was 25. Long story short, don't do it. You'll be ready to own your own business one day, but not today.
@jag157 So the company will be in your name and he'll run your name into the ground.. you can do it. Just set up some safety measures for yourself and and a possible out
