Boss is offering ownership

[jag157]

My boss has recently told me that he has to declare bankruptcy due to a massive client who never paid. He is offering me partner status in the next company and I could really use some outside advice. I’m 20, in college, and planned on going into sales. My business on the side hasn’t had any traction for a while due to my lack of connections, but my boss has consistently had work for my company since his network is huge.
He’s s offering ownership in a new company which will have the services I offer, with his connections, as well as all of his contracts from the previous company, which is well into six-figures. I’d be bringing skills and labor to the table. He’d be bringing that, plus connections and current contracts/relationships.

Where do I start? This seems like a great opportunity but throws a wrench in my other plans. Any outside opinions, and questions are welcomed! I’ve never faced something like this and have no clue where to start.

 

[tobelieveinhim]

@jag157 He is declaring bankruptcy and offering you a partnership. Is he going to use your credit to get approved for everything?

Be very careful and consult an attorney. This sounds like a lot of red flags for a partnership.

 

[jag157]

@tobelieveinhim There isn’t any talk of needing a loan for the potential new company as we currently have everything necessary for the work we provide. What kind of attorney and what questions should I be asking or using the attorney for?

 

[tobelieveinhim]

@jag157 A business attorney, preferably with some background in bankruptcy. You should ask about the risks of this potential partnership.

Bankruptcy may be an issue for non-loan items such as opening a bank account, vendor terms, etc. In my industry if you declare bankruptcy you may forfeit a lot of your business.

 

[jag157]

@tobelieveinhim Will do thank you for the advice

 

[tobelieveinhim]

@jag157 My pleasure. Also because you are 20 I am going to tell you that just because a loan isn't discussed today doesn't mean it won't come up again. Nothing against your boss and I'm sure they might be a great person, but they'd dissuade you from the partnership if they brought up the credit issue down the road. Once your partners, it will be much harder for you to say no.

 

[risen145]

@jag157 Plan an exit strategy upon negotiations & get in writing. U r only 20. You’ll have time later for your stagnant side biz. Look at the offer seriously. Speak with/attorney, make a tight employment contract, buy/sell contract if relevant, exit strategy, etc. gauge his acts in the meantime. Hopefully he’s on the level. Someone not paying your boss for work is DEFINITELY a hardship & CAN plow a biz into BK. Is he suing the client in arrears? GL.

 

[jag157]

@risen145 I believe he’s working on that, it’s a municipality which has been dragging along for over 2 years now. I will look into getting all that in writing and getting with an attorney for it too. Thank you

 

[hellofriends]

@jag157 Make sure you get your own attorney to review things. Don't use his. They won't have your best interests in mind.

 

[cristian1980]

@jag157 Bro, don't do it, you will be buying in to nothing & less then nothing. The bank account you will have with this person will be a nightmare to control + plus if his creditors realize he is in the account they will raid it for funds.

If you know that this man was not responsible with his credit and business. Do you think he will be responsible with yours?

My advice is to finish school, wait, save and open your own.

 

[dicran]

@jag157

There isn’t any talk of needing a loan for the potential new company as we currently have everything necessary for the work we provide.

If this were true, he would still have a viable business.

Dude is trying to take advantage of your youngness and fresh credit history.

If he closed up a business to declare bankruptcy, that means he has debts that he couldn't pay. So he obviously doesn't have money laying around to start a new business. Bankruptcy doesn't just erase your debts and leave you at the same place you were before.

As someone looking to break into sales, you should smell his bullshit from a mile away. Take off the rose coloured glasses, he's courting you.

You have no contacts, little traction in your side business and are young without much experience. Isn't it odd your boss is just offering you a piece of a new company for seemingly no reason. Have you even discussed anything about money and who is going to bankroll things?

This is red flag heaven!

 

[reneewly]

@dicran This is correct. He wouldn't file bankruptcy if he had any money.

 

[bornagainsteve1]

@dicran Just to point out the reason they might not need start up capital could be it’s a simple service business, which doesn’t need stock or much equipment (like digital marketing)

 

[luth96]

@jag157 This is a business groom job and run far far away

 

[risen145]

@jag157 What type of biz?

 

[jag157]

@risen145 Primarily managed IT services for companies, as well as web development and SEO.

 

[justjem]

@jag157 How is he facing bankruptcy for a service business bc of one unpaid bill?

 

[ninkies]

@justjem My question. Sounds like a pile of debt he won’t talk about

 

[lawrencemcdonald1]

@jag157

Primarily managed IT services for companies

Be VERY careful here... How are all of his other clients going to react to him declaring bankruptcy? There are lots of MSP's around. I'd run if the one that I was using declared bankruptcy and immediately opened under a new company name and expected all their clients to move over with them.

 

[sunny2014]

@jag157 If you have the skills, have him sell your services of your side business (like a reseller) and mark up the prices. That way you are completely separate entities, he can still benefit of your skills, offer the services, both of you can profit but neither of you are locked in with a partner.

Having a business partner can be a huge benefit or a huge detriment. It depends all on how well you two work together, how well your visions are aligned and if both of you are equally willing to work hard for the success of the company. That's a lot of "ifs". I would not recommend it at this point.