Boss is offering ownership

[ttbastian84]

@jag157 Answer = NO THANK YOU

 

[slawek]

@jag157 Run. I’m surprised you see the light at the end of the tunnel through all those flags.

Something is way off here looking from outside

 

[captseriouspants]

@jag157 Yeah, maybe don’t get aboard a sinking ship.

His business is failing, thus proving he’s a poor businessman.

You don’t want to get any of that stupid on you, RUN!

 

[vicganda]

@jag157 One thing no one is saying: you need YOUR attorney to make or revie the contracts. AND, it has to be simple, easy, and cheap to get OUT. People don't think about partner breakups or divorces. Both happen.

 

[riverrider]

@jag157 Take the gamble for 12 months. You’re young. The network alone is worth it. Capitalize while you’re there though.

 

[jag157]

@riverrider Any knowledge on ways to capitalize on it?

 

[riverrider]

@jag157 Build personal relationships within his network as well, don’t rely solely on him. Identify the large accounts or folks that bring you the best opportunity.

At this point your major risks are legal and financial. Be smart, don’t guarantee any lines of credit, ensure you are listed as a 50/50 partner on the incorporation. Establish by-laws you both agree to at incorporation. A small business lawyer will help establish this, ask him to help fund and create this if needed. You need to see mutual investment.

The nature of this doesn’t seem entirely exploitative, so I’d explore it. You can always ejecto seat out in 12 months.

Ask him about compensation beyond equity. You need to eat. What’s the plan for the first 3, 6, 12 months. Who will you hire next? When? Why?

Learn about his business mind over a couple lunches.

 

[albertha849]

@jag157 You should ask him how much revenue he’s expecting. Also, what’s the start up cost going to be? At 60% equity just know he maintains all operational control. Might be a good learning opportunity for you but he needs to share a lot more information with you. If he’s filing for bankruptcy at this stage in his life is he someone who will be a good mentor/partner?

 

[jag157]

@albertha849 Start up is minimal due to closing one and opening the next day. As a 40% owner that leaves me with no power?

 

[albertha849]

@jag157 Whoever has 51% of a business usually has the controlling interest and thus maintains ultimate control of decision making. There are caveats to that like preferred/common stock etc. but if this is going to be an LLC, legally he will be the majority stake holder. That being said, It’s never a good idea to get into a partnership without having a good working relationship and some understanding of dispute resolution. I’ve been a part of several partnerships and if a disagreement arises you work through it. Since you aren’t putting much cash in, the biggest concern you should have would be any potential debt this partner/business takes on. If there are personal guarantees involved, that could pass onto you and be problematic, especially with a guy who’s short term track record isn’t great with his finances. Normally if both of you are listed as managing members (LLC) you would need to both sign and be aware of any financial transactions like new loans or credit cards. That’s where an attorney can come in and help set up the articles of organization and answer some basic questions about protecting yourself. At this point you need to ask a lot of questions so you have a better understanding of what this arrangement will look like. If there isn’t a need for loans and credit cards or much potential to damage your personal finances it might be a good opportunity for you.

 

[jackreid99]

@jag157 Depends on how the agreement is structured. I was a 40% owner of a business with partner at 60%. However, our business agreement was set up such that the 40/60 applied only to compensation. All other matters (decision making, control etc.) were 50/50.

 

[cbviau]

@jag157 He can out vote you. So no you’ll have no control. I’ve seen this. Given everything this is sobering you probably don’t want to get involved in. He’s managed the business so poorly he needs to declare bankruptcy. That’s not good. Many red flags here. Will customers even stay with him doing this? I wouldn’t. You’d be better off starting your own business without him.

 

[613jono]

@jag157 What happens when they find another non-paying customer in the "new" venture?

 

[jag157]

Personally guaranteed the loan for the business. Receivables never landed. Company would be created ASAP to continue serving clients, I am looking at 40% ownership, I’m struggling to estimate the time since I currently go to school. Would likely consider dropping out to give it my all. I will be continuing to work in the field, and service clients. He will likely do most admin work.
Thank you for your input I appreciate it

 

[ivans]

@jag157 Not related, but was curious what your tech stack looks like for the website side of things.

 

[makas]

@jag157 If he’s llc then he’s not really going bankrupt just the company is so he starts fresh I’d learn all I can cause one day he’ll retire his connections will end up your connections