Another business partnership problem...

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Higgsy

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Oct 1, 2018
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Hi All,

I'm new to the forum, and have been reading lots and hopefully as my experience grows in business I will be able to return advice.

You've most likely guessed I have a business with a business partner, providing consultancy style services (please excuse me not giving too many details away).
Our company has 2 Directors both having 50/50 shares. Of course, I was naive and have no shareholders agreement in place.

We've been in business for 3 years or so, and our turnover has grown, profit slightly too. We can track who has found the work and brought in the sales, either me or the business partner. Consistently over the past 3 years i have brought in 90% of the Turnover, and subsequently been paid more (we are paid for the hours of "paid" jobs we do). I also have vehicle through the company which we are both PG for.

My honest feelings are; I am unhappy with my business partner, and no longer want to be in business with them. They don't have the ambition to grow the business how I do. Lets just say their is an age gap, and our company is more than likely planning to be a pension top up, whereas for me, I have ideas to potential gain large growth and expand the business in new ways.

I don't know which route to go;
I leave, they stay - agree a buyout (Their turnover would only cover running expenses - not wages) - My clients would leave and come with me.
I know if i leave the business would fold. They have no idea of how to run it and costs. My concern is, when this happens the vehicle on PG would fall on us both... Hence, it is within both our interest that i take the company.

I stay they leave - my clients comfortably cover all expenses, wages and dividends. Happy for them to keep their own clients. I don't feel they deserve a buyout as I have made all the profit. I would offer them their equipment and obviously any owed monies.

Are there any other options?

Thank you,

Higgsy
 

Lisa Thomas

Business Member
Apr 20, 2015
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553
How much is the negative equity on the vehicle?
 
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Mr D

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Feb 12, 2017
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You are both directors, you are both shareholders yes?

If they resign from being a director they keep their shares. Do you want to give them their share percentage in dividends any time you declare a dividend?
Do you want to get their permission if you want to make major changes?
Do you want them requesting an audit every once in a while?

Or do you want to buy their shares at a price they are willing to sell for?
 
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Higgsy

Free Member
Oct 1, 2018
100
19
Hi All,

Hos much is the negative equity on the vehicle?

It's on lease, approx 2.5 years left on the vehicle lease - not purchase.

You are both directors, you are both shareholders yes?

If they resign from being a director they keep their shares. Do you want to give them their share percentage in dividends any time you declare a dividend?
Do you want to get their permission if you want to make major changes?
Do you want them requesting an audit every once in a while?

Or do you want to buy their shares at a price they are willing to sell for?

I see your point, my trouble is knowing what their buyout is worth. As realistically their services only made their first bit of profit this year. If we based it on that - ignoring the losses they made in years 1 and 2. 50% would be less than £500. Whereas my clients/services would be a minimum of 10 times that.

Is this a common law partnership, an LLP, a Ltd, or what?

Sorry, didn't realise i missed that. We're a LTD.
 
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Mr D

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Feb 12, 2017
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Hi All,



It's on lease, approx 2.5 years left on the vehicle lease - not purchase.



I see your point, my trouble is knowing what their buyout is worth. As realistically their services only made their first bit of profit this year. If we based it on that - ignoring the losses they made in years 1 and 2. 50% would be less than £500. Whereas my clients/services would be a minimum of 10 times that.



Sorry, didn't realise i missed that. We're a LTD.


But according to you he owns half the business. That's half of what your clients bring in as well as half what his clients bring in.
 
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Higgsy

Free Member
Oct 1, 2018
100
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But according to you he owns half the business. That's half of what your clients bring in as well as half what his clients bring in.

Ok, I understand.
Another option then; if i went down the route of resigning, sold my shares and started a new company. If my clients chose to come to me, this wouldn't be a problem (free choice after all and many choose us as consultants at the minute - not the business). The original business will crumble. They won't be able to sustained the costs on their clients, where does that leave me in liability to the business (ignoring PG)?
 
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Lisa Thomas

Business Member
Apr 20, 2015
3,896
553
That leaves you in a good position to negotiate...!

If you resign as a Director you are only at risk of claims being brought against you by any subsequent insolvency office holder - i.e. Liquidator for transactions that occurred whilst you were a Director and whilst the Company was insolvent.
 
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Higgsy

Free Member
Oct 1, 2018
100
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That leaves you in a good position to negotiate...!

If you resign as a Director you are only at risk of claims being brought against you by any subsequent insolvency office holder - i.e. Liquidator for transactions that occurred whilst you were a Director and whilst the Company was insolvent.

Thank you Lisa.

I don't know if anyone will know this answer. The on thing on PG is the vehicle lease. If the business was to end dissolve as we couldn't resolve our LTD breakup. Has anyone/Anyone heard of someone taking on the vehicle lease privately/through a new startup, rather than being chased for the funds but having no vehicle. (Hope that makes sense?)
 
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Gecko001

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Apr 21, 2011
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If your partner sees this as a pension, he/she will fight to keep it keep it or at least not have the income dry up completely. Changing the present set-up rather than dumping it completely should be your first option and not your last one.
 
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Chris Ashdown

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Dec 7, 2003
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Norfolk
What made you start up together in the first place?, whilst you say you bring in the majority of the work, who does the actual work with those orders?

What size turnover are we talking here that you are worried about a lease on a car

Dont assume that just because you brought in the customer that they will move with you, many may well be happy to stay for any number of reasons

Do you owe your partner any loyalty for the work they have given or are they just spongers and thats the reason you want to leave
 
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Higgsy

Free Member
Oct 1, 2018
100
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If your partner sees this as a pension, he/she will fight to keep it keep it or at least not have the income dry up completely. Changing the present set-up rather than dumping it completely should be your first option and not your last one.

Hi Gecko,
I want the business to succeed, I have ideas for growth which I have been holding back as I don't feel comfortable to fund someone else pension, but at the same time have used the last three years or so to build our business so we have a name (albeit small at the minute).

What made you start up together in the first place?, whilst you say you bring in the majority of the work, who does the actual work with those orders?

What size turnover are we talking here that you are worried about a lease on a car

Dont assume that just because you brought in the customer that they will move with you, many may well be happy to stay for any number of reasons

Do you owe your partner any loyalty for the work they have given or are they just spongers and thats the reason you want to leave

Hi Chris,

We started together as, it motivated me to go back into business I guess. But this person at the time i felt added value in another sector that I know is a big market and not saturated with competitors, I didn't have the background to understand it fully at that time (i've taught myself about the market - not learnt from the business partner).

The work is carried out by ourselves and our own assigned contractors when req. I.e. I have 4 contractors. They have 2. We are paid for the paid work we complete.

Basic Figures:
Turnover is approx at £150k -
My business brought in approx 135k (100k in my sector, 35k in my business partners sector - without trying hard)
Business partner brought in 15k (14.5k in their sector and £500 in mine).

My clients have not always been impressed by my business partner... Doubt they would stay with them. Often they request me or my approved contractors specifically.

They obviously do non-paid work behind the scenes, as do I, but this is the joy of being a director, and we knew that this would be the case instead of investing money.
I brought some of my own equipment across that i still own (not the business). In addition I paid for the incorporation (was refunded). No other funds were brought in. I've pretty much built what we have from scratch, sounds bad saying I - but I do feel it is me.
 
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Gecko001

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Apr 21, 2011
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Hi Gecko,
I want the business to succeed, I have ideas for growth which I have been holding back as I don't feel comfortable to fund someone else pension, but at the same time have used the last three years or so to build our business so we have a name (albeit small at the minute).

Can you discuss your plans for growth of the company with the other director?
 
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Higgsy

Free Member
Oct 1, 2018
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Can you discuss your plans with your fellow director?

Not really, as in my opinion it will be a bigger earner. I have used my spare time to develop it and not business resources. I would prefer to do it through this company as it would be easier to get a business loan. I just don't want them with 50% of it.

I've given them 3 years to show their worth, if they cant do it with a small project, how can I trust them with a larger scale?
 
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Gecko001

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Apr 21, 2011
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Not really, as in my opinion it will be a bigger earner. I have used my spare time to develop it and not business resources. I would prefer to do it through this company as it would be easier to get a business loan. I just don't want them with 50% of it.

I've given them 3 years to show their worth, if they cant do it with a small project, how can I trust them with a larger scale?

It looks like all communication has broken down between you and the other director and you should go your separate ways. Tell him/her you want to go your own way as soon as possible for both your sakes.
 
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Thank you Lisa.

I don't know if anyone will know this answer. The on thing on PG is the vehicle lease. If the business was to end dissolve as we couldn't resolve our LTD breakup. Has anyone/Anyone heard of someone taking on the vehicle lease privately/through a new startup, rather than being chased for the funds but having no vehicle. (Hope that makes sense?)

Yes. It isn’t uncommon to transfer an agreement
 
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Higgsy

Free Member
Oct 1, 2018
100
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It looks like all communication has broken down between you and the other director and you should go your separate ways. Tell him/her you want to go your own way as soon as possible for both your sakes.

I have one thing being sorted this week, that i can't start the split til is complete. This is mainly as it would give them leverage. It is nothing sinister, simply putting something into the companies name. Then I plan to do a split.

Yes. It isn’t uncommon to transfer an agreement

Perfect. Although it is obviously simpler for me to continue with the business taking the liability then transferring it to a new start up.
 
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Gecko001

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Apr 21, 2011
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Higgsy

Free Member
Oct 1, 2018
100
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It might not seem sinister, however the way you take this action needs to comply with the responsibilities and duties of a director:

I have basically asked that a service provided through someone else's name (that my business partner is linked to) but solely used by our company is moved and paid for by us solely. This has all been agreed.

Whether I get the business or not it will be the business's asset, not mine. Meaning if the split becomes "horrible" my BP won't try to charge me £20k for it to be transferred.


Also, can i just say how amazing these forums are for the advise and the airing of problems. Everyone who has responded has been so helpful.
Thankyou
 
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Higgsy

Free Member
Oct 1, 2018
100
19
Hi All,

I know how frustrating it is for you guys for people to do the following:
New members appears > posts problems > receives advice > poster disappears.

So I thought I would update you all:

I have now received my BPs resignation as director and we are talking amicably regarding their sale of their shares.
The customers gained together; i.e. both found will stay with the company. They will keep the customers that I do not deal with.

Everything is just being put in writing.

There is light at the end of the tunnel.
 
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