Business partnership breakdown...what would you do?

[Dilemma]

Hi everyone.. I have been researching peoples experiences with business partners and I thought I would join to ask for some advice as I am at a crossroads at the moment.

I would appreciate if you could please take a moment to read my situation as follows..

I started a new business/brand (Limited Company/UK) with a friend 3 years ago.
Just the two of us work together.
For reasons I did not become a director of the company.
I am 50% shareholder.
My business partner is also 50% shareholder.

The industry/business which is run from home, is pretty complex and requires constant research and attention, product design, finding new clients, advertising, logistics etc; most of which I take care of hence I have gained much experience in doing so.

As with all start-ups, it took time to establish itself and the future of the brand looks positive.

At the start my business partner and I were both unemployed hence we were both able to put a lot of time and effort into getting things up and running.

2 years ago my business partner got a full time job and I was happy to keep going as was as I could see great potential.

We did not/do not receive a wage.
We split profits 50/50 at the end of each month.

I moved to mainland Europe last year and due to local laws, I formed a new EU company of which I invoice the UK company for my 50% share.

In the last year, due to work and family commitments, my business partner has basically put little time and effort into the business and this has led to arguments, resulting in a complete breakdown of our friendship and working relationship.

We never had a contract from the start (Big mistake I know) on tasks etc and due to my business partner more or less leaving many task to me I have little choice but to do what has to be done as nobody else will do it for me.

Taking on the extra workload whilst my business partner has the security of a full time job and the benefit of me taking care of 90% of tasks which we should be sharing 50/50; has led to me asking myself, why should I be doing such extra work whilst my business partner does little or nothing but continues to receive 50% of profits?

Due to what time and effort the business needs to progress; I have made several suggestions including an hourly rate for both of us (we receive payment for the hours we put in) and or a commission on sales but my business partner will not agree saying that the business only needs a few hours work a week and not the hours that I say put in. It is extremely frustrating.

My dilemma is that I am part of a brand that is growing slowly but surely and I make sure that everything is done to the best of my ability and although I want to walk away from it at this moment, I cannot walk away from 3 years of hard work so easily. However on the other hand, I also have a business partner who's head is in the clouds at the best of times, has other commitments and who is difficult to motivate to do tasks that should be shared in order to progress the company.

I have thought of walking away and starting my own brand but this will take time to build and it would be such a shame to walk away from an almost established brand/business which would fall apart if I was to walk however the peace of mind in walking from an uninterested business partner feels like a burden would be removed.

As I design the products for the UK company/brand (again work for this is invoiced for from my own EU company) I have also thought of offering a private label service (under my company). I mentioned to my business partner; that I may offer this service to other companies and there was the argument that I would be competing with 'Our Brand' which is true however my argument is why should I put even more time and effort into the current business by offering a private label service whilst my business partner does little but would benefit from the extra efforts/profits...

As you can see, it has evolved into a difficult partnership but something has to give as it cant go on like this..

I would appreciate any advice/feedback on what to do. Have you's been in a similar position?

Many thanks for reading.

D

 

[skippydo.co.uk]

Well he owns half of the company, many people do not lift a finger yet enjoy the benefit of ownership so you can't avoid that. You need to make yourself a director and draw a PAYE wage. Explain to your friend that this is because you are running the company and the money will be owed to you for doing so. After that, the remaining profit can be split 50/50 as divi. If he wants to appoint himself a director too and pull his weight then he is welcome to also draw a wage but you are no longer going to work for nothing. Or you can offer to buy his shares. If he doesn't agree you have little choice but to rip it up and start again trying to retain your custom at newco.

 

[Dilemma]

Thanks for your quick reply.

You are right that many don't lift a finger and enjoy the benefits however our business started out as a 50/50 venture and time and efforts were 50/50 and should continue as 50/50 as the company grows/tasks increase.

My BP is under the illusion that it only takes x amount of hours a week to run whilst really knows it takes a lot more time and that I will continue to do it.

Becoming a director is not an option now unfortunately as it has to be agreed by my BP of which he wont agree to. I offered to buy his shares but he wont sell...saying he's going nowhere. We have some large orders coming in early 2015 hence why he is comfortable sitting in wait.

Regarding ripping it up and starting again, I like your thinking but it would kill me to do so if I am honest. With the orders due in I would be shooting myself in the foot by walking away. The only other option I can see at this moment is taking my foot off the gas and letting things run as they are but branching out by offering a private label service of which I am rewarded 100% for my efforts. The trade off is that the current brand would suffer as a result.

D

 

[Scalloway]

What are you getting out of this at the moment? - very little

What would you get if you broke away? - as much as you want to put into it

Edit - Don't get emotionally involved with a business

 

[cjd]

Why don't you just work the same hours as he does?

 

[Psl]

If you design the products for the UK company, simply stop supplying them with the designs and sell them through your EU company.

If you do most of the work, and we only have your word for it, two sides to every story etc, just stop doing the work for the UK company and concentrate on the EU company that you own and sell everything through that company. If your business partner is that bothered about it he will do something about it. It does sound like the other partner wants his safety salary and few quid on the side for very little input.

As Scalloway states, don't get emotionally involved with a business.

 

[Dilemma]

What are you getting out of this at the moment? - very little

What would you get if you broke away? - as much as you want to put into it

Edit - Don't get emotionally involved with a business

I agree with you regarding not getting emotionally involved but it is my income at this moment and as mentioned..orders almost secured for 2015

If I break away ie start a new brand; I am creating a situation whereby current clients will wonder what is going on/have they faith in the current brand/should they proceed with their orders.. Such a move could backfire on both businesses..

 

[Dilemma]

Why don't you just work the same hours as he does?

If I do; ie little or no hours the last weeks then nothing would get done. He knows I know the business inside out and is taking an easy route of leaving all to me. I don't mind doing extra work as I love what I do and do a good job of it but it is extremely disappointing when business partners who shared the same enthusiasm at the start..one suddenly decides to ignore the business and move onto something else..

 

[Dilemma]

If you design the products for the UK company, simply stop supplying them with the designs and sell them through your EU company.

If you do most of the work, and we only have your word for it, two sides to every story etc, just stop doing the work for the UK company and concentrate on the EU company that you own and sell everything through that company. If your business partner is that bothered about it he will do something about it. It does sound like the other partner wants his safety salary and few quid on the side for very little input.

As Scalloway states, don't get emotionally involved with a business.

You are right; you have only my word for it but trust me, I would not be asking for advice at this moment if I felt the situation was any different. Like many good business people that I have learned from...I make sure that I give 100% time and effort to what I commit to/ what is expected of me hence it is extremely disappointing to realise that my BP suddenly takes another road/could not be bothered anymore. He knows that if I was to back off then I would lose out on future profits.. Caught between a rock and a hard place as the saying goes.

Thanks again for your replies.

 

[Psl]

You are right; you have only my word for it but trust me, I would not be asking for advice at this moment if I felt the situation was any different. Like many good business people that I have learned from...I make sure that I give 100% time and effort to what I commit to/ what is expected of me hence it is extremely disappointing to realise that my BP suddenly takes another road/could not be bothered anymore. He knows that if I was to back off then I would lose out on future profits.. Caught between a rock and a hard place as the saying goes.

Thanks again for your replies.

Business poker!
If you own the designs how can the UK company sell them if you don't supply them to them?

If you deal with the sales, you will know who all the customers are.

Give your BP a choice, step up to the plate and graft or don't.

 

[Chris Ashdown]

Who deals with the customers, Many if not most will follow the person they deal with when companies split up, yes you may loose some, but better to control your own destiny and if the company folds he will not be in a position to carry on.

You have the time to get friendly with your customers and suggest you may go different ways and sound them out, set up a new company and get sorted before you break the news to your partner

Not being a Director helps you as you have no responsibility to the company you are just a employee as well as a shareholder, therefore any action you take which may damage the company by say competing is not against the law where as a director has duties to protect the company

 

[Dilemma]

Good morning Chris. I do. I basically deal on all aspects of the business. Ive had a good think about it and I feel the only way forward is to start a new brand with new designs and also offer a private label service. I'll continue working for the current company and handle tasks/orders as they come as it would be unprofessional for me to just walk away at this moment. I will not supply any new designs to the company. Some people just dont realise just how easy they have it do they..
Appreciate everyone's advice, thank you!