Opening a Record Shop

[TheStrongSilentType]

Hello

Hoping someone may be able to help with a few novice queries.

A friend of mine has experience in the record/vinyl trade and has his own online shop. He also has another job and I work fulltime in an office.

Through some lucky connections he recently managed to acquire an empty property at very competitive rental rates on a nine month lease which he is opening as a record shop at the beginning of next month. The current plan is for me to become a joint owner along with one other person who is older and also has a long history of experience in the trade.

There are some complexities as unlike the other two I don't possess any pre-existing stock which will be used for the initial sales but I would be willing to put forward the necessary finances to procure an equivalent level of stock. Additionally due to my present employment I will not be working in the shop (at least not in the immediate future) so therefore unlike the other two I wouldn't be paying myself a wage.

Nothing has been signed yet and to be honest I'm looking to find that 'sweet spot' where we can keep it as relaxed as possible (no requirements for lawyers etc) but to also have it all in black and white as well to ensure everything is done fairly.

Grateful for any advice and happy to provide further details if that would help.

 

[Paul Norman]

I understand you preference for no involvement from lawyers.

However, this forum is littered with people who had no involvement from lawyers, and, a few years down the road are trying to unravel complex situations.

You need to draw up precise agreements between you. These need to set out exactly what each of you will do, what each of you will put in, and what each of you will take out.

It also needs to set out precisely how you will handle any disputes between you. It needs to spell out how one, or more or you will leave should you wish to do so in the future.

For those actually working in the shop, there needs to be a properly drawn up contract of employment, and proper job description?

It all sounds so over the top now. But scroll forward when one of you starts to resent doing more, or being paid less, and you will be really pleased you did this.

Whether you form a limited company, or a partnership, or something else, you really are best advised to do this. You have completely correctly expressed a wish to have it all in 'black and white', and some of this won't need lawyers - like contracts of employment, perhaps.

But don't be too quick to rule them out.

 

[Deleted member 59730]

I know of 3 small independent record shops. They require massive amounts of work. The shops in 2 cases are just a front for doing record fairs and market sales every weekend.

 

[Deleted member 335660]

I formed a company whereby we had one sleeping partner and two working so your situation is not unusual.

Most definitely I would insist on a Limited Company whereby you are a Director and Shareholder. The working partners would be employees drawing a salary or they could just share the profits at the end of the year.

As a shareholder you would take your share of the profits.

If you are putting equal value into the business then you could have 33 shares each, don’t issue the last one.Obviously general decisions would only require two of the three directors or shareholders. I think you could get a memorandum amended so that significant shareholder decisions require 75% of shares, but best talk to an accountant.

We had a disagreement and I left, but I took my shares with me. Whatever legal agreements you come to working with partners is never easy.

 

[Mark T Jones]

Whether or not you pay a legal bod (I recommend you do), it is really very important that you sit down & talk through at length how you will perate together

 

[TheStrongSilentType]

Thank you to everyone for your advice so far. It's most appreciated. I'll keep you informed on how things are progressing.

 

[The Supplier Central]

You should talk about what happens in best and worst case scenarios and if you don't want a highly legalised agreement then definitely you still need shares and directorship and a "Memorandum of Understanding" is a lite document which could lay out the principals

 

[SillyBill]

No amount of money would tempt me into a partnership with a friend...that is my position in any case. Knowing the strains of running a business I absolutely know it'd mean the friendship would never be the same, and a reasonable probability it'd be dissolved. I remember talking at University years ago all starry-eyed with mates how we'd set up in business together. Years later, running businesses, I literally couldn't imagine anything worse. A micro business with a non-involved day-to-day shareholder is also IMO a recipe for disaster. A matter of time before the resentment builds if a) its successful (why are we splitting our fortune with this hanger-on) or b) if its not successful (why are we carrying a deadweight). A non-involved shareholder has to be the major bankroller or can open doors for the business with connections. Then again you could be the next Innocent...so what do I know.

 

[MBE2017]

With retail looking poor overall, can these records be sold via other channels? I’m sure they can, but opening any shop would be very low on my list of things to start atm.

I agree with SillyBill, friends rarely work as partners, a sweet spot rarely exists in new start ups, whatever you believe atm, expect treble the workload for half the expected money.

Not trying to put you off OP, butthink long and hard. The other two if working together might gel well, and you are that guy putting just money into the business. Well received in the early days, but expect to be outvoted on any major decisions.

 

[TeaRoomLady]

As others have said, if you go into partnership with a friend, you stand to lose that friendship.
Be very careful, keeping things casual could be a recipe for disaster.
The only person I could go into partnership with is my sister. We have run a business together before, so know it works.
Business can be stressful at times and you and your partners will need to pull together. You can only do that successfully if you have covered all the ‘What ifs’.

 

[MattRumbelow]

Hey, could I just check what your contribution to the business will be?
Is it just a financial one (via buying stock for selling)? –there's nothing wrong with this, lot's of people's contributions to new companies are financial, but it's just good to know.

If you're providing services on the side, (say, doing the books in evenings and weekends), then that changes your contribution.

All in all, I'd definitely suggest visiting a legal pro, and getting it all sorted out. It's good to have written down what everyone is expected to do, and what they're getting out of it. All agreeing to a shareholders agreement (while not the most fun thing to do upfront) will help give you a roadmap of how the relationship should develop, and make it clear when someone is/isn't pulling their weight.

 

[ethical PR]

Hello

Hoping someone may be able to help with a few novice queries.

A friend of mine has experience in the record/vinyl trade and has his own online shop. He also has another job and I work fulltime in an office.

Through some lucky connections he recently managed to acquire an empty property at very competitive rental rates on a nine month lease which he is opening as a record shop at the beginning of next month. The current plan is for me to become a joint owner along with one other person who is older and also has a long history of experience in the trade.

There are some complexities as unlike the other two I don't possess any pre-existing stock which will be used for the initial sales but I would be willing to put forward the necessary finances to procure an equivalent level of stock. Additionally due to my present employment I will not be working in the shop (at least not in the immediate future) so therefore unlike the other two I wouldn't be paying myself a wage.

Nothing has been signed yet and to be honest I'm looking to find that 'sweet spot' where we can keep it as relaxed as possible (no requirements for lawyers etc) but to also have it all in black and white as well to ensure everything is done fairly.

Grateful for any advice and happy to provide further details if that would help.

Why don't you want to involve lawyers. Partnerships are fraught with difficulties.