Question about Business partner

beatrice33

Hi,

I have met someone who is interested in joining my small business. She doesn't have money to invest but she has time, sales skills and a business background which is what I'm lacking.

She would be looking to get part of the benefits if/whenever we make any.

I am very interested in having this person on board but I don't know how to go about this. How do I protect my business in this case? She said we didn't need to go to a lawyer, as there are plenty of contracts online that we can use. I also wouldn't know how to decide what percentage she should get from benefits.

She sent me this contract as example:
http://www.smallbusinessnotes.com/managing-your-business/sample-partnership-agreement.html

Any advice would be welcome,

Bea

Peterdalkey

The good news is that a written agreement is the only way to go to protect both of you. As she is not putting up any of the funds, it is hardly a 50/50 deal unless she is going to work more hours than you. You need to make a clear list of who is to do what and how the profits(losses) are to be split.
Probably the most important part of a partnership agreement is the termination terms, who is to get what and who has the right to continue the business. You may also want a non-compete clause for 12 months if she leaves, after all it is your enterprise. Bit like a prenup really! the agreement needs to be customised accordingly.
I am sure you will get a good few more pointers from the posters here.

cheers

Peter

beatrice33

Thank you Peter,

Thats really helpful.

Cheers

Lplated

Maybe propose that she join for the first 12 months on the basis of some kind of basic pay plus commission type agreement, with the intention of negotiating a partnership agreement after 1 year?

Unless you know for sure that you will get on with this person, and that she can perform to the extent that you anticipate [both impossible without trying her out], then I would be slow to let in a partner.

The cynic in me would wonder, if she is all that good and all that desirable, why would she be completely unable to come up with any funds at all???

An alternative approach might be for her to buy her share in the partnership, but pay that off over 12 months [or whatever time] through some of her earnings and her share of te profits.

You've spent some time building up your business, investing your time and captial - it has a value. The normal course would be to 'hand' over some of that by way of hiring an employee rather than 'hand' it over by giving a free share in the company.

beatrice33

Thanks for the advice.

I want to be careful because we have only met twice and she is already suggesting opening a joint bank account for the business which is defo not going to happen...

I customized contract from the Internet, signed by both would be valid at all in case of trouble?

Im still thinking about a way where I can beneift from her skills while protecting my business...

Peterdalkey

Make haste very slowly! Your radar is working, joint bank account with someone you have only met twice? Heed it!
A contact, whether verbal or written is valid in law, but a verbal contact without witnesses is very hard to enforce in court.
It appears to me that you have yet to agree on what basis you propose to work together, this needs to be done ahead of finalising the actual contract itself. The contract should acccurately reflect the complete detail of the agreement between you.
To be blunt, while a contact is VERY important if things go wrong, trust and confidence in each other is more important in making the business work and grow. If you have any doubts, trust your instinct and don't do it. I agree wholeheartedly with the other poster, who advised working together for a period on a wage or profit share basis for a period..... A bit like a courtship before getting married. If she is not agreeable, just walk away. You will learn a lot about her in 6-12 months and be in a much better position to make an informed decision with that experience behind you.
Remember it is your business and you could end up spending more on a legal battle it it goes wrong than the business itself is worth or you could afford.

Good luck which ever way it turns out

Peter

Lplated

beatrice33 wrote: »

I want to be careful because we have only met twice and she is already suggesting opening a joint bank account for the business which is defo not going to happen...

I customized contract from the Internet, signed by both would be valid at all in case of trouble?

Im still thinking about a way where I can beneift from her skills while protecting my business...

Red flags all over the shop .....

Why are you so sure about her skills? Do you have independent references? Records of previous successes?

What kind of customized contract are you thinking about?

In those circumstances a partnership agreement of any kind would seem like the opposite of a good idea ....

beatrice33

Lplated wrote: »

Red flags all over the shop .....

Why are you so sure about her skills? Do you have independent references? Records of previous successes?

What kind of customized contract are you thinking about?

In those circumstances a partnership agreement of any kind would seem like the opposite of a good idea ....

Thank you guys.

About her skills, no I dont have any references but after listening to her, at least I can see she is sales/business orientated and always looks for ways to get the benefit of things, whereas I would be looking more to the aesthetics and content of the biz.

I wont go into partnership with her. I think I will give her 6 months to start off with some sales on the phone and If she gets a certain amount of leads per week/month, I can offer her some percentage of the benefits? Would that be valid? After that, we can look into it again.

onedmc

beatrice33 wrote: »

Thanks for the advice.


Im still thinking about a way where I can beneift from her skills while protecting my business...

You shouldn't give her a share in the business unless she pays for it. It it dosn't work out then you have a serious headache.

Offer some sort of profit share. If the company makes profits she get say X% after the business retains some profits to expand.

If after a year or two she wishes to reinvest those profits she is free to do so.

You must hold onto the purse strings.

Lplated

beatrice33 wrote: »

Thank you guys.

About her skills, no I dont have any references but after listening to her, at least I can see she is sales/business orientated and always looks for ways to get the benefit of things, whereas I would be looking more to the aesthetics and content of the biz.

I wont go into partnership with her. I think I will give her 6 months to start off with some sales on the phone and If she gets a certain amount of leads per week/month, I can offer her some percentage of the benefits? Would that be valid? After that, we can look into it again.

Something like that would be more in your interests. If she resists that kind of proposal it would probably indicate what her real interest was to begin with.

There are 450k unemployed in the country at the moment, at least some of whom would have business/sales skills - you're not confined to just this particular individual!

Hope it works out.

beatrice33

I have emailed her a proposal:

Work for 6 months, 1 or 2 hrs a day ( x days per week) she chooses the amount of time she wants to dedicate to this.

After the 6 months, we sit down, see how is it going and decide on next step.

Once we have made enough profit to re-invest and bring to our pockets (This will take a lot more that 6 months) we will chat about how much each gets (not 50/50)

She knows Im a start up and I cant afford to pay a salary and I have made clear Im not interested in partnership or going 50/50.

If she agrees we will put in on paper.

I will let you know what she says :pac:

I really appreciate all your advice.