Going into business with other people

Huzar1683

Huzar1683

Well-Known Member
Silver Stacker
I am in the planning stage of a business with huge potential in my state of Australia, the business involves me as the driving force and the two others have business and marketing backgrounds, I will be the hands on in operation and they will run the company one as the business and finance side the other with sales marketing and research....

I have never been in business with other people before and although they are rather transparent and if business fails it will be their investment $$$$$$ that is lost not mine, naturally I still want to make sure that everything is as it should be....

We are developing a solid plan however my concern here is more geared towards negotiations and contracts and solidifying myself as a co owner of the business...

My question is for anyone with experience in building large businesses.

What do i need to know?

How should I negotiate my share in ownership of the company? Considering as i am the most vital cog in the machine but also that I am putting up only some equipment and no real financial investment on my part.

I want equal share, is this reasonable?

How can i protect myself initially and down the track?

Am i asking the right questions?

What other questions should i be asking?

Any help is appreciated, thank you
 
What do i need to know? Get a lawyer - Be open about this with your partners and the reasons why you are getting legal advice.

How should I negotiate my share in ownership of the company? Considering as i am the most vital cog in the machine but also that I am putting up only some equipment and no real financial investment on my part.

How did you get this far, without having a frame work + Do you have a patent or is this just an idea?

I want equal share, is this reasonable?

Yes, no or maybe...

1. If you dropped dead tomorrow, could your business partners continue with this venture without you?
2. How much are your partners putting in... Is it substantial compared to their net worth?
3. Will you be drawing a salary from the capitol from your partners are putting in?
4. Are you willing to walk away if your partners dont agree.

How can i protect myself initially and down the track?

Get a lawyer and your partners should get a lawyer - A non compete agreement at a minimum if your idea is something that can be replicated easily.

Am i asking the right questions? Yes

What other questions should i be asking?

Could you go to the bank and get a loan to start initially -> if yes this gives you better leg up

Any help is appreciated, thank you
 
You probably want to (as a minimum) be setting up a limited liability company. In other words CompanyXYZ Pty Ltd. Then the company can have a private shareholding structure of whatever you can agree on. eg, 3 shares and you get 1. It would have a constitution (which could be standard or customized) These things aren't actually as expensive to set up as it sounds. I did it for my last business and I was basically a 1-man show though admittedly it was a bit of overkill it did make the business rock solid structurally and legally.

Good lawyer and good accountant of your own is a must because it's not just about investment dollars. Liability is important. Make sure you know the people you are getting into business with VERY WELL. Do they know each other better than you?

Good luck.
 
SilverTounge15 said:
I am in the planning stage of a business with huge potential in my state of Australia, the business involves me as the driving force and the two others have business and marketing backgrounds, I will be the hands on in operation and they will run the company one as the business and finance side the other with sales marketing and research....
I have never been in business with other people before and although they are rather transparent and if business fails it will be their investment $$$$$$ that is lost not mine
Click to expand...

Be careful. If the company gets into debt, directors of the company (and you want to be a director) whilst they are not personally liable for the debts, if you fail to act in any way against your legal obligations as a director (or knowing allow your other directors to do so) then you can be held personally liable.
 
SilverTounge15 said:
What other questions should i be asking?
Click to expand...

How will the company produce a profit in the short to medium term in order to keep the company solvent?
Three full time directors will bleed cash pretty quickly unless you are all willing to live the startup pizza and cardbord box furniture dream.

How should I negotiate my share in ownership of the company? Considering as i am the most vital cog in the machine but also that I am putting up only some equipment and no real financial investment on my part.

I want equal share, is this reasonable?
Click to expand...

Yes.
 
I love this community, thankyou very much guys, I'm going to speak with a lawyer which stupidly I hadn't considered getting my own lawyer....
 
In reply to your question buggedout...

Yes they are known to eachother.

They are a semi retired couple who share the same dream as me and have a different skill set and a wide range of contacts making this dream a possibility
 
Cover your own ass first and foremost, both liability wise and protection wise for your effort. A handshake and verbal agreement is sadly no longer viable in this day and age. Get a registered Company in order if you are serious as others have suggested.
It might seem like an added cost and hassle right now, but you will all sleep better at night knowing everyone is on the same page and a registered company is also a better selling point for customers and other businesses rather than a "bunch" of X retired couple and dude doing the selling point etc if you know what I mean.

Also remember that (so it appears) Your partners are the ones putting up the hard earned so far and they need protection as well as yourself.

You can have the best Idea in the world but .... If you are unable to finance it yourself to get up and going, then they are placing a lot of trust in yourself to realise their investment in your idea and capabilities as well.

Be equitable with your partners, I don't know the in's and out's etc but ask yourself if the shoe was on the other foot and it was you financing them would you feel comfortable with the deal ... Honestly ?

You obviously have a decent relationship with these people and they seem so far happy enough to finance you with your idea. So talk to them some more, tell them you want it all above board and legally structured etc, and if you honestly feel that you are entitled to 50% then ask for it/demand it on paper.

The other option is to appoint an independent director with a non financial interest to vote one way or another on any decisions made in the future for the best interests of the company, if you two current party's can not come to an agreement.

If you really truly believe that what you have is a real goer, then you need to organise it from the ground up with your partners, they may not understand all the intricacy's that need to be in place to protect you all either, but it is better to be prepared from the start rather than catching up on it all later.

The best thing you can do is to protect everybody involved personally by becoming incorporated, IE become a Company with equitable shareholders on pre agreed terms, maybe just get together and get some advice from a qualified advisor before going any further once you have had a good discussion about what you want and what they want.

Seems like you already have a sweet deal organised and just need to get the equity and legality/protection side of things sorted. A lot of hoops and jumps to go through with a shite load of paper work as well provided by the bureaucracy but once it is all sorted, you all will be able to sleep well at night.............

Until.... you get so much business you cant handle the incoming e-mail demands and no-one is there to answer the phone call's and the website crashes and your partners are nowhere to be seen as they are currently touring the Mitchell plateau in the Kimberly's with some of thier profits.

Good Luck M8
 
I've just finalised some business done with others and was glad to have an agreement signed by all involved on how it was to proceed. I was surprised at how people's ideas changed once they had to sign their name to an agreement, and then after it was signed how they wanted to change it again.
 
GoldenEye said:
I've just finalised some business done with others and was glad to have an agreement signed by all involved on how it was to proceed. I was surprised at how people's ideas changed once they had to sign their name to an agreement, and then after it was signed how they wanted to change it again.
Click to expand...

Yeah, funny how that happens, isn't it?
 
Thank you very much Southern cross, I have had several good sit downs and talks with them and it seems we all agree with having everything on paper, I have never been to savvy with business and paperwork but im not afraid of it i just have to ask a lot of questions due to my lack of experience with such matters, aboout going public this is something they have suggested as a goal as they have done this before with other businesses they where involved in and is something i would have never thought about myself as i dont even understand the pro's and con's of doing so....

Thanks again everyone
 
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