Please advise me on what agreement I should make with this guy?

by neo4evr 13 replies
Hi

I could not find the suitable category so posting it here. Sorry if I am using any wrong category for this thread....

I am in the process of my company registration, and I want it to be as a sole-proprietorship, not any partnership to keep things simple and straight.

But there is a guy who is chasing me since a year, and wants to be a partner in company. I respect that but I dont see him as someone I can trust. Earlier I did a mistake of accepting a sum of money from him but I was inexperienced and not aware of some things at that point. Now I know several things about him that makes me sort of not trust him in a partnership> Thank god it happened before the company registration...

So I am deciding to keep him as an investor (but not a general partner who shares a part of the company). He will basically be providing me with the clients/leads and will receive his commission, as simple as that. But I do not want him to be a general partner of the company who shares a part of the company.

What should I do about this? What kind of business entity should I form to have a sole proprietorship as well as keep him as an investor or perhaps a sleeping partner? Is it possible?

Please guide me on this so I get a better knowledge....
Thanks!
#mind warriors #advise #agreement #guy #make
Avatar of Unregistered
  • Profile picture of the author damiensuccess
    Wait for more support then my post.

    Was there ever that agreement he would be "Partner" not investor?
    Is there immediate income/profit?

    An agreement to boost company with shorter term investments with a percentage return can be more safer for him.
    Sole proprietor has to take the risks in his own hands.. Guarantee him small returns while explaining the risk is on you.


    I was silent investor for a company that went under..
    My investment was $5000 with an even $6000 return. Signed and agreed to be paid in 3 equal payments of $2000.

    Even though business fell because the demand for his business did not last. I had still profited and moved on happy.

    (Not to scare you as a Sole Proprietor, but an influence to why he would want to remain as an investor.)

    Also, it can easy be pushed off as a bad business decision for the early stages of your business. Under developing stages, you may consider partnering later if it proved beneficial?
    Signature
    Damien Parsons
    Success Coach | Writer
    Join me on Successful Lifestyle Secrets
    {{ DiscussionBoard.errors[9159528].message }}
    • Profile picture of the author damiensuccess
      On another note.
      A partner must invest MUCH more to a business than just money.

      If it is just money, he is an investor..
      If valuable effort and resources come from this person, he is a partner.


      Can the work being done by him equal or come close to the work you will put in?
      If the work was done by you to start the company, then my opinion would be to start it alone.


      2 Partners, 2 Paychecks
      Signature
      Damien Parsons
      Success Coach | Writer
      Join me on Successful Lifestyle Secrets
      {{ DiscussionBoard.errors[9159542].message }}
  • Profile picture of the author Jason Kanigan
    1. Partnerships do not last. Ever. Sooner or later there will be the inevitable break-up, and you will have to chop up the business. That will probably kill it.

    2. If you don't trust the guy, why on earth would you ever consider getting into business with him??

    3. Never give equity away. Give bonuses, salaries, incentives...but not equity. If you don't understand why, find How To Get Rich by Felix Dennis (it is out there online as a pdf) and read the whole thing.

    4. If you are afraid of going into business unless it's with a partner, don't do either.

    All this road will lead you to is upset, disappointment and financial loss.
    {{ DiscussionBoard.errors[9159767].message }}
  • Profile picture of the author RichBeck
    Originally Posted by neo4evr View Post

    Hi

    I could not find the suitable category so posting it here. Sorry if I am using any wrong category for this thread....

    I am in the process of my company registration, and I want it to be as a sole-proprietorship, not any partnership to keep things simple and straight.

    But there is a guy who is chasing me since a year, and wants to be a partner in company. I respect that but I dont see him as someone I can trust. Earlier I did a mistake of accepting a sum of money from him but I was inexperienced and not aware of some things at that point. Now I know several things about him that makes me sort of not trust him in a partnership> Thank god it happened before the company registration...

    So I am deciding to keep him as an investor (but not a general partner who shares a part of the company). He will basically be providing me with the clients/leads and will receive his commission, as simple as that. But I do not want him to be a general partner of the company who shares a part of the company.

    What should I do about this? What kind of business entity should I form to have a sole proprietorship as well as keep him as an investor or perhaps a sleeping partner? Is it possible?

    Please guide me on this so I get a better knowledge....
    Thanks!
    neo4evr,

    You are a bit confused with what type of business you actually have....

    A sole-proprietorship is you and you alone... with no investors or partners.

    Sole Proprietorship Definition | Small Business Encyclopedia | Entrepreneur.com

    The disadvantages of a sole proprietorship include:
    • Owners are subject to unlimited personal liability for the debts, losses and liabilities of the business.
    • Owners cannot raise capital by selling an interest in the business.
    • Sole proprietorships rarely survive the death or incapacity of their owners and so do not retain value
    Since you already have an investor, this rules out the sole proprietorship.....

    You are now left with other "forms" of businesses....

    Such as an S Corp...

    Subchapter S Corporation Definition | Small Business Encyclopedia | Entrepreneur.com

    A corporation must meet certain conditions to be eligible for a subchapter S election. First, the corporation must have no more than 75 shareholders.
    As always, I would advise seeking out the services of a competent professional in your jurisdiction.

    All The Best,

    Rich Beck BCIP, MCSD, MCIS
    {{ DiscussionBoard.errors[9159943].message }}
    • Profile picture of the author damiensuccess
      Originally Posted by RichBeck View Post

      neo4evr,

      A sole-proprietorship is you and you alone... with no investors or partners.
      Not entirely true..
      Valid if you do it legitimately.

      Silent Investing means you have nothing to do with the business.. Your name is not connected to the business what so ever. The agreement is a silent one between you and the Sole Proprietor.

      The business and the owner are still "one". If the owner dies, the business usually dies with him... (not always)


      As I mentioned. I have been silent investor,,, made profit, and have NO connection with the business. As a matter of fact. One business does not exist now but my profit from it does.

      You can still have silent investors and still be sole proprietor. (You just don't tell anybody the difference)

      P.S. I have my occasions of bad influencing..... Listen to RichBeck before I get you in trouble
      Signature
      Damien Parsons
      Success Coach | Writer
      Join me on Successful Lifestyle Secrets
      {{ DiscussionBoard.errors[9160684].message }}
      • Profile picture of the author RichBeck
        Originally Posted by damiensuccess View Post

        Not entirely true..
        Valid if you do it legitimately.

        Silent Investing means you have nothing to do with the business.. Your name is not connected to the business what so ever. The agreement is a silent one between you and the Sole Proprietor.

        The business and the owner are still "one". If the owner dies, the business usually dies with him... (not always)


        As I mentioned. I have been silent investor,,, made profit, and have NO connection with the business. As a matter of fact. One business does not exist now but my profit from it does.

        You can still have silent investors and still be sole proprietor. (You just don't tell anybody the difference)

        P.S. I have my occasions of bad influencing..... Listen to RichBeck before I get you in trouble
        damiensuccess,

        I was assuming neo4evr wanted to do things legally...

        There are various way to work "informal agreements." But, I would highly discourage it......

        It is much better to do things "above board" contractually... and to have everything formally defined in case you need to take legal action.

        All The Best,

        Rich Beck BCIP, MCSD, MCIS
        {{ DiscussionBoard.errors[9161110].message }}
      • Profile picture of the author neo4evr
        Originally Posted by damiensuccess View Post


        Silent Investing means you have nothing to do with the business.. Your name is not connected to the business what so ever. The agreement is a silent one between you and the Sole Proprietor.
        I also heard about this, and that silent investors do exist in sole proprietorship businesses... I am confused what's illegitimate about this?

        I simply want this business to be a sole proprietorship one, but keep this guy as an investor/silent partner. Is this possible?

        Does this mean he will have to be given a share of the company as well? Or I can share just commissions or return investment.
        Signature
        Check This Out -> biglyf.com/mh
        {{ DiscussionBoard.errors[9161303].message }}
        • Profile picture of the author damiensuccess
          Originally Posted by neo4evr View Post

          I also heard about this, and that silent investors do exist in sole proprietorship businesses... I am confused what's illegitimate about this?

          I simply want this business to be a sole proprietorship one, but keep this guy as an investor/silent partner. Is this possible?

          Does this mean he will have to be given a share of the company as well? Or I can share just commissions or return investment.
          How much money are we talking about here?

          As Richbeck said, its highly discouraged to accept informal agreements because they do often backfire for many reasons. Often Personal. It is hard to pursuit legally. Even though it will be difficult for the investor, it can create bad names and bad reputation which is a negativity that will hurt.


          Is this a big investment he made?
          How easy can you recover this investment for him?
          It is hard for anybody to provide a good answer because it is the direction of the business that will decide how this will turn out.

          Tell us more about the business
          Signature
          Damien Parsons
          Success Coach | Writer
          Join me on Successful Lifestyle Secrets
          {{ DiscussionBoard.errors[9162069].message }}
  • Profile picture of the author damiensuccess
    A silent investor can be a personal written contract to receive a loan from someone to be paid back by a certain time with a certain interest. This agreement would not be connected to the business or any of its operations. It is just a loan to be returned with interest for doing you this favor.

    I know this is legal in Canada. Different countries will have different laws
    Signature
    Damien Parsons
    Success Coach | Writer
    Join me on Successful Lifestyle Secrets
    {{ DiscussionBoard.errors[9162080].message }}
    • Profile picture of the author RichBeck
      Originally Posted by damiensuccess View Post

      A silent investor can be a personal written contract to receive a loan from someone to be paid back by a certain time with a certain interest. This agreement would not be connected to the business or any of its operations. It is just a loan to be returned with interest for doing you this favor.

      I know this is legal in Canada. Different countries will have different laws
      damiensuccess,

      Exactly! It is merely a personal loan.... not a "partnership" or "investment."

      All The Best,

      Rich Beck BCIP, MCSD, MCIS
      {{ DiscussionBoard.errors[9164487].message }}
      • Profile picture of the author damiensuccess
        Originally Posted by RichBeck View Post

        damiensuccess,

        Exactly! It is merely a personal loan.... not a "partnership" or "investment."
        Probably why i'm not a millionaire yet...


        Neo4evr I forgot to tell you that because of your post, I remembered a personal loan I need to act upon. I gave a personal loan to someone that was to be paid back after they reached a settlement for a bad car accident.
        The settlement was made a year ago and they have pushed it off.

        I just completed the small claim form that I have to mail today! Thanks! If I never got this done, they will have all the money gone.


        If your curious how much, $30k was the agreed amount to pay me back with.
        I will only get $25k because it is the maximum for a small claim. The rest gets abandoned. It will still be a $5000 return, but unfortunately it turned into a 2 year investment..... Wish I had written an increased interest per year but I failed to do so. Live and Learn!
        Signature
        Damien Parsons
        Success Coach | Writer
        Join me on Successful Lifestyle Secrets
        {{ DiscussionBoard.errors[9164520].message }}
  • Profile picture of the author bones46
    Did you sign an agreement with this person when you took his money? Did you have an oral agreement? If so, you have to live by that or potentially be sued.

    You can form a LLC and be a single member LLC. This will help reduce your taxes as your business grows and more importantly reduce the chances of you being sued personally if something goes wrong in your business.

    Regarding your partner/investor - you have to sit down and work out a new agreement with him - then put it in writing. If you feel this strongly, then make sure that you will wins out in the end and then get it in writing!!!!!
    {{ DiscussionBoard.errors[9218021].message }}
  • Profile picture of the author osamaye360
    Originally Posted by neo4evr View Post

    Hi

    I could not find the suitable category so posting it here. Sorry if I am using any wrong category for this thread....

    I am in the process of my company registration, and I want it to be as a sole-proprietorship, not any partnership to keep things simple and straight.

    But there is a guy who is chasing me since a year, and wants to be a partner in company. I respect that but I dont see him as someone I can trust. Earlier I did a mistake of accepting a sum of money from him but I was inexperienced and not aware of some things at that point. Now I know several things about him that makes me sort of not trust him in a partnership> Thank god it happened before the company registration...

    So I am deciding to keep him as an investor (but not a general partner who shares a part of the company). He will basically be providing me with the clients/leads and will receive his commission, as simple as that. But I do not want him to be a general partner of the company who shares a part of the company.

    What should I do about this? What kind of business entity should I form to have a sole proprietorship as well as keep him as an investor or perhaps a sleeping partner? Is it possible?

    Please guide me on this so I get a better knowledge....
    Thanks!
    hi, i think you have said it all. since you have done business with him before and you are not satisfied with it the best you can do is remain as a sole proprietor and have an agreement or a form for those who want to profit from your business. since you say he brings leads or customers, then you need to quantify how much you make from a lead and how much or what percentage of the profit from that lead that you are willing to give. then draft a form or agreement in this line stating what the commission you will give out for each lead generated.

    you need to be very careful with people like him. they would promise you more fund to boost your business but at the end of the day if you are not careful you will discover that you have actually sold out part of your biz. so registering your company would be paramount as you need to make sure it does not contain his name in anyway or his contribution. in summary just make sure everything you do relating to this guy should be put in writing clearly stating your terms.
    {{ DiscussionBoard.errors[9219182].message }}
Avatar of Unregistered

Trending Topics