Finance Question about small business

Discussion in 'Growing and Managing a Business' started by c.ross, Feb 25, 2011.

  1. c.ross

    c.ross
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    My wife is a half owner in a pet sitting business. Recently the business has slowed and she has decided to find work elsewhere for a couple months until things pick back up. Her partner has decided to stay on and operate the business and take all of the profits. They took out a loan to buy this business. Every month they make the loan payment and then split whatever is left over as their wages. My question is while my is working away from the business will she have to make the loan payments out of what she makes from her outside job? Or will the loan be covered by the business?
     
  2. Fergal

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    Welcome to our Business Forum c.ross. Did your wife and her business partner have any type of written agreement when they set up the business? If they did, it would be worth checking that agreement to see if it provides for one partner leaving the business temporarily or permanently.

    Is the loan in your wife's name or in the name of the business?

    Does your wife plan on going back to the business or do you feel that she will now leave the business completely?

    I know I've given you more questions than answers but it is difficult to give you a definite answer without having some further information on the nature of the agreement between your wife and her business partner.
     
  3. c.ross

    c.ross
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    Fair enough. They have no written agreements as far as I know. My wifes name is not on the loan, in fact I think the loan is in the partner's father's name and they are making payments to him. Her name however is on the business license and the bank account for the business. I don't believe my wife will go back to the business once she leaves, her partner is also her cousin and the business has been very stressful on their personal relationship. I appreciate you taking the time to read and respond to my question.
     
  4. Fergal

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    Thanks for posting back c.ross and sorry to hear that the business has put a strain on your wife's relationship with her cousin, I know from personal experience that situations like that can be very difficult. The best I can suggest is that she arrange a meeting with her cousin and perhaps her father (who gave the loan) to talk the matter through and try to come to an amicable agreement regarding the loan. It would be great if they could come to an agreement they were both happy with so that they could both put the unfortunate situation behind them. Life is short and it is good to get conflicts resolved in a speedy manner when at all possible.

    Perhaps some of our other members will have further suggestions.

    Good luck with it!
     
  5. seanstevens

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    This looks like it will be more of a situation of relationships than legalities.

    It will come down to the name on the loan. If it is in the companies name then it is the company that has to pay it back (this is assuming that it is a Limited / LLC), so regardless of who is in and working the company needs to bare the cost. If it does not pay then it is the company that would be liable.

    If as it seems that the loan is actually in someone elses name that is not related to the company then it is going to be a personal situation.
     
  6. ArcSine

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    Ideas never play out as smoothly in reality as they do in their blueprint stage, but here's one way they might play it:

    Since you feel your wife has no further interest in the business, she sells her half of the operation to her cousin. The cousin can assume your wife's half of the loan obligation as payment to your wife for her half of the biz.

    If they figure that the business is worth about as much as the loan itself, then it's an even swap (half of the business for half of the loan); no cash changes hands. If they mutually feel that there's a significant difference between the value of the business and the balance due on the loan, then one party would owe the other some amount to make up the difference. Which one has the residual obligation to the other depends on whether biz value > loan amount, or the other way around.

    Best of luck, and I hope they reach a satisfying resolution.
     
  7. KateB

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    I completely agree with your view....in fact I am of the belief that in most cases if the personal and the professional lives are mixed...both suffer...therefore it is always wise to keep the professionalism away from personal lives....
     

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