Partnership breakdowns

Discussion in 'Growing and Managing a Business' started by persevance, Jan 5, 2011.

  1. persevance

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    Jan 5, 2011
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    Hello everyone,

    I'm new here, just alittle vexed and confused with the current plight i'm in. Hope to consult everyone on this situation i'm in.

    I've been in my friend cum director 's retail company for coming to 3 years, neither self employed nor considered as an employee. Initially i enrolled as an employee given the promise that i could one day startup something with him. After 6 months of tending his stores and administration work i brought up the idea of parallel importing the same products at a better pricing from overseas. I went all in and started spearheading the operation solely in sourcing and procurement, and few months after which we had a negotiation and i was given a profit share of 40% for all imported products. When i asked if we could setup another company with our names and was told that we should use his company instead. Back then to me it seem like i had some sense of belonging as i was given a share. It doesn't matter to me back then and i had great passion in tackling its development phase. A little background on his company, he co founded the company with his initial partner with just one retail store. Soon they expanded to 2 more stores, and roped in 2 other 'so-called' partners solely to incharge of the 2 stores. Hence, internally all of these 'so-called' partners like myself works hard to pay off for each of our own stakehold in various sectors of the company, and as we are all broke, we are dedicated to working our arses off to pay off these personal debts by my friend(director). In addition, recently my friend and I, just bought into another courier delivery company without the acknowledgement of all other partners/'so-called' partners. Over the last 3 years, my friend's initial partner wasn't too happy as an income disparity between them started to surface. my friend could now afford a domestic maid, 2 cars and a condo to himself, where as his initial partner still lives with his parents. And i realize over time that the margin from my importings are pathetically low seemingly a huge portion of the profits has been transferred to the retail sector for their benefits. Eventhough, i was invited (again on debts) to join this new courier company i felt that things shouldn't be the way it is. Also it seems like he is engaging with other external party and seems like another new company is coming up soon yet again without all partners/'so-called' partners acknowledgement.

    All he's employees (includes so-call partners) are given a gross wage and without federal , social security and Medicare taxes from him. And we are all responsible for paying our own federal, social security and medicare taxes ourselves (including the portion his company is suppose to declare to the government). Hence, most of us didn't take the initiative to contribute so on the surface though we are all 'partners' we have no entity name, do not contribute social tax and are deemed as unemployed.
    After dedicating 3 years of my life to this company and sold with dreams of being self employed and independent, i did a comparison with my peers only to realize i am still poorer than most of them in terms of wealth.
    I have this sense of frustration deep down building up, as if i wasn't treated fairly yet i could not explain what's wrong in this scenario. I do not hold a sense of security and trust in my friend and felt as though i was underpaid as an employee.

    I am currently doing my part time degree and will be graduating in 6 months, I am torn in between to get myself truly employed after my studies or to continue with my development plans over at the current company.

    thank you for reading such a long post, and i sincerely hope that someone could advise me on my plight thank you

    Best regards,
    #1 persevance, Jan 5, 2011
    Last edited: Jan 5, 2011
  2. scifi

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    Nov 2, 2008
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    Dear persevance!!

    It happens with many people. Happened with me too in my college life and it appeared to me that all has ended. The life no more seems to be so much cheerful to me. The project to which I dedicated my valuable years is not any more mine. The seed which I have sown and grown into a plant, I can not eat fruits of that. Still, I am struggling..But one thing that inspired me was Biography of Steve jacobs, CEO of Apple. read it.

    Take a tough decision, talk to him directly. Show your consent to your partner without reacting. I am damn sure he don't wanna loose you in this phase of expansion and growth....

    Let me know your feedback after talking to him..

    Wishes and cheers.. enjoy:)
  3. Fergal

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    Premium Member

    Nov 18, 2007
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    Welcome to Business Advice Forum persevance, sorry to hear about your predicament. Unfortunately lots of people go into business partnerships without having a written partnership agreement and this can often lead to misunderstandings and disagreements at a later date. You say that you are doing a degree part time, does this mean that you are working in the business part time, while your friend is working in it full time?

    I'd agree with Scifi and recommend that you spend some time clarifying your concerns and then write them down in point form. Arrange a time to meet with your partner / friend and then discuss your concerns and go through them one by one. Hopefully he will see your point of view and you will be able to work things out. Alternatively he may tell you his side of the story, in a way that you have not considered. Try to remain calm during the meeting and stick to the facts, don't let your judgement get clouded by anger or any other emotion.

    If you decide to stay with the business, following your discussion, make sure that all parties sign a written partnership / written agreement. The agreement should cover topics such as;

    • How profits are calculated and divided between the parties
    • Wages paid in return for work done
    • How any losses will be dealt with - hopefully there won't be any, but it is always better to plan for them
    • Responsibilities and duties of the different partners
    • How to handle expansion into new businesses
    • How to manage a situation where one partner wants to leave or sell the business.

    Good luck with everything and please do post back with your thoughts and to let us know how everything works out for you.

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