Wanting to buy into friend's business

Discussion in 'Growing and Managing a Business' started by RatZap, Mar 1, 2012.

  1. RatZap

    RatZap
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    My questions is about how much I need a business attorney and how much money I can potentially save when hiring (or not hiring) one.

    An acquaintance started a small business a couple of years ago---a "family center" offering classes and daycare. I told her I liked the model and mentioned that I would like to invest, but didn't go into specifics. (I've never invested in someones business.) On two occasions I was offered vending opportunities (drink machines, leotards), but declined.

    The business grew and prospered as I suspected it would. Then just recently the building was condemned and the business was in jeopardy of having to close for an undetermined period of time, losing some regular customers. Not having the capital to afford a move, she contacted me once again.

    This time I was offered a percentage of the profits and a "seat one the board" if I would pay for the move to a new, larger location (first month's rent plus security deposit). I jumped on the opportunity. Time being crucial, I made a personal loan with the understanding that a formal contract was to follow.

    Now the question: Can I go the cheap route, using a fill-in-the-blank standard contract, and perhaps not even use an attorney? I'd like to create some very specific options and benefits, but not if it's going to cost me a lot. Or perhaps, rather than paying by the hour for a professional to draw up a contract to my specifications, can I save money by editing a standard contract my self? (I think I can write in unambiguous legalese.) How much should I expect to pay an attorney to "look over" a contract that I create my self?

    I'm totally new to this kind of thing, so any information would be helpful.
     
  2. jcworlditsme

    jcworlditsme
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    I wouldn't recommend writing something yourself, although I do think there must be a reasonably priced alternative.
     
  3. AshleyWhiteBusin

    AshleyWhiteBusin
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    In starting a business, you should do everything legally right that is why it is important to have someone on the legal side to guide you. It is very dangerous to have a mistake on this part of the business so I suggest you talk to a lawyer regarding all legal matters.
     
  4. rjd1265

    rjd1265
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    ALWAYS have a lawyer involved. I started a business with a friend, best friends who swore we would never let this break us but we still had a lawyer draft up our LLP.

    Thank GOD because about 6 months in he became a lazy piece of ****. In the contract I was 51% owner and had full right to my company. So I fired him. He got a lawyer and lost the case.

    Now having 8 months pass he still does not have a job so I hired him back as an employee and he admits his wrong doing. If not for the contract I could have lost my own business or all my money.

    He went from making $8500 a month to $11 a hour and 1 weeks vacation. People will always take advantage of a good thing handed to them but it worked out for me...he is my best employee. LOL!
     
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  5. bizwizgenie12

    bizwizgenie12
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    Hello,

    @RatZap: I am looking beyond the question of whether or not to outsource legal-documentation-drafting of the business contract here: It appears that your friend's business model is centered around the location where it has been set up. The fact that she has already lost regular customers, and that there is a plan to set up the business in a new location - together imply that she may be as good as starting afresh, with the difference that she now has experience. You may consider therefore the fundamental risk of the earlier experience of success _not_ repeating, and the hoped-for RoI not materializing. Given this, you might do well to have a second pair of eyes go through the paperwork from not only the legal angle but also a business-viability angle. Especially so considering that your partner is financially weak, and the joint business may require additional capital infusion from you for incidental expenses for some more time to come.

    @rjd1265: Good for you that your intuition/hunch proved right!
     
  6. RatZap

    RatZap
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    Indeed the business benefitted from the previous location---next to a McDonald's! But the move went smoothly, over a weekend, and there was no loss of clients due to the business being closed.

    This is useful advice, but doesn't answer my questions. I'm curious about standard arrangements and contracts. Guess I need to go to a legal advice forum!
     
  7. Business Attorney

    Business Attorney
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    RatZap, generally you should be able to find a qualified business attorney to look over a contract you draft yourself at less than it would cost for the attorney to draft it himself. There are a couple of caveats, however.

    First, unless you spend a lot of time making sure that you have the right starting point for the contract (one that has all or most of the relevant terms) and do a good job on the drafting, presenting a contract that is full of holes will take more time for an attorney to review and fix than if he has started with a form that he was already familiar with and knew to meet most of your needs.

    Second, drafting unique provisions can be more difficult than it seems. The point is not to write in "unambiguous legalese" but to write in unambiguous English. One of the biggest mistakes both lawyers and laymen alike make is trying to sound like 18th century lawyers. There are certainly times when a well-established legal term should be used in contract, but in most cases the important thing is to write a contract so that it is unambiguous to any reasonable person.

    As for how much you should expect to pay, that depends on a lot of factors. How complicated is the deal? How lengthy is the contract? Are you located in a major city where rates tend to be higher or a small town? Are there complicated provisions or a great deal of money at stake that justify hiring a lawyer with 20+ years of experience who has "seen it before" or can you hire a relatively young attorney who is familiar with standard provisions but may not have the background to evaluate more complex issues? Depending on your answers, you could be looking at just a few hundred dollars to several thousand dollars.
     

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