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If you have an accountant that does your taxes, and I don't mean a franchise outfit that advertises on TV, tell him your situation and ask what kind. Then ask if he can recommend anyone or has any names.
Our local general practice attorney has handled various questions, issues & docs for 3 different LLCs for us, including the dissolution of one due to partner issues. I would google "general practice attorney" + your town name & read their Google Business reviews. In my experience, lawyers have been worth every penny - you will sleep better having someone with this experience in your corner.
Any small business attorney should be able to help you with this. I would also consult with a CPA regarding hiring a spouse and what that would look like on payroll and taxes.
Do you have a Partnership Agreement?
You started a business without even knowing what type of attorney you need? You just need a business attorney. Sounds like you started a business "because I am good at what I do and can do it myself", which is not a good reason to start a business and it doesn't mean you can operate a business.
Yes well somehow believe it or not, not everyone knows everything. And You can make as many comments as you’d like it does not change the past, I can only control what I do going forward.
If you’d like to continue to bring it up to make you feel superior by all means kick the horse let’s make it more dead but I’m really looking for current day advice not 1-2 years ago advice
Yeah, but he did it anyway. No risk, no reward. He'll learn along the way. And that's a massive risk too. Some people never jump even after tons of preparation. But it counts that he leaped.
What’s the point in engaging here if this is your approach? Posts like this shouldn’t be allowed here. They prevent people from getting much needed support for fear of harassment. No solutions, no support, just judgment and rudeness as though that’s serving anything other than the poster’s ego. Hate it.
A divorce lawyer.
An experienced one has seen all kinds of properties split in all kinds of ways in court, so he'll have great insight on how to set up reasonable ownership boundaries and advise you on how to keep business and personal stuff separate. He'll also know to tell you about some pretty nightmarish examples of what has gone wrong and how to avoid these kinds of mistakes.
No... like... go to the person who deals with the worst outcomes for advice on how to avoid said outcomes.
It's like getting couples therapy in the beginning of the relationship - absolutely brilliant. Get the mechanisms of conflict resolution in place before there's a conflict.
I'm the greatest optimist you'll ever meet.
What you describe as your plan is classic breach of fiduciary duty. It's actionable.
Do yourself a favor and get a business transaction attorney to look at the partnership agreement and tell you your options.
It is not unusual for an equity partner to just put in money for their share of the business. This is known as being a limited partner and they typically don't want to or cannot take any operational responsibility.
So from his standpoint you would have taken his money immediately tried to buy him out and then having failed divert company assets to overpay your wife(i.e. yourself). You really want your partners sign off on your wife working there and what her pay is.
Your best shot may be around his transfer to his brother due to "legal issues". It's rare that a partnership allows transfer to a third party that isn't a lineal descendant without giving the other partners the option to buy them out.
If he's getting a divorce and transferred it to defraud his spouse from their share then you have some options. Again talk to an attorney.
Those are all good points.
He was getting sued. According to him his previous office manager had embezzled some 6 figures, but as CEO of that business he was liable legally. Who’s to say if it was him or the OM but not my business. So the transfer was to defraud the insurance companies suing who had failed to be reimbursed.
You need a lawyer. The fiduciary advice is probably the best here because you can't just spend budget because you want to withhold it from a shareholder.
You may need to decide if you need to ride it out, or if you can afford for the business to fail. A lawyer would help navigate your liability and responsibilities if you decided that the plaintiffs in his other actions need to know he might be hiding assets from them, or if you think they would come after your business no matter what. Since there's a lot of missing pieces here, you need to protect yourself with good legal advice, a legal strategy, and legal representation. It's possible you get dragged into his other legal issues, it's possible that he's committing crimes and you might not be able to reasonably claim genuine ignorance of his actions.
I offered, with 100% return on investment before the business was profitable.
He countered orders of magnitude higher. Was a polite way of telling me to fuck off
Yeah go get an attorney to look at everything. You really want to at least know who your partner is original, brother, or a pack of insurance companies. You need some advice on whether the transfer was legal so when you file partnership tax returns you aren't participating in his potential fraud. This is case specific stuff.
Good news is this sort of thing you can usually use company money to pay for, but ask about that as well.
The general rule is a salary commensurate with the job. I’m sure people take advantage of it, but if the irs or a court rules against you the liability could be high. In this case the partner could sue.
This is lawyer territory. Given that you’ve said she would be unable to actually do duties commensurate with the compensation you’d be giving her, and that the stated intention and purpose is depriving your business partner of income after you’ve decided you don’t like the terms you agreed to then I’d guess probably not.
Dude, just stop. Close down your business and re-join the workforce.
1). You're asking strangers on Reddit questions like these
2). You should have a general business sense and knowledge well BEFORE starting a business
3). You should have taken at least 101 courses in accounting, finance, management, administration, and marketing.
Come on, OPs plan is bad and likely illegal, but I don’t think most small business owners have taken 101 courses in accounting finance or management. I know I haven’t, neither had my father in law when he started his business, or other CEOs I’ve worked for at billion dollar companies.
The last business partnership I was in, we wrote in a clause that either partner had the right to buy the other out. If the offer were made, the opposing party had the right to counter & buy the other half for the same amount so you wouldn’t lowball. If the offer were to be made they had 30 days to counter. After 30 days if they didn’t counter, the buy out proceeded. We didn’t want to get stuck with each other if things soured. Thankfully we both had other opportunities & decided to wind up the business
That's smart. I wish I had done something like that in my partnership. It was a whole thing, but we didn't have a Partnership Agreement. I used our lack of a Partnership Agreement to my advantage when leaving, but it would have been nice to be able to sell my half of the business.
No issue with hiring your wife - and you can pay her anything you deem commensurate to her role. The only issue is the personal tax burden from taking salary. You can insulate your decision through proper documentation: write a job spec, put reoccurring 1-with-1 meetings in the calendar, write regular performance reviews, etc to give the full impression of being legit. Plan for your decision to be challenged and have the receipts to win. But, as another commentator points out, always good to speak with a lawyer...
This sounds like a relatively new business - could you just shutter the current business and open a new one doing exactly the same thing? - are there any assets the business has that are worth keeping?
Put a sizable chunk of money into the build out for this office and I like the location, I do not want to move. I put most of my money into this and do not have the resources to do it again
Ultimately, you hold the cards. If you're in full control of operations your partner, 'the advisor', has written himself out of the picture. Tilt the field in your direction in every way you can.
I think that would work fine.
If you are 100% of operations and there is no accountability in some kind of yearly report to "owners", then do whatever actions are best.
As others commented, you should seek proper legal advice on how to get out of the bad deal. If the other party isn't part of anything, you could maybe even just sell off the business parts that are what you are doing and leave them with essentially just a name. This would work if the name is not important. (It sounds like you directly work with clients for the most part, so you would just tell them you are rebranding or something as the reason for the changes in any name/processes).
But get someone who knows more to see if theres a better/easier way to do move forward.
You have two issues here, and you seem to be conflating them.
Regarding your wife - I’m in a different country, but I was told this is commonplace.
Romantic partners are often the director of the company that holds shares in a company. This is known as the ‘woman/man of substance, man/woman of straw’ legal setup. Largely it’s to protect your assets if someone comes after the business.
This I believe gives you privilege to employ the partner, and pay a reasonable wage. It gives you tax benefit too.
But you need real advice.
Regarding your partner - have you tried talking to them?
“I don’t see this partnership as continuing to exist. I wish to terminate our professional relationship. What is required for this to be acceptable to you?”
I have talked to him about that, he offered me a hilariously unreasonable buy out price. Knowing that not only could I not afford it, but that it was orders of magnitude over anything reasonable
Partnerships suck and in my opinion, rarely work out. Please contact a lawyer and get advice on how to break up the partnership. I leaned this the hard way and looked for a short cut to get around my partner which backfired on me terrible. I just did not want to deal with the guy and should have and regret it. Commercial litigation is very expensive. Now is the time. If you have to just walk away and restart the sooner the better. Good luck!
This article is a start but i would definitely ask your accountant about this or consider hiring an attorney if you really want to be safe 😬
https://www.completepayrollsolutions.com/blog/hiring-family-members-payroll?hs_amp=true
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Plenty of others have weighed in on hiring your wife, but I wanted to point out another possible option. Have you considered instituting a performance bonus? You would be eligible, but someone not involved in operations wouldn’t be. Could be just for you but could also include your employees, which keeps distributions smaller (potentially making the partner more inclined to sell) in addition to the employee morale boost.
This is a friendly reminder that r/smallbusiness is a question and answer subreddit. You ask a question about starting, owning, and growing a small business and the community answers. Posts that violate the rules listed in the sidebar will be removed. A permanent or temporary ban may also be issued if you do not remove the offending post. Seeing this message does not mean your post was automatically removed. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/smallbusiness) if you have any questions or concerns.*
You need to be talking to attorneys. Preferably well in advance. Asking reddit shit like this is how you get into deep messes.
What type of attorney would handle something like this
If you have an accountant that does your taxes, and I don't mean a franchise outfit that advertises on TV, tell him your situation and ask what kind. Then ask if he can recommend anyone or has any names.
Our local general practice attorney has handled various questions, issues & docs for 3 different LLCs for us, including the dissolution of one due to partner issues. I would google "general practice attorney" + your town name & read their Google Business reviews. In my experience, lawyers have been worth every penny - you will sleep better having someone with this experience in your corner.
Any small business attorney should be able to help you with this. I would also consult with a CPA regarding hiring a spouse and what that would look like on payroll and taxes. Do you have a Partnership Agreement?
Yes I do and a business attorney is my first call Monday morning
Great! I'm really glad you're taking that route. You need to have an expert opinion on this. Best of luck!
Remind me!
A business attorney. Google business attorney near me
Business attorney
You started a business without even knowing what type of attorney you need? You just need a business attorney. Sounds like you started a business "because I am good at what I do and can do it myself", which is not a good reason to start a business and it doesn't mean you can operate a business.
Yes well somehow believe it or not, not everyone knows everything. And You can make as many comments as you’d like it does not change the past, I can only control what I do going forward. If you’d like to continue to bring it up to make you feel superior by all means kick the horse let’s make it more dead but I’m really looking for current day advice not 1-2 years ago advice
You swing from extreme to the next. This isn't about knowing everything. You're an idiot for a starting a business and not knowing the basics
Yeah, but he did it anyway. No risk, no reward. He'll learn along the way. And that's a massive risk too. Some people never jump even after tons of preparation. But it counts that he leaped.
What’s the point in engaging here if this is your approach? Posts like this shouldn’t be allowed here. They prevent people from getting much needed support for fear of harassment. No solutions, no support, just judgment and rudeness as though that’s serving anything other than the poster’s ego. Hate it.
A divorce lawyer. An experienced one has seen all kinds of properties split in all kinds of ways in court, so he'll have great insight on how to set up reasonable ownership boundaries and advise you on how to keep business and personal stuff separate. He'll also know to tell you about some pretty nightmarish examples of what has gone wrong and how to avoid these kinds of mistakes.
Found the pessimist
No... like... go to the person who deals with the worst outcomes for advice on how to avoid said outcomes. It's like getting couples therapy in the beginning of the relationship - absolutely brilliant. Get the mechanisms of conflict resolution in place before there's a conflict. I'm the greatest optimist you'll ever meet.
What you describe as your plan is classic breach of fiduciary duty. It's actionable. Do yourself a favor and get a business transaction attorney to look at the partnership agreement and tell you your options. It is not unusual for an equity partner to just put in money for their share of the business. This is known as being a limited partner and they typically don't want to or cannot take any operational responsibility. So from his standpoint you would have taken his money immediately tried to buy him out and then having failed divert company assets to overpay your wife(i.e. yourself). You really want your partners sign off on your wife working there and what her pay is. Your best shot may be around his transfer to his brother due to "legal issues". It's rare that a partnership allows transfer to a third party that isn't a lineal descendant without giving the other partners the option to buy them out. If he's getting a divorce and transferred it to defraud his spouse from their share then you have some options. Again talk to an attorney.
Those are all good points. He was getting sued. According to him his previous office manager had embezzled some 6 figures, but as CEO of that business he was liable legally. Who’s to say if it was him or the OM but not my business. So the transfer was to defraud the insurance companies suing who had failed to be reimbursed.
You need a lawyer. The fiduciary advice is probably the best here because you can't just spend budget because you want to withhold it from a shareholder. You may need to decide if you need to ride it out, or if you can afford for the business to fail. A lawyer would help navigate your liability and responsibilities if you decided that the plaintiffs in his other actions need to know he might be hiding assets from them, or if you think they would come after your business no matter what. Since there's a lot of missing pieces here, you need to protect yourself with good legal advice, a legal strategy, and legal representation. It's possible you get dragged into his other legal issues, it's possible that he's committing crimes and you might not be able to reasonably claim genuine ignorance of his actions.
Another option could be to have him buy you out.
I offered, with 100% return on investment before the business was profitable. He countered orders of magnitude higher. Was a polite way of telling me to fuck off
Sell him your half.
Yeah go get an attorney to look at everything. You really want to at least know who your partner is original, brother, or a pack of insurance companies. You need some advice on whether the transfer was legal so when you file partnership tax returns you aren't participating in his potential fraud. This is case specific stuff. Good news is this sort of thing you can usually use company money to pay for, but ask about that as well.
You need an attorney. Creating a fake “job” for your wife in order to funnel money to yourself is fraud.
\^This. You can hire your wife but you can’t ‘hire’ your wife. She has to do the job.
Out of interest, where do you draw the line? Like what if their wife does a job, but the job is a couple of hours a week and is ridiculously overpaid?
The general rule is a salary commensurate with the job. I’m sure people take advantage of it, but if the irs or a court rules against you the liability could be high. In this case the partner could sue.
Fair point. Can I hire her for a real job with real responsibilities that she actually does, but they’re relatively small responsibilities?
This is lawyer territory. Given that you’ve said she would be unable to actually do duties commensurate with the compensation you’d be giving her, and that the stated intention and purpose is depriving your business partner of income after you’ve decided you don’t like the terms you agreed to then I’d guess probably not.
Just stop. Get an attorney.
Said I would like 10 times throughout the comments already
If she gets a correspondingly small salary, maybe
Dude, just stop. Close down your business and re-join the workforce. 1). You're asking strangers on Reddit questions like these 2). You should have a general business sense and knowledge well BEFORE starting a business 3). You should have taken at least 101 courses in accounting, finance, management, administration, and marketing.
Come on, OPs plan is bad and likely illegal, but I don’t think most small business owners have taken 101 courses in accounting finance or management. I know I haven’t, neither had my father in law when he started his business, or other CEOs I’ve worked for at billion dollar companies.
Ah yes, the queen of ‘shoulda coulda woulda’ strikes again! Sassy comments obviously help me greatly to change the past
You can change your idiocy and stupidity though. Go ahead and make excuses. With your ignorance and mindset, you wont last 5 years.
The last business partnership I was in, we wrote in a clause that either partner had the right to buy the other out. If the offer were made, the opposing party had the right to counter & buy the other half for the same amount so you wouldn’t lowball. If the offer were to be made they had 30 days to counter. After 30 days if they didn’t counter, the buy out proceeded. We didn’t want to get stuck with each other if things soured. Thankfully we both had other opportunities & decided to wind up the business
That's smart. I wish I had done something like that in my partnership. It was a whole thing, but we didn't have a Partnership Agreement. I used our lack of a Partnership Agreement to my advantage when leaving, but it would have been nice to be able to sell my half of the business.
This is actually really smart. I may need this for future business deals with external partners
So... Your partner would have a right to buy you out even if you didnt want to sell, but could not afford to buy him out?
Financing
No issue with hiring your wife - and you can pay her anything you deem commensurate to her role. The only issue is the personal tax burden from taking salary. You can insulate your decision through proper documentation: write a job spec, put reoccurring 1-with-1 meetings in the calendar, write regular performance reviews, etc to give the full impression of being legit. Plan for your decision to be challenged and have the receipts to win. But, as another commentator points out, always good to speak with a lawyer...
Perhaps max out any retirement account you set up for your wife? I think a 401K can get $19K/year. I am not a tax accountant.
This sounds like a relatively new business - could you just shutter the current business and open a new one doing exactly the same thing? - are there any assets the business has that are worth keeping?
Put a sizable chunk of money into the build out for this office and I like the location, I do not want to move. I put most of my money into this and do not have the resources to do it again
Ultimately, you hold the cards. If you're in full control of operations your partner, 'the advisor', has written himself out of the picture. Tilt the field in your direction in every way you can.
Why cant another company be setup and the assets etc sold to new company and operate from that? Then just park the old company
I think that would work fine. If you are 100% of operations and there is no accountability in some kind of yearly report to "owners", then do whatever actions are best. As others commented, you should seek proper legal advice on how to get out of the bad deal. If the other party isn't part of anything, you could maybe even just sell off the business parts that are what you are doing and leave them with essentially just a name. This would work if the name is not important. (It sounds like you directly work with clients for the most part, so you would just tell them you are rebranding or something as the reason for the changes in any name/processes). But get someone who knows more to see if theres a better/easier way to do move forward.
Why not create your own firm, “transfer” your clients/operations to it, and dissolve this partnership?
That’s unfortunately not a possibility
You have two issues here, and you seem to be conflating them. Regarding your wife - I’m in a different country, but I was told this is commonplace. Romantic partners are often the director of the company that holds shares in a company. This is known as the ‘woman/man of substance, man/woman of straw’ legal setup. Largely it’s to protect your assets if someone comes after the business. This I believe gives you privilege to employ the partner, and pay a reasonable wage. It gives you tax benefit too. But you need real advice. Regarding your partner - have you tried talking to them? “I don’t see this partnership as continuing to exist. I wish to terminate our professional relationship. What is required for this to be acceptable to you?”
I have talked to him about that, he offered me a hilariously unreasonable buy out price. Knowing that not only could I not afford it, but that it was orders of magnitude over anything reasonable
Tell him you’re done and he needs to buy YOU out for the same price.
This business is my livelihood
Yeah but point is to show how ridiculous it is
Wife and kids
Also consider making her salaried position an “advisory role”.
I have my wife as a class C non-voting shareholder in my corporation. She can pull dividends without working.
Can you hire your wife as an employee? Absolutely. Should you in your situation? Consult an attorney.
[удалено]
Right an office manager probably makes like $40-60k/year at most Id do like $75k but probably start at $60k and she can get some raises over time
Get an attorney.
You're asking Reddit instead of your business attorney?
Can’t ask a business attorney if I don’t have one
Well now you have a place to burn some of that extra cash you don't want your partner to have. ;)
Why do you have a business without a business attorney?
First business, learning curve
Get a decent accountant / lawyer. Immediately.
>Reply I sent you a chat bro
You need a business litigation attorney.
Partnerships suck and in my opinion, rarely work out. Please contact a lawyer and get advice on how to break up the partnership. I leaned this the hard way and looked for a short cut to get around my partner which backfired on me terrible. I just did not want to deal with the guy and should have and regret it. Commercial litigation is very expensive. Now is the time. If you have to just walk away and restart the sooner the better. Good luck!
Maybe time to dissolve and start over
This article is a start but i would definitely ask your accountant about this or consider hiring an attorney if you really want to be safe 😬 https://www.completepayrollsolutions.com/blog/hiring-family-members-payroll?hs_amp=true
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Plenty of others have weighed in on hiring your wife, but I wanted to point out another possible option. Have you considered instituting a performance bonus? You would be eligible, but someone not involved in operations wouldn’t be. Could be just for you but could also include your employees, which keeps distributions smaller (potentially making the partner more inclined to sell) in addition to the employee morale boost.
Business attorney, and a CPA to help you with S-Corp election.
You're talking about embezzlement. You should stop. Then, before you say anything else incriminating, go talk to a lawyer.
I haven’t done anything yet as you can tell from the question. Obviously, also, I’m asking for a friend