business owner question

[Happy912]

Hi mamas-

I have no idea if anyone has advice or if this is even the place to post this question, but my husband co-owns a business- he is a 50/50 owner.

Long story short, his partner is being shady and doing very little work- they are not profitable yet- they still have lots of debt, much of which is in his own name. My husband is doing well and working very hard at making the business successful, and doesn't think it is fair that the absent partner reaps the benefits of his hard work. My husband wants to either leave or take over 100%- he no longer wants to work with this person. The other person is basically refusing.

Do you guys have any idea what we can do in the situation? His partner is just being so unethical, but we have absolutely no means to just pay off his half of the debt. Plus we can't afford to just completely get screwed either.

Have any of you been in this boat? Or, do any of you have any legal education? We just have no money to be paying a lawyer to tell us our options right now

[VisionaryMom]

I think a lawyer is your option. I mean, you make an offer to buy out the partner. You'll need an assessment on the value of the business to do that, and you likely need someone to help you split the debts associated with the business. What kind of contract do you have with the partner? It should spell out how one person leaves the business.

[SunRise]

Look into entrepreneur organizations and you may find a lawyer that offers reduced rate advise.

For instance in my city/community there is free lawyer advise once a week at the community center.
As well, there are a couple of entrepreneur organizations (Women in Business, etc) ...which host gatherings. If you can find these organizations, maybe your husband can find someone there to speak with and get some get some advise, experience, "been there done that".

Did the partners write up a business plan to refer to?
I am sure its a buy out kind of thing, but if the other partner is not willing to be bought out, maybe he can buy out your husband and then your husband can start his own business. OR maybe your husband should just start up his own business on the side of his partnership business and then dissolve his current partnership. (of course this option would also require lawyer advise as its tricky....you dont want your husband to be accused of stealing clients or whatever is the business)

Good luck.

[Caneel]

Is your husband's name associated in anyway at all with the debt? Did he sign a personal guaranty for the loans?

I ask because when I worked in banking, it wasn't unusual to see debt in the name of one of the owner's/partner with the others personally guarantying the same debt. This was often done to speed the loan approval process or if one of the other owners had less than great credit.

Just another thing to think about as you plan your exit.

[zebra15]

How is the business set up
are there articles of incorporation
is this a true partership or an LLC, is someone a 'silent partner'?

THere are a million and one ways to set up a business and hopefully your DH and his partner have every last little thing in writing.

[Happy912]

Yeah- unfortunately all the debt is in their personal names. It was one of the only ways they were able to get the loans in the first place.

Thanks everyone for the advice- we're slowly working our way through all the options and the consequences. Wish us luck