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Original poster

DH and his business partner

58 replies

KimmyKimdoo · 07/10/2021 15:31

Advice please if you have any!

DH has run a successful business with his partner for the last ten years. Partner came to ask DH if they can set up a second business (the same) just down the road. He wants them to go 50-50 on everything just the same but work at one site each most of the time. They’re looking at doing this currently, it will be very expensive to set up initially of course. Now partner has a new girlfriend who wants in. She’s just quit her full time job and is in training to work in the business. Partner is trying to make the second business more of “their” thing saying the income should be split 1/3 each and he and the new girlfriend will run it. It doesn’t seem right and I feel the partner is taking advantage of DH and his trusting nature. I’m worried about all sorts of things really and DH is going to get legal advice obviously. Any suggestions on how DH can be fair to partner and new girlfriend about her working? It’s not unreasonable to just say no way is it?!

OP posts:

Original poster

KimmyKimdoo · 07/10/2021 16:03

@HollowTalk everyone is happy about the new location

OP posts:

romdowa · 07/10/2021 16:09

Partner and husband pay 50/ 50 each , share profits 50/50 each and partner pays his girlfriends wage out of his 50%. Why should your husband put in 50% and get less back.

girlmom21 · 07/10/2021 16:12

50% of the initial outlay and only a third of the profit, with a third going to a new girlfriend? No way!

Aquamarine1029 · 07/10/2021 16:13

"No" is a complete sentence. Don't even bother getting legal advice, just say it's not happening and end the discussion.

HollowTalk · 07/10/2021 16:14

FWIW I think the partner is making a huge mistake in even thinking about letting his girlfriend - not even his wife - get involved in the business. They've not been together long - he is thinking with his penis! He might want to spend all day every day with her but surely he can see that the whole business is at risk if he gives her a stake?

Winniemarysarah · 07/10/2021 16:19

@Nicknacky

What’s the issue with her having a role?

There’s an issue of her having a 3rd of their business. Would you go into partnership with someone you didn’t even know?

HollowTalk · 07/10/2021 16:20

And with someone with such little business sense that she thinks she can choose to put a bit of money into a successful business and get 1/3 of the profits!

arootintootingoodtime · 07/10/2021 16:26

It is going to depend on what is written into the partnership agreement or what type of company it is.

What's fair isn't going to matter in legal terms. What matters is what's in the contracts/agreements, although I suspect you won't be able to give enough details here to get really specific advice.

If they have no written agreement, there is a law that covers it, but as always some interpretation is needed. But, for example, if the business partner splits his profits (above board) with his girlfriend, she could use that as evidence of the existence of a partnership. Or depending on the contracts, the partner may be able to hire his girlfriend with or without your DH's agreement. So your DH really needs that specific legal advice.

AliceMcK · 07/10/2021 16:35

would the gf have any legal rights to the business?
Would she be working on a salary or profit only?
Is there potential to grow the 2nd business even bigger than the first, meaning she would be a benefit to the business increasing profits and giving your DH a bigger profit?

I can understand that if they are expecting her to work full time on a profit only salary why they think 1/3 is “reasonable” in their eyes, to an extent.

I know your DH isn’t interested in employing anyone but I would probably want to know more about what his partners long term plans are.

An alternative to look at could be the gf working on a commission based basis, based on new business she brings in with an option to review the situation after a certain period, possibly giving her an option to buy into the business. I’d have a territory plan set out too, they can’t touch business that will encroach on the original businesses territory even if she finds new clients they would be considered part of your husbands branch not theirs (if that makes sense).

HollowTalk · 07/10/2021 16:41

If she wants 1/3 of the profits she has to put in 1/3 of the value of the business BUT both your husband and her new boyfriend have to agree. Does she realise that? You say it's a successful business - what does she think she'd bring to it if she's not qualified and inexperienced? It's a joke, really.

Original poster

KimmyKimdoo · 07/10/2021 16:54

I just can’t see what value she has to bring at all as she’s so inexperienced. The partner wants her to work with him - if they want their own family business I think they should go elsewhere and set one up themselves. I can’t understand why we would want to be responsible for employing her or allowigg N her to buy in to our business really.

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Original poster

KimmyKimdoo · 07/10/2021 17:00

Also what if they split up?? Nightmare!

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HollowTalk · 07/10/2021 17:03

But a family business implies a marriage really. This is a new relationship. His partner needs a bloody good shake. Ten years of hard work could go down the pan if he continues to think with his dick.

Mumoftwoinprimary · 07/10/2021 17:03

One option would be that your Dh gets 2/3s of the profits from the current business. He can then choose if he wants to use his (higher) profits to employ an extra staff member or work his fingers to the bone and get the full amount.

The business partner gets 2/3 of the new place. He can share with his girlfriend or whatever.

That will keep them both invested in both businesses but also mean that if one of them is willing to work harder than the other and one business makes more money then the harder worker is better rewarded.

Even if the girlfriend is willing to put in 1/3 of the costs I don’t think she should get 1/3 of the profits. She is new and inexperienced - why would two people with 10+ years of experience want her??? (If one of them wasn’t bonking her obviously.)

HollowTalk · 07/10/2021 17:04

How much is she thinking of putting in? What was the profit last year? (Roughly)

MargaretHooper · 07/10/2021 17:10

Professional advice required from a solictor / accountant as to all the possible options, but here are a few:

The partner should have 2 totally separate businesses:
1. Original business - in partnership with your DH.
2. New business - with his new partner, however they want to structure it.
or
the original partnership is dissolved and your DH buys him out, to continue the original business on his own.

A business partnership is like a marriage, and needs the same level of trust - if that doesn't exist, you need to think carefully about continuing it.

Original poster

KimmyKimdoo · 07/10/2021 17:19

@HollowTalk

I won’t use exact figures but profit last year circa 150k so DH took 75k.

Reckon the new business will take around 10% of business but he could still stand to make a lot more on his own if he keeps the original one and the second one is equally successful.

However, new business will cost circa 50k to set up plus another 50k over the first year. It will share some of the business costs of the original business to make it cheaper than it was to set up the first one.

DH and partner going to put in 50k each, the new girlfriend wants to throw in her own 5k to “help out” and work there full time and keep one third profits.

OP posts:

HollowTalk · 07/10/2021 17:23

I'm laughing so much here. £5,000 for 1/3 of the profit!

Can I put in the same on the same conditions, please? She has got even less business sense than she has money!

Biscoffee · 07/10/2021 17:23

Op, I’m as thick as mince when it comes to these things but I understood this situation very easily because it’s so very obviously all wrong.

Your husband needs legal advice.

Polkadots2021 · 07/10/2021 17:24

[quote KimmyKimdoo]@JasonMomoasgirlfriend looks like he will have to have the first business alone either way. The partner is leaving to run the second business. Partner will still be taking 50% profits out of it though.[/quote]
I think this is a great scenario personally.

Polkadots2021 · 07/10/2021 17:25

But leaving means leaving, he can't just take 50% for doing nothing. Whatever your DH does do not enter the second!!!!!

Original poster

KimmyKimdoo · 07/10/2021 17:32

@HollowTalk I know!! DH has been saying for a while now tht he could run the business on his own really now so in one way it’s exciting for him to get the opportunity to do that. I’m going to advise him to ask his partner if we can buy him out and see if he will agree to that. The partner is taking the piss.

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HollowTalk · 07/10/2021 17:34

If your husband's business partner is showing such little business sense then I think your husband should be talking to him about splitting up the company now.

BIoodyStupidJohnson · 07/10/2021 17:37

This is a bit confusing.

Thinking about the business as a legal entity -- is it one business right now, to which your husband and the business partner have equal shareholding? How many shareholders are there, and how many directors are there?

If the partner's girlfriend is being offered a salaried job, that sounds fine. She would be an employee, and would join on an agreed salary.

A profit-share arrangement is murkier. Share of what profit -- the new site, or the entire business? On what basis would she be entitled to profit share? She hasn't generated any of the profits. And you don't generally 'buy in' to a profit-share arrangement, it's not how it usually works.

If they're talking about the girlfriend becoming a shareholder, that one comes with a lot of caveats. Not to mention legal responsibilities. The existing shareholders who presumably are your husband and the business partner would both have to agree to this, because it would mean their shares being diluted.

And she would have to buy in to acquire the shares, based on an agreed external valuation. You can't just give someone shares in a business for nothing.

Original poster

KimmyKimdoo · 07/10/2021 17:39

@HollowTalk I’m worried that he can’t see how that would be unfair to DH. They have a long history working well together and now he expects us to pay his girlfriend a wage?! I mean, pay her yourself or let her work elsewhere?! I help out with the business at times and have never taken a wage or any money.. I do it for DH as it’s ours. I see our recompense coming from his 50%. I do have a full time other job and can’t be there full time but if DH buys out the partner and we took similar profits to normal (150k), I could give up work and help him out.

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