Forums: Discussions for entrepreneurs and small business.

Hi, I have a question I'm hoping I can get some advice on.... my husband has been working with a landscaping/lawn maintenance company for over a decade. The owner of the company recently offered him a part ownership in the company. The owner's goal is to eventually (within 5-8 years) be able to stop having anything to do with the business and just receive a portion of the profits. As it stands, he was offering for my husband to take over the Lawn Maintenance part of the company and the owner would be over the Landscaping portion of it. My husband would be in charge of everything on "his side" of the business (i.e. payroll, taxes, P&L, etc.). 

The thing is, this is not a 50/50% split between them and I am trying to figure out what a fair percentage is, if my husband were to agree to the terms. As well as figuring out based on the percentage, what all he should be responsible for vs. what the original owner should be responsible for, if anything.

 Also, I am curious as to exactly how this would work from a business stand point. Would the company be two separate entities under the umbrella of the original company name? Or would it be set up as an LLC/Partnership?  

I know that we should consult with a CPA and an attorney, and we will do that once we have the basics laid out. But first, we are just trying to do the research to have an idea of what we are getting into. 

Any help would be greatly appreciated! Thank you!!

Dani G.

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You still have a lot of "terms" to work out yet.  It might sound like a simple question, but there are untold ways it could be done - depending on his (the controlling factor's motives/needs).  I would suspect he wants to sell the lawn service and get some cash out - and get a recurring revenue from it.   I doubt he wants to make you part of HIS company.

It can be done with joint ventures or many ways, but you need to know:

• his plan.
• the value of what he wants you to have.
• the method he expects you to pay.
• the dependence on his business for your business (does he provide a lot of busines and what stops him from sending that elsewhere after you buy?
• his ability to take it back.
• The shape of the assets - and what are the assets since he'll probably want to keep many for his side?

Many many things to work out - then you decide whether it is a good fit.  But attorney's and CPA's aren't the only sources you should be consulting.  Probably should look at the HUGE number of companies for sale on the open market with a broker - you'll learn a lot.  And often those are better deals than an owner gives an unknowing employee.

Good luck.

 

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Ed
Business Optimization - www.businessoptimization.biz

Thank you for the advice! One of the options that is being looked at right now is dividing the company up into two separate divisions: Landscaping and Lawn Maintenance with the owner having total ownership in the Landscaping and my husband and him both owning the Lawn Maintenance division. Then over the next 5 years, my husband receiving 5% more equity per year based on certain criteria until he completely owns that division. The owner is also not expecting my husband to "buy" this 25%, he is using the last 10 years that my husband has been employed with the company as his Manager as his "buy-in". 

I don't know how difficult it will be to divide a company into two separate divisions, but this seems like it is a logical idea on the surface. But as I have never had to deal with anything like this before, I am trying to get as much advice on it as possible.  

Thank you!

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Merging is good if the business you are going to work with is 

Not in debt

Not bankrupt

Has relevancy to yours

and has good network of contacts

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http://www.startupfundingclub.com

obtain physical references and speak to them

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I would work with a business attorney right away, An attorney can help you with every part of this process, from drawing up a plan to signing all of the legal documents.

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