Forums: Discussions for entrepreneurs and small business.

Hi, Let's say I wanted to go into the orchard business. I've got enough money to just make the investment myself, but here's an interesting angle. What if I find someone to be my partner and we each take out a loan of $100K, giving us $200K to build the business. I know enough about the orchard business to know the market for selling such a business is very small. However, I find a partner that doesn't know anything about the orchard business. Now, if the business doesn't do well, and we have to sell it to cut our losses, let's say we'll get only $100K during that sale. We each lose $50K. But I've got enough capital to buy the business (maybe under another company name) at this distressed price. But my partner only had $50K in assets to start, so he is wiped out paying off the loan. I now own a $200K orchard that I only paid $150K (my $50K loss during the distress sale and the $100K for the purchase side of the distress sale). My clueless partner's $50K loss is my gain. The tricky part is the business must initially fail, but since my partner doesn't know the orchard business, I could hire a gardener that has never gardened before and his incompetence would ruin a crop, but I could blame it on the weather and my partner wouldn't know the difference. what do think...is this legal?

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I think you are trying to ask for outside approval so you can run a scam on someone else, in order to justify doing it.

Also, you need to factor in legal fees to make sure your stock owners agreement is inline to pull something like that off.

Even if you did pull it off, it doesn't seem worth the trouble.

 

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If you planned to do this, that would make it fraud.  However if it just so happened to fail, you could legally do this.  You would also to see how your partnership is structured.  Who decides, and at what point the final fate of the company?  If I was ever in your partners shoes, and I really hope I never do business with someone like you, I would drag it out, tell you to go fuck yourself, and make the orchard a worthless pile of dust.

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Are you trying to justify your conscience, or just trying to screw someone over without getting caught? Either way I hope someone investing 100k in a business would have the right sense to learn the business before going into it, and will also have an equal say in the matter of who you should hire and how it should be done.

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Gary Barzel - Manager of Business Development
FastUpFront - Business Loans and Working Capital
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Thanks for sharing

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Not sure who is more clueless - anyone who would invest $100,000 in a business that they know nothing about OR you for thinking that you would be able to find someone that gullible.