Need a bit of business advice - Tilted Forum Project Discussion Community

Mantus · 04-28-2006, 04:06 PM

Hey guys.

I am going to team up with two friends and form a reno/construction crew.

We are all young and have little experience in the business but each of us can bring something to the table.
The other guys have connections and transportation. They are hard workers but they don't have many skills and dont own many tools.
I have experience, skills and all the tools I need but lack transportation (at the moment),

I've always worked alone or under someone. Never had to deal with business partners. Advice to avoid foreseeable problems would be much appreciated.

- Dividing profits. Money is the cause of much evil. What can I do to avoid confrontations?
- Making sure everyone puts their share of labor in.
- Any other tips?

Thanks!

maleficent · 04-28-2006, 04:17 PM

I would put everything down in writing... get it notarized and stash this contract away if you need it...

Business is business and friends is friends.... the two don't always go together...

Some other things to cover:
What happens if a tool breaks? They are yours do you get reimbursed?
What about gas for the transportation? Does that come off the top of the profits?
What are you charging your customers?and who decides that How are you getting your customers?
Who is in charge for dealing with problems as they arise?

How are you dividing the profits?
How will you seperate if need be?

Good luck..

Elphaba · 04-28-2006, 09:32 PM

Mantus, any business relationship needs to begin with a legal written document. See an attorney to advise you of the best organizational entity to enter into with your partners. As an alternative you can have a CPA set up your business legally that meets taxation requirements.

I cannot stress enough that you DO NOT want to go into a casual business agreement with your friends. I promise you that you will not be friends for long when the business is in a "down" vs. and "up". I don't wish to rain on your idea. I am just sharing my own experience.

Good Luck!

MoJoPokeyBlue · 04-28-2006, 10:11 PM

Money is not the cause of all evils. It's the LOVE OF MONEY that is the problem. Money in itself is a very good thing...and starting a business can be very exciting.

Whenever I sign a Partnership Agreement on a new venture, I make sure there's a "Shotgun Clause". Let's assume there are three of you and after a few years the business is worth $600,000. You decide that you want out because you need the cash for another venture. One of your partners knows you "need" the money and offers you $150,000 for your share, when all of you know it's worth $200,000. The Shotgun Clause let's you refuse his offer and buy him out for $150,000. This ensures that every partner gets a fair offer.

Another thing you have to worry about is the death of yourself or your partners. Does the business go to the two remaining partners, or to the partners spouse?

MoJo

docbungle · 04-29-2006, 08:26 AM

I suggest forming an LLC.

It's cheap to form. You file Articles of Organization with the state and apply for a federal identification number.

All of the issues you bring up can be solved by including them in your Operating Agreement, which is the binding document for all members in the LLC.

Good reading to get you started would be the Nolo books, since they are very easy to understand - particularly "Legal Guide for Starting and Running a Small Business," "Tax Savy for Small Business" and "Form Your Own Limited Liability Company," all from Nolo Press. They can be found pretty cheap on Amazon.com.

You must study before you jump into things or you will be immediately overwhelmed and in over you head.

Self-employment taxes and estimated taxes are also areas you will want to become familiar with, as they will apply to all of you.

Ample · 04-29-2006, 08:41 AM

TAKE A CLASS, in project management and cost estimating.. Even if you are not going to be the project manager it helps to know more about what he is doing and to know if he is not cheating you. Cost estimating is crucial don’t want to put in a bid and find out that you are not going to make any money out of the job. I work for a engineering firm that does mechanical and electrical plans for buildings. This industry is so shady. Owners don’t want to pay the architects/engineers-they don’t want to pay the contractors. Contractors don’t want to pay their subcontractors.

Last, RFI’s are the golden ticket to pick up extra cash. Find a way to use them and do plenty of them.

Mantus · 04-30-2006, 07:12 AM

Really good stuff guys - got allot to plan. I'll keep you posted.

04-28-2006, 04:06 PM	#1 (permalink)
Mantus lascivious	Need a bit of business advice Hey guys. I am going to team up with two friends and form a reno/construction crew. We are all young and have little experience in the business but each of us can bring something to the table. The other guys have connections and transportation. They are hard workers but they don't have many skills and dont own many tools. I have experience, skills and all the tools I need but lack transportation (at the moment), I've always worked alone or under someone. Never had to deal with business partners. Advice to avoid foreseeable problems would be much appreciated. - Dividing profits. Money is the cause of much evil. What can I do to avoid confrontations? - Making sure everyone puts their share of labor in. - Any other tips? Thanks!

04-28-2006, 04:17 PM	#2 (permalink)
maleficent Junkie Moderator Emeritus Location: Chicago	I would put everything down in writing... get it notarized and stash this contract away if you need it... Business is business and friends is friends.... the two don't always go together... Some other things to cover: What happens if a tool breaks? They are yours do you get reimbursed? What about gas for the transportation? Does that come off the top of the profits? What are you charging your customers?and who decides that How are you getting your customers? Who is in charge for dealing with problems as they arise? How are you dividing the profits? How will you seperate if need be? Good luck.. __________________ Free your heart from hatred. Free your mind from worries. Live simply. Give more. Expect less.

04-28-2006, 10:11 PM	#4 (permalink)
MoJoPokeyBlue Upright	Problems Money is not the cause of all evils. It's the LOVE OF MONEY that is the problem. Money in itself is a very good thing...and starting a business can be very exciting. Whenever I sign a Partnership Agreement on a new venture, I make sure there's a "Shotgun Clause". Let's assume there are three of you and after a few years the business is worth $600,000. You decide that you want out because you need the cash for another venture. One of your partners knows you "need" the money and offers you $150,000 for your share, when all of you know it's worth $200,000. The Shotgun Clause let's you refuse his offer and buy him out for $150,000. This ensures that every partner gets a fair offer. Another thing you have to worry about is the death of yourself or your partners. Does the business go to the two remaining partners, or to the partners spouse? MoJo

04-29-2006, 08:26 AM	#5 (permalink)
docbungle It's all downhill from here Location: Denver	I suggest forming an LLC. It's cheap to form. You file Articles of Organization with the state and apply for a federal identification number. All of the issues you bring up can be solved by including them in your Operating Agreement, which is the binding document for all members in the LLC. Good reading to get you started would be the Nolo books, since they are very easy to understand - particularly "Legal Guide for Starting and Running a Small Business," "Tax Savy for Small Business" and "Form Your Own Limited Liability Company," all from Nolo Press. They can be found pretty cheap on Amazon.com. You must study before you jump into things or you will be immediately overwhelmed and in over you head. Self-employment taxes and estimated taxes are also areas you will want to become familiar with, as they will apply to all of you. __________________ Bad Luck City

04-28-2006, 09:32 PM	#3 (permalink)
Elphaba Deja Moo Location: Olympic Peninsula, WA	Mantus, any business relationship needs to begin with a legal written document. See an attorney to advise you of the best organizational entity to enter into with your partners. As an alternative you can have a CPA set up your business legally that meets taxation requirements. I cannot stress enough that you DO NOT want to go into a casual business agreement with your friends. I promise you that you will not be friends for long when the business is in a "down" vs. and "up". I don't wish to rain on your idea. I am just sharing my own experience. Good Luck!

04-29-2006, 08:41 AM	#6 (permalink)
Ample Psycho Location: In your closet	TAKE A CLASS, in project management and cost estimating.. Even if you are not going to be the project manager it helps to know more about what he is doing and to know if he is not cheating you. Cost estimating is crucial don’t want to put in a bid and find out that you are not going to make any money out of the job. I work for a engineering firm that does mechanical and electrical plans for buildings. This industry is so shady. Owners don’t want to pay the architects/engineers-they don’t want to pay the contractors. Contractors don’t want to pay their subcontractors. Last, RFI’s are the golden ticket to pick up extra cash. Find a way to use them and do plenty of them.

04-30-2006, 07:12 AM	#7 (permalink)
Mantus lascivious	Really good stuff guys - got allot to plan. I'll keep you posted.