Hello all!
I have recently been offered a partnership in a commercial and residential cleaning company that has already been in business for some three years now. What is the process for changing the business structure to a partnership?

First, find your own attorney and accountant. The attorney for the legal end and the accoutant for the books. You need to see the books and so does the attorney. That will be a good start, but I am sure your attorney will give you a check list.

Are they money strapped, is that why they need a partner? A valid question, sorry. Do you know these people ?

Tick

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Originally Posted by 4thqtrknlz

What is the process for changing the business structure to a partnership?

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Hello 4th:

What's your PRESENT business structure?? Are you a sole proprietorship? If so, then write up an agreement between YOU and THAT entity. If that entity is also a sole proprietorship, then it's just a matter of the two individuals signing the partnership agreement.

If the business structures are not sole proprietorships, tell me what they are, and I'll tell you what to do.

As tickle suggested, you're going to need an attorney to do this properly.

excon

Hello again:

Look. Maybe I'm being too technical. If you and some guys who clean offices want to form a partnership, then you simply need to write and sign a partnership agreement.

excon

I have been there, and been bitten, therefore my questions regarding 'do they need money'. I would also suggest a client base list of present business and I would also suggest asking some how the service was. If the other people are above board they won't mind these simple procedures to safeguard 'the money you will invest'.

Tick

Right now the business is a sole proprietorship and business was at a stand still until recently. Now the business is doing subcontractor work and business is picking up.

I agree, you must get an attorney involved.

Determining the true value of the company will determine your investment. This is not easy to calculate for a 'service company.'

Usually there are not a lot of tangible items that are owned by the company; a warehouse, trucks, etc. Usually it is mostly the equipment, supplies and value of the contracts. The total annual sales is not always a good indicator for a single item for evaluating.

What sales are in the 'pipeline', the current relationship with present clients, how many contracts were lost in the last year and why, etc? Your accountant and attorney can determine the value from many factors, not just the sales, for example the real ROI.

What is the business experience of the other partners? This business can be very stressful, do you know the other partners well?

Have you established exactly what will be expected of you as a partner? Is this just an investment or will you be expected to participate daily, doing exactly what?

Will you be collecting a salary? Dividends? Both?

Take a close look at the existing contracts, how many clients for how long, are the receivables current, etc.

I agree, take all the time you need to look at the books with an independent CPA, not theirs.

Also, I don't know if I read what you said correctly but if they are using sub contractors instead of employees then you can be in serious trouble with your state and the Feds. Sub contracting has many strict rules governing their use and if all these rules are not complied with then they will/can investigate your books and the penalties and fines can be substantial.

Stringer

Thanks,

Thanks,
The business is not using subcontractors the business is getting work AS a subcontractor. There is not much of the business right now. The owner started the business three years ago when he was married. He was doing pretty well for the first couple of years and then got a divorce and started splurging on girlfriends, vacations and things of that sort and essentially lost focus. He procrastinated in finding new contracts when his last few were near the end and has been having trouble finding new contracts. He had no contracts for a little over a year. With my help he recently has gotten back in business and will be subcontracted a few small offices ($3,000-$5,000 contracts) and I have been doing a lot of his "administrative" work (i.e. insurance renewal, organizing, marketing, cold-calls, correspondences). He offered me partnership in what is basically a new business since there is nothing to gain or lose at this point. Right now I do not have to invest much more than time and hard work.

I understand 4th.

I guess that I would seriously be asking myself some questions at this point;

Why should I stay with him? Possibly with your experience you should start your own cleaning company, OR

If he doesn't seem to have his head into this *and you know as well as I do that this IS necessary), then why not just buy him out completely.

I feel he may be a friend and I appreciate that, however as cold as it sounds... business is business. NO one will pay the bills because they are 'nice.'

Just asking and bringing up some new perspectives, possibly.

Stringer

Hello again, 4:

Cool. Now were talking about due diligence. That's wayyy more fun to talk about than corporate stuff...

To follow up on Strings questions, I have some of my own.

What is your role in this proposed venture, and what's HIS role. Are you going to sit in the office while HE handles the mop? Are you going to pay yourselves a salary? Based upon what? Is it YOUR job to get new clients? What are your duties going to be?

There'll be more questions, I'm sure once these have been addressed.

excon

Quote:

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Originally Posted by excon

What is your role in this proposed venture, and what's HIS role. Are you gonna sit in the office while HE handles the mop? Are you gonna pay yourselves a salary? Based upon what? Is it YOUR job to get new clients? What are your duties going to be?
excon

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My role is pretty much just handling the paperwork, marketing the business and finding leads. It's like he's starting from scratch again. New business cards, new logo, etc. just same name. I offered to help "handle the mop" while he is starting up but eventually, I would like to see the business expand to employees. Essentially, I am interested in making this small business a bigger business. Getting everything on books and getting the acounting and finances in order.

Hi 4th, good luck, it sounds like you have a game plan !

Tick