My business partner and I have irreconcilable differences and we are definitely splitting. I have 50% shares in the private company but we have considerable debt to the government at 200k. The company however is doing better and better and should be able to pay off all debt within 2 years. meanwhile the company (paris based web agency) is working with bigger and bigger clients including in the luxury sector and with its rising profile will soon be very profitable. I however after trying my best simply can't participate in the venture. I currently receive remuneration (like a salary) every month and i want to keep that for 6 months as i start to wind down my work as the art director and launch my own consulting business. Can i ask for that? what else can i reasonably request? i know you can make any deal you like and each company is different. but as a general rule, how do these things generally take place? My business partner and co-founder has previously made errors that are borderline illegal and i don't agree with how he runs the company. i do not however wish to take control or stay in any capacity. I don't have to sell my shares yet but what would be the best way to transfer out of the company into my own company?
I am not an attorney and this is not "professional advice."
Consult a lawyer.
If you get involved with a partnership ever again, get an operating agreement in place and TALK ABOUT SEPARATING at the beginning. Get it figured out immediately. Be up front with it: "We should talk about what happens if one of us dies. Or wants to move on." It's not offensive, or confidence-gutting...it's smart (as you probably now see.)
Generally speaking, an agreed-upon independent third party firm would assess the value of the company. This firm would be named in the operating agreement provisions so there wouldn't be bickering at the time of separation.
Another typical provision is that partners have first right of refusal on share sales.
But since you don't seem to have such an agreement in place, it's probably going to be tough for you now. The more you fight the more the other shareholder is going to fight back.
Consult an attorney. Find out if there are any restrictions on selling your shares.
My guess is that with a negative cash position due to debt, the company isn't worth a whole lot. You may be able to have a value assessed based on revenue...but if you leave, how much of that goes with you? Is the business model based on repeat customers, or one-time sales? You need more expertise than a Clarity answer to solve this one.
And remember, the more mean-spirited you approach this question, the more resistance you will get.
My opinion--which again is not "professional advice" and is merely for discussion--is for you to quietly discover your options by consulting an attorney and accountant good at digital business evaluation (most are not), and wait for the company to return to profitability.
Terribly sorry to hear of the division between yourself and your co-founder/partner. I've experienced an ugly split with a partner and it's not a fun time. I'm not certain if you have a corporate attorney or not but it would be wise for the both of you to have a chat with him/her. My concern for you would be the debt (specifically to the government). As 50% owner of the firm, you are "on the hook," so to speak, and with the growing dissension between yourself and your partner, I'm inclined to believe that's a sour situation that could very quickly turn sour. If you truly want out, and this is just my opinion, I would check your Buy/Sell Agreement and strongly consider selling back your shares of the firm. Please do yourself a favor and speak with your attorney before this gets ugly.
I am involved in a similar action currently. I am negotiating a severance package (actually litigating it because the investors simply chose to not honor it).
Relationships change all the time. Divorce in business is common. First issue is to make this simply a business deal. The disagreement about the way the business has been run and, you will be aware, "borderline illegal" is 1) borderline, 2) difficult to prove, and 3) not relevant to the discussion since you just want to move on while retaining your ownership.
Key here is to keep your emotions in check and to manage the emotions of your co founder. Nobody wants a business to fall apart so make that clear. You wish them total success and cheer for them in the future.
Yes, 6 months is reasonable. They may want (you should check your corporate documents) to buy your shares back. If so, there should be a process there. You will need to have confidentiality agreements and non-competes for a period of 12 to 24 months, or as long as you are a significant shareholder.
The best advice is to tell your partner that you have come to this "difficult" decision, do not make it about him or his processes, and say "this is what I would like to do". Do not threaten or belittle anything and it goes faster, farther, and at lower cost.
You can email me at Dane@DaneMadsen.com or call me in Seattle at 206.900.5852 and I can share some thoughts.
Dane
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