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To Partner or Not to Partner

I have a good friend of mine that I believe is interested in going into busiess with me (he has not come out and said I do not know for sure).

I am thinking of going into the food business and he is an excellent cook (he cooks all the food at his house) and he seems to have a good head on his shoulders regarding his restaurant ideas.

But while I think he would be great...we do not really need the financing or assistance since I believe my wife and I can do this on our own.

The benefit to him is that he only works two to three days a week so he would be available to focus on 100% on the start up of the business and running it for the first six months...without me having to quit my full time job.

I trust him but I am just afraid of getting money involved in a friedship...

If we were to do this...I would want to have as much as we can written in a contract...but I am still afraid...thoughts?? Experience with this issue?

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Answers (8)
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T Harv Echart has said in his seminars, listen to your heart, it will never let you down. it is apparent that you do have some misgivens about this. but if you do decide to pursue, then i would recommend that there some other entity involved. that will protect your 'backside'. one of the easiest ways i can think of, is to purchase an aged corp with you as the owner of course. with the aged corp, use the line of credit to invest into his venture. thereby the aged corp is the partner and your 'assets; are covered, also in the agreement, allow for a mutual buy out provision. the aged corps i can offer is guaranteed to have a minimum of 350k already available and within 10 to12 weeks. i can send more info on this to you upon your reply.

Nov 25, 2009
Julie A. Barnes, CPA
Small Business Exchange, Inc.
Travis County, TX

Hello there,

All of the advice proferred so far is great. I've worked with 3 partners - 1 of which worked out just fine. The most important ingredient in a partnership is chemisty so if you're already good friends, that's a decided advantage.

I would structure a consulting contract that allowed vesting - that is, as your friend contributes to the success of the business, he would begin acquiring equity. I would also include a clause that dictates a 'meeting of the minds' every 6 months so that you are both forced to review the bidding. It's all too easy to let issues slide and to procrastinate unpleasant confrontations.

Good Luck!
Julie A. Barnes
President, SBX, Inc.


Nov 14, 2009
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Try a deli and/or diner. It's hard work, but good rewards and fun. Plus in the right area it is an excellent investment that will grow. And you can do this anywhere there are people. We doesn't like to eat great food? Also, know of 2 possible locations in Florida under a different name that may be available together or separate.

Nov 8, 2009
Steven St
World Business Partners, Inc
Los Angeles County, CA

That's good. You seem to be on the right track. One thing you need to consider is that with the I.R.S. there are only two types of workers, 1. a regular employee and 2. an independent contractor.

Since independent contractors usually receive no benefits and you do not pay federal or state taxes on these workers there are rules for determining if this person will be considered an employee or independent contractor by the I.R.S. that you should follow.

Basically, if you're treating this person like an employee, i.e. making them come in at a specific time, if they are using your resources and equipment or theirs, the permanency of the relationship, etc. determines what the I.R.S. will consider them.

The I.R.S. has a form SS-8 for you to use to determine if the person can be considered an independent contractor or a regular employee.

Other than that good luck!

Hope this helped.

Apr 27, 2009
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Franchise Advisory Group

I totally agree with both responses below. If you don't need a partner, do not get one. I had a partner once and once was enough. Also keep in mind that just because he cooks at home, doesn't mean he can cook in the restaurant, it's two completely different things. If you think he can bring value to your business, then hire him as an employee or manager it will make for a much better relationship. Good Luck.

Apr 27, 2009
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Denton County, TX

Thanks for the advice...since I posted this question, I am leaning more towards going with no of the reasons is that I want to be heavily involved in the business (since the debt will be in my name) in order to make sure I can only blame myself if it does not work.

Would I offend him i instead of a partnership deal I offerred him a "consulting" contract? Whereby he helps me with equipment and recipe help and it is a one time deal for him....thoughts??

Apr 27, 2009
Steven St
World Business Partners, Inc
Los Angeles County, CA

If you do not need him to finance the business and you want him then hire him as an employee and you can sweeten the deal by giving him a percentage of the profits (Have a really really good business attorney create your employment contract if you are doing anything more than a regular salary).

If you don't have to partner, don't. If you HAVE to partner, hire the very best attorney you can afford to write the contract. Partnership are only as good as the paper they are written on and even those go bad. But the headache, money and friendship can be saved with a very well written partnership agreement.

Hope this helps.

Apr 24, 2009
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The BAF Group LLC

Partner only with someone you is going to end up that way, anyway! Okay, that was mean. But that is not an uncommon experience. You need the partnership drawn up in a contract, particularly spelling out what happens if one of you dies or wants out. But you also need a detailed chart about who does what, when and where. He works 2 to 3 days you say, but a typical food operation is a 7-day per week operation. This is something that you need to consider, carefully. Six months is not a lot of time for startup. Twelve to eighteen is more like it, in food. And is it really a partnership if you are putting all of the money up? I sure would want him to be legally, financially on the hook if he is potentially generating debt in my name, with me (and my wife) being the only responsible parties for the consequences. Do partnerships do well? Some. So do some marriages. But look at how many divorces there are!

Apr 22, 2009

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