Let’s merge and be full partners! Oh wait, never mind, you can be my employee.

Miscellaneous and Personal Stuff I Must Share
1

And, by the way, direct all your business to me !!

Eight years ago this month, I started a consulting engineering firm. I ran it out of my house. It was quite a struggle, as I was a single mom with no other source of income. Through a lot of hard work and late hours, I became successful and now my company has a good reputation in the area. I get along well with other engineering firms in the area; I get enough work to make it worthwhile; my work is respected by the regulatory agencies; and I love what I do.

There is another firm in town which does exactly the same kind of work I do. This is a partnership of two gentlemen (let’s call them Moe and Joe) who retired from a government agency about twelve years ago. When I first started out, they would occasionally call on me to subcontract certain projects for them. As time went by, I’ve done more and more subcontracting of their work. I even rented office space next door to them (in the same building) 4 years ago to make it easier for us to do work together. By now about ½ to ⅓ of my business is subcontracted from these guys. They’ve also picked up another subconsultant who comes into the office and works for them on a part-time basis.

A couple of years ago Joe cuts down to working only 3 days a week. This past year he has decided to retire altogether at the end of December. Moe starts saying things like “there’s no need to have two separate companies” (meaning mine and his), and saying he’d like to cut down to working only 3 days a week. More recently, Moe has been emphasising that we subconsultants need to be sure to help him continue the business next year. We have some casual “what-if” conversations about ways to do that.

Finally, about the beginning of this month, he mentions (a couple of times) that the three of us could set up a 3-way partnership. Moe wants all of my future work to come into the partnership company (rather than through mine). I’m interested, and so is the other subconsultant. We start talking about moving the office location, and looking at office space. The other sub and I start talking about ways to structure the partnership, and ways to divvy up the project management tasks. We also talk about streamlining the business and modernizing the way they do business. I’m getting jazzed up about finally being able to manage my own projects over there, and about revitalizing the company.

Then on Thursday, Moe comes back from a meeting with their accountant, and he says: “Accountant tells us that I’d be better off hiring you two as employees, instead of doing the partnership. So that’s what I’d like to do”.

I asked, “So, you still want me to direct all of my future business to your company?”. “Yes”. “Including my expert witness work?” “Yes, of course”.

:dubious:
:mad:

2

What an idiot. You should merge with the other subconsultant and then see if you can work out some sort of buyout with Moe.

Just tell him that what his accountant thinks is best for him offers you nothing.

3

Go with your thread title - offer to employ him. Part time.

4

Part of what has me all wrapped around the axle about this, is that I just think the world of this guy. He’s extremely well known and greatly respected for his body of knowledge. He’s a really nice guy and means well - he just doesn’t have much of a head for business (their company has been run more like a hobby than a consulting firm).

I’m pretty sure he doesn’t realize what he’s just done, there, by extending an offer and then replacing it with something else.

sigh

5

Talk to a lawyer. Not because you intend to sue anybody, but because this is the stage in the process where a lawyer can be most helpful: planning a business organization to avoid future troubles. It’s much cheaper to hire a lawyer now to set up a LLC and determine membership, than it will be to hire a lawyer in 5 years to help you litigate the breakup of a malformed partnership.

6

I did mention it to my sister who is a tax lawyer. I think I need to look through my contacts and see which of my attorney acquaintances would be best to talk to.

7

I agree with this.

8

But, undoubtedly just a coincidence now, his little innocent mistake works pretty strongly in his favor.

9

It would have been prudent for him to have done his due diligence and checked all that out before he made the initial offer, wouldn’t it? It’s fine by me if he doesn’t want to partner, but you’re right, it makes him look bad to have done it this way.
A transition of ownership could work out very smoothly between us, if he would play nice. For example, he could keep 52% share of ownership and the other two of us have 24% each. We could have an agreement to buy him out over the next few years. He’d get to keep as busy as he’d like to be, with the comfort of knowing the company was in good hands as he eventually rides off into the sunset.

Now I’m leery of entering into any kind of agreement with him. I think I’ll just let things stay like they are. Hmph.

10

Well, it WAS the best deal for him. :slight_smile:

I suggest you renegotiate the renegotiation.

11

It evidently was not the best deal for him, actually, since the accountant forgot to account for the value of “two mightily pissed-off people who have no interest in being employed by Moe or by anybody.”

I’ve gotten quite a few calls from agencies who tried to use the old trick of “we’ll make you a permanent employee from the start! Shiny! We don’t work with subcontractors, everybody is a permanent employee!” For some reason, “sorry, I’m not interested in becoming an employee at this point in time but will consider freelancing offers” has always managed to turn up their procedure for hiring freelancers :stuck_out_tongue:

Having you as his employee would have been best for him if he had put that offer forward first and if he had offered (and you had accepted) much worse financial conditions than as a partner (which is what the accountant is counting on). He needs a new accountant.

12

If he brings up the partnership thing, I think I’d better let him know pronto that I expect a detailed, binding written agreement. No agreement, no deal.

He’s kind of in a predicament if he doesn’t sub this work out, as he’s not going to be able to turn it out all by himself. He needs us (or somebody) to continue to do the subcontracting. In contrast, I think I could survive the loss of that work stream, with a little belt-tightening and some aggressive marketing to make up the difference. So he’s not really got much leverage in the situation.

I suppose he could always sell out to someone else entirely. I don’t think he’s entertaining that notion at the moment however. He’d always hinted that he would like to see me ‘inherit’ the business.
This was just so … unexpected. And aggravating !

13

well, of course, it will be to his advantage to have employees as opposed to partners.

It seems everyone on the board is forgetting the most important part of business. Who is getting the jobs?

Obviously, Moe and Joe have made their reputation and are getting the jobs and that is worth more then any thing else.

Of course, if you were to decline, Moe and Joe can hire someone else. Which also probably came up in their conversation with the accountant.

Now if you go in nicely and negotiate an employee contract with stock options, etc. At least you can get your foot in the door and a line into becoming an owner. The question you have to ask yourself is… is having access to the client base under their umbrella worth it in the long run? Even if it means being an ‘employee’ for a few years.

Put yourself in their shoes in 20-30 years, and odds are, you would probably go down the exact same route (because for business purposes) it is the proper way to go. Keep in mind, they are not trying to insult you by making this new offer. They are just covering their asses.

Be nice and negotiate real terms and an ownership option if you think their firm is worth it in the long run. Also, keep in mind, pissing them off could cost you 1/3 to 1/2 of your current business. I m sure you probably don t want to lose that.

14

Bingo.

15

They are getting the jobs which are coming to their company. Obviously, I am getting the jobs which are coming to mine.

Remember, this is Moe only now. Joe is retiring, and Moe’s buying him out.

One would have thought that I’d have a foot in the door from doing all the jobs they didn’t want to do for the last 4 years. From doing other things like setting up their computer network, showing them how to upload/download files from email, and showing them how to find aerial maps and FEMA data on the Internet. From running errands and taking care of their clients as if they were my own. Shucks, from bringing them homemade goodies, even. I have been nurturing this relationship for a long time.

My answer is, I don’t think so. There are only a few of their clients with whom I don’t have a good working relationship with already. I have a good client base myself, and as I said in my last post, I can manage without the work stream I’ve been getting from them. This fall I’ve registered with a referral service which connects expert witnesses to attorneys who need them, and so I expect my expert witness work will increase next year.

I am 100% certain that Moe never intended to insult me. You’re right about that. But he did. A wound doesn’t bleed any less just because it’s accidental, yanno. I wouldn’t have been insulted if he hadn’t offered a partnership one week and then yanked it off the table the next. Or, if he had offered the employee option without simultaneously demanding all of my business. Really, everything I’ve sweated and strained for over the last 8 years? No thanks.

If I were desperate I would do this. However, I’m not. I also do not intend to piss Moe off. But thanks for the advice. :slight_smile:

16

I think the lawyer route is the right one here, too. Moe is looking after his own interests, and you must also (look after your own, that is, not his). Sorry he acted like that, though - I have once or twice in my life had a boss or superior who not only did what he had to do, but went above and beyond and did what was right or decent, and it was always such a pleasant surprise. It would have been nice if Moe had done that, too.

17

Well it’s best if you know upfront if you know that your potential partner is a business doofus. Despite his technical acumen being partners with someone who plays around like this is financially dangerous.

18

and given that he’s probably a business doofus, you might want to give him the benefit of the doubt and that this was a clueless unintended insult. Point out that what his accountant thinks is rather immaterial and accountants are often not very good at giving overall business advice. This being a case in point. Suggest you would be interested in having a formal discussion and involving a lawyer that would provide suggestions on how to structure a partnership or buyout or something that is equitable to all parties.

19

I’m not convinced there was ever a real offer extended here. Nothing in writing, just people talking casually…hey, maybe we oughta do something together sometime…at least from his point of view. Sounds to me like maybe the guy is worried about surviving on his own, and looking for a way to cover his ass. After talking to his accountant, now he has a better idea of what it would take to maintain his lifestyle. Could be a full partnership deal would reduce his income, and he may not be in a financial position to take that. Also not sure I’d be comfortable in a three way deal with one person holding a controlling interest. With 52%, he can out vote both of the minority owners.

20

I remember you saying how you hoped to get in with the place earlier. I’m sorry to hear the guy got greedy and blew the deal at this point. I have to wonder if the retiring guy will still sell his half to the other guy, if he’s not happy either. I would be careful about what is posted here though. You don’t want problems from this post because it got read by someone.