associate/partner 2

[skier1578]

I have been with my company for 4-1/2 years now and am taking the PE exam in April. My boss has talked with me a few times in the past couple years about becoming a partner when I get licensed. The company is a small one (by boss is the only licensed engineer) and having another license would benefit him.

I am extremely intrigued by the offer, but am also curious about what being a partner typically involves. My boss has openly admitted he's not sure what this would mean either as he was never a partner in any of the companies he previously worked for. He is going to be talking with his lawyers and others to see how this type of thing should be arranged. I am wondering if anyone out there has any input on this. Thank you in advance for any comments.

 

[JAE]

For a small firm, the partnership (or shareholder status in a corporation) would place you in line to many rewards:

1. Share of the profits.
2. A say in how the firm is managed and grown.
3. Authority within the firm
4. Job satisfaction in that you are creating your own destiny

Some risks:

1. As an owner you may be or will be exposed to the liability involved with anyone owning a business.
2. The investment in time and money to be an owner can go "poof" if the firm fails.
3. Sometimes there is risk in that owners are sometimes required to put their personal property on the line to get the necessary lines of credit to keep the firm going.
4. Harder to walk away from the firm should you end up not liking the work environment, types of projects, etc...since you own it.
5. Higher levels of time commitment (away from family, hobbies, etc).

I'm sure our vast membership here will also weigh in on various other rewards and risks.

Usually small firms become Limited Liability Companies (LLC) or S corporations within the US. These typically have up-front buy-sell agreements - a sort of on-going contract that specifies how shares in the firm are owned and managed and how profits/bonuses are set.

There are outside consultants that help firms set this up - Zweig-White is one that a previous firm used. Find them here:

http://www.zweigwhite.com/index.asp

They may have some resources to help you on your way - good luck.

 

[casseopeia]

skier1578,

Find out what your initial buy-in will be. The company has a dollar value based on gross receivables, net profits, current inventory, minus debts, etc. If you are buying in as an equal partner, 50-50, then you will have to pay the current owner 1/2 of the value of the company. This does not necessarily mean cash up front, but it can mean some. You will need an accountant or someone who specializes in business valuations to review the books and establish a price. Get your own attorney and insist on getting at least three valuation reports. Use the attorney for the negotiations.

After seeing the numbers and reviewing the current health of the company, you may elect NOT to become a partner. You are not entitled to recover any of your due diligence costs such as attorneys fees and the cost of the valuation reports. That's another risk.


"If you are going to walk on thin ice, you might as well dance!"

 

[skier1578]

JAE and casseopeia,

Thank you both for your quick responses and valuable input. When the time comes I will definitely consider the things you both mentioned.

 

[Ashereng]

It also means you will now have to deal with all the PEOPLE in the company. You will most likely have to hire and fire.

I know of some friends who really could not bring themselves to do the firing part. I guess if they were better at the hiring part, they wouldn't have to fire so much.

Laying people off is probably the hardest. They did an honest job for you, and you are still letting them go. That's tough.

Congrats on owning a part of a company. Good luck.

"Do not worry about your problems with mathematics, I assure you mine are far greater."
Albert Einstein
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