Absorbing a current company. Need help!

**njsdca** · 01-07-2008 05:07 PM

Hey everyone!

Name is Nick. I am looking for some help with the company I am starting with a partner.

Here is the situation! John, my partner, already owns Revenge Motorsports and we're looking to expand into a different area with an investment on my part. $50,000 of my money will be used to "Abosorb" his company. In turn, we will be called Insignia Motors Corp.

It will be a partnership, meaning I will then own 50% of the company and thus 50% of his current company, Revenge Motorsports... correct?

Now, to insure that my $50k is used correctly we have already set up an agenda, and also I think I need legal documentation of the absorbtion and something that also says that I do in fact own 50% of Revenge Motorsports/Insignia.

Let me know what I need please, I'm having a rough time figuring it out!

**BusinessAdviser** · 01-07-2008 05:10 PM

Originally Posted by njsdca

Hey everyone!

Name is Nick. I am looking for some help with the company I am starting with a partner.

Here is the situation! John, my partner, already owns Revenge Motorsports and we're looking to expand into a different area with an investment on my part. $50,000 of my money will be used to "Abosorb" his company. In turn, we will be called Insignia Motors Corp.

It will be a partnership, meaning I will then own 50% of the company and thus 50% of his current company, Revenge Motorsports... correct?

Now, to insure that my $50k is used correctly we have already set up an agenda, and also I think I need legal documentation of the absorbtion and something that also says that I do in fact own 50% of Revenge Motorsports/Insignia.

Let me know what I need please, I'm having a rough time figuring it out!

Based on your inexperience, you need... an attorney.

**2gould** · 01-07-2008 05:13 PM

To be blunt - you NEED a good lawyer to explain the legal landscape to you. With the kind of money you are talking about investing, you need to be perfectly clear on how each decision will affect you and the company. Even if it costs a couple thousand for competent counsel, it will be well worth it. A small expense now can prevent a huge expense later. Good luck.

**njsdca** · 01-07-2008 05:14 PM

Right, thats what we're meeting with on Wednesday, but I want to be prepared! Thats what I am looking for is some preparation.

**DPayne** · 01-07-2008 08:28 PM

For one, you need to know what exactly it is you want to get out of this partnership. Your partner needs to know exactly what he wants out of the deal also.

You will need some sort of legally binding partnership agreement that describes EVERY SINGLE aspect of the business. Partnerships with friends can be great, or they can turn sour quickly. I once had a successful businessman tell me that in choosing business partners, one needs to be as selective as if he were choosing his wife.

I am currently in the process of splitting up with my business partner (and good friend). The problem here was that my goals and work ethic are on a different level than his. I'm not bashing him, it is just there is no way this arrangement will work if we have a different vision. Trust me it costs less to sort this out BEFORE going into business than AFTER.

**njsdca** · 01-07-2008 08:32 PM

Originally Posted by DPayne

For one, you need to know what exactly it is you want to get out of this partnership. Your partner needs to know exactly what he wants out of the deal also.

You will need some sort of legally binding partnership agreement that describes EVERY SINGLE aspect of the business. Partnerships with friends can be great, or they can turn sour quickly. I once had a successful businessman tell me that in choosing business partners, one needs to be as selective as if he were choosing his wife.

I am currently in the process of splitting up with my business partner (and good friend). The problem here was that my goals and work ethic are on a different level than his. I'm not bashing him, it is just there is no way this arrangement will work if we have a different vision. Trust me it costs less to sort this out BEFORE going into business than AFTER.

Ok, understandable.

But in the mean time, in order to get things started we need to create a contract that states that after I invest my $50,000 I will gain 50% ownership as well as the money will go to Incorporating our new business.

If someone can write an outline or some sort of contract up that will break that down that would be excellent!

**2gould** · 01-08-2008 09:14 AM

Originally Posted by njsdca

Ok, understandable.

But in the mean time, in order to get things started we need to create a contract that states that after I invest my $50,000 I will gain 50% ownership as well as the money will go to Incorporating our new business.

If someone can write an outline or some sort of contract up that will break that down that would be excellent!

That is what your attorney is for and why you are paying him...
I still don't understand what you are looking for? What you need to do is ask your attorney these questions at or before your meeting. Tell him what you want with regard to the business and your investment and let him incorporate your desires into the contract. You are paying the guy, let him work for you.

**BusinessAdviser** · 01-08-2008 01:54 PM

Originally Posted by njsdca

Ok, understandable.

But in the mean time, in order to get things started we need to create a contract that states that after I invest my $50,000 I will gain 50% ownership as well as the money will go to Incorporating our new business.

If someone can write an outline or some sort of contract up that will break that down that would be excellent!

If you have such a strong aversion to professional legal advice, especially with regard to such an important matter, I think that you are just looking for trouble in the future.

**BM_ag02** · 01-08-2008 02:09 PM

I agree with the above post, you need an attorney to work on this arrangement with you and to build an agreement which will hold up in court. If at some point in the future things go south, you want your investment to be properly protected. I have witnessed many failed business ventures which started as good ideas but were not properly set up, and trust me things get very messy when it all hits the fan. If you have $50K to invest then you can afford to pay for proper legal advice. Good Luck!

**rogercbryan** · 01-08-2008 08:34 PM

I’m confused as to what you are spending your $50K on? Are you buying materials, patents, supplies, or are you just buying stock in the company. Beyond the fact that you need an attorney you may want to ask yourself where your money is going. As of right now it does not appear that you have clearly defined that.

I’m also in the process of ‘absorbing’ a competitor. My upfront capital is going to pay for the underline accounts that they service. I’m also committing to pay the previous owner a decent salary for their experience. As Warren Buffet as stated in the past: (this is not an exact quote)- “Mergers are not to be done so that two companies can combine to do the same things that are already doing, just better. A good merger takes place when one company sees that by capturing the management of another company they can do new things that neither is capable of doing on their own.”

Ask yourself if this is the case. Are you creating something new or are you both just going to continue doing what you are already doing.

**Revengemotorsports** · 10-30-2009 12:54 AM

Originally Posted by rogercbryan

I’m confused as to what you are spending your $50K on? Are you buying materials, patents, supplies, or are you just buying stock in the company. Beyond the fact that you need an attorney you may want to ask yourself where your money is going. As of right now it does not appear that you have clearly defined that.

I’m also in the process of ‘absorbing’ a competitor. My upfront capital is going to pay for the underline accounts that they service. I’m also committing to pay the previous owner a decent salary for their experience. As Warren Buffet as stated in the past: (this is not an exact quote)- “Mergers are not to be done so that two companies can combine to do the same things that are already doing, just better. A good merger takes place when one company sees that by capturing the management of another company they can do new things that neither is capable of doing on their own.”

Ask yourself if this is the case. Are you creating something new or are you both just going to continue doing what you are already doing.

Sorry to have missed out....

**jessica34** · 10-30-2009 06:04 AM

Hello
Stay competitive
Where do you begin in determining a fair salary for your position? You can determine the approximate value for your position by utilizing information that you can easily find online at the United States Census Bureau or through a company. This information should give you a good start to understanding your value to an employer. If your pay falls within the average range, great job maintaining your value! If you come in lower than the average you have some work to get your salary on track. Of course, it is common for a person that stays with a company for a long time, to receive a 4% annual average pay increase each year. This will lead a to a below-average salary after many years with the same employer.

Be flexible
If you uncover that you are not making the correct amount for your position, do not make any huge changes. You immediately forfeit your negotiation power when you are not employed. Start researching the type of company you want to work for, the position you would like and the direction of your industry - the future. Do not speak of money as the reason you are leaving your position if you determine you need to make that change. Say things similar to, "There is no place for growth in your current position with your current company and you enjoy the challenge of new tasks." This will be an appropriate answer in your interview in response to why you are leaving and you leave on a good note with your current company.

**mjr** · 10-31-2009 01:09 AM

As some of the others already touched on. It doesn't seem like this is something you should be undertaking without the assistance of a lawyer and accountant. The mechanics of such a maneuver are not all that complicated, but there are going to be many non-obvious financial and legal implications you need to be crystal clear on. Shouldn't have to say this, but protect your money, know what you're getting yourself into.

**LSnyder** · 11-02-2009 10:42 AM

njsdca,

by your username I am assuming you are located in NJ?

**KingofTorts** · 11-05-2009 01:57 AM

Call around, you probably have a friend or a friend of a good friend who is a lawyer and will be able to draft what you are looking for in 15 minutes over a beer or two. Everyone telling you that you are in dire need of a lawyer and need to spend thousands of dollars is highly exaggerating.