I don't agree with my business partner. What are my options?
My business partner and I own 50% each of a restaurant & bar. We can't seem to agree on anything and it becomes a fight. I do not get along with the accountant and my business partner refuses to fire him because he thinks we'll be audited. I don't trust him. What can I do?
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May 3, 2018
Hi Gabriela,
Do you have a partnership agreement? If so, and you think there could be fraudulent activity within your books, this may be grounds to get your partner removed. The Business.com team recently published this guide on 5 Steps to Remove a Shareholder. The guide can help you better understand and think through your options.
Removing your partner may be excessive, especially if it is someone else (your accountant) causing the rifts in your professional relationship. I echo other's advice to try to have a one-on-one conversation with your partner first to voice your concerns. And know that the accountant works for you, so you are in the right to ask as many questions as you want. If you do become suspicious, you should take your books to a trusted advisor to have them reviewed. If you do decide you want to part ways with your business partner, it can take a very long time. Use this time to get your books and affairs in order, review the partnership agreement, and talk to your partner to see where you stand.
Oct 3, 2017
Beyond law, I have a few questions. Are you both sharing decisions on all aspects of the business? Is it that each one tends to "encroach" on the other's area of authority? Why don't you try and distribute authority with a clear understanding that each one will stick to his area. Clearly there is a trust issue and that is not good for business. I am sure both of you are in to grow and profit. Legal is the final recourse.
Aug 26, 2017
All of the responses you have received are spot on.
However, for quick results about your accountant, hire an audit accountant to audit the financials your present accountant has performed. If your concerns are warranted, your present accountant can be reported to the Accounting Board, the NASBA and/or the AICPA.
You are 50% owner and have as much right to audit the present accountant as much as your partner, who is also 50% owner has the right to want to keep the accountant.
The both of you stand on equal footing.
This direction can be a good start toward leading you down a path to resolve your present accountant issues.
But at the end of the day, you may still need to hire a business attorney.
Aug 24, 2017
Gabriela,
1. Never go into a partnership on a 50%-50% basis; someone has to be the majority owner (at least 51%) just for these reasons.
2. If your business partner feels you're going to be audited if you fire the accountant, then your partner knows there are some shady practices going on with the accountant. I would get a set of books, take them to someone you can trust and have them review the books for you. I was recently told that many banks will not deal with restaurants and bars because of the shady handling of cash, especially when it comes to paying employees.
3. Business partnerships are like a marriage. You need to find a marriage/business counselor in an attempt to resolve your issues of trust (or lack thereof). If with an independent 3rd partner, you and your partner can't work out your differences it is time to end the partnership by either you buying out your partner or your partner buying you out. Of course dissolving the partnership can be difficult, painful, and time-consuming depending on how the partnership agreement is written.
Aug 24, 2017
I'm a business energy coach so resolve relationship energy for my business clients all the time. Fundamental principles to understand include (1)s we are always seeing a reflection of our consciousness and energy, (2) we see in our relationships how we feel about our self, and (3) by understanding how we truly feel about our self, we can dissolve any and all dysfunctional patterns reflecting back to us in our relationships with others.
It's likely that this relationship is reflecting a relationship you've had earlier in your life. Once you uncover that (or those) relationship/s, and understand what in that/those relationship/s was not loving for you, the energetic charge will dissipate and you will see the relationship with your business partner improve. Or, I'll be happy to help you resolve this if you'd prefer.
Aug 24, 2017
One thing you should have done is include a buy/sell agreement into your business arrangement. It's not too late, I don't think, but I am not a lawyer. I would recommend you contact an attorney and seek whatever remedies that they recommend, including arbitration, mediation, buy/sell amendment.
Partnerships are extremely tricky things, and even the best of friends, even brothers or sisters, find difficulty in them. My advice beyond the lawyer, ask your partner for a disinterested evaluation of your business accounting by a reputable CPA, and make certain the books aren't cooked somehow. At least then you'll know exactly where you stand about buying out your partner, or selling out. Either way, don't expect the issue to resolve itself without legal action.
Aug 24, 2017
First let me say with a bar involving all the liability I would not have chosen a partnership but that being said Partnerships can be tough and a lot of times they do not work because of the chance of disagreements. First do you have any written agreements?
Next sit down and talk! Get a neural person to help if necessary as a mentor. It is always best to start with trying to understand each side.
Next the accountant is only doing the partnership return and talk to him or her and express your concerns and have them explain what ever you do not agree with. There may be good reason why things are done the way they are. No two accountants think the same way. You take your K1 to your personal return anyway and there may be ways to work with it on your personal. G\Firing an accountant or having one quit is not a reason for an audit. Get a second opinion from another accountant. If you have accurate records an audit should not scare you. Did you do something wrong I doubt it.
If you can not work things out sell the business . Or you buy his share. Or you run restaurant and he runs Bar. These are just examples. Put things in writing so in future you have guidelines. SIT DOWN AND TALK! ALL things can be worked out. Give and take.
You can get an atty involved but try the cheaper method TALK! Do not end a friendship over something that can be worked out. Your in NY so am I but your downstate and I am up. THere are many firms in your area so you should have no big issue. Small business may be willing to help and most colleges have students that may help.
Aug 24, 2017
Most of my suggestions have been made, but... Obtain all or as much as possible - historical financial documentation: All annual tax returns, sales tax, monthly & annual balance sheets, P & L's, QuickBooks or copy of checkbooks, acctg records, etc. you can garner - hire a separate CPA for a forensic audit. Call it a discovery or confidence activity. If all is correct, there should be no fear of an audit. So what's the secret? Try to have the business pay the CPA but if your partner locks you out, be prepared to pay for it personally. If you ever go into another business own at least 51%, preferably 100%.
Aug 24, 2017
HI Gabriela,
Some very good answers have been provided so far. In addition I would recommend:
1) You could ask your partner if they would consider a dispute resolution service (many lawyers or other independent agencies provide these types of services);
2) Firing an accountant does not necessarily trigger an audit by IRS. In addition, if there are any specific issues that you have with the accountant maybe you and your partner can agree to obtain a second opinion? (You need to answer why you don't trust the accountant and have your partner agree with your rationale);
3) Your partnership agreement should have provide protocols for dispute resolution. If it does not already contain these protocols and if you will be continuing your partnership, you will want to amend your partnership agreement with this type of provision.
4) If no resolution is possible, then (as already pointed out) you will have to determine how to sever your relationship and divide the assets. This is far from from optimal and likely not desirable. However. there may be no other options available to you and your partner.
Aug 24, 2017
Either find a legal arbitrator to resolve your differences or buy your partner out, or vice versa. You should have developed a partnership agreement addressing these issues, including the hiring and firing of accountants, before you started this business - did you?
Aug 24, 2017
Hi Gabriala,
The saying goes: if you fill up a jar with sugar when a stone is inside, the more sugar you add the deeper the stone will be buried. So, you need to get the stone out first, then you would be able to fill it up with sugar.
From your perspective, the opinion of your partner is the stone. And your opinion and understanding about the situation is the sugar. As you want to replace the stone with the sugar in your partner's mind, you will have to really understand their perspective and fears of WHY they decided so and so, and HOW they came to their opinion or decision. Their thought process.
Then you would be able to explain to your partner the fears and frustrations you were experiencing – and they would listen!
Then, and only then, will you be able to explain to your partner that all the issues and fears they want to cover is also covered with your approach, but your fears and frustrations are not covered with their way of thinking.
This way you're not fighting their thought process, their responsibilities, their capabilities of understanding situations and you're not questioning their ability to form the right decisions. All you're saying is that you have issues that needs to be taken care of.
For instance, if we let this guy go we may get audited, God forbid, but with a new trustworthy accountant we may be able to go through it with ease, vs. sticking with the current accountant who may do each and every day more harm than good, and if an audit will happen anyway we will really be screwed.
Together you may come up with a third new approach on how to cover all the bases, and everybody would really be happy.
P.S. beware of this approach, as you may come to realize that your approach was the stone and your partner's perspective
was the sugar...
Good luck!
Aug 24, 2017
Since you're in NY, the first thing you should do is consult with someone licensed to practice law in the state where your business resides. I think it would be valuable for you to know your worst case scenario ASAP, because that may frame how you approach your partner. In California, for example, depending on what kind of you legal entity you are, there are remedies available. If an LLC, for example, you could seek to dissolve the entity. That usually results in one member buying out the other. If a corporation, you could also seek the appointment of a provisional director who would act as a tie breaking vote on the Board of Directors. Those California remedies, are worst case remedies to pursue, but at least they are available. (Also, if a legal entity, you need to review the governing documents to see if there are any additional rights or restrictions.)
Once you have more information about the worst case scenario, you can pursue informal negotiations with your partner to see if you can resolve your differences or agree to separate. I would also recommend that you consider having a neutral party act as a mediator if your conversations are highly charged. A good mediator/neutral can be professional restauranteur that you both respect, or an attorney or retired judge that is experienced in business transactions/law. That neutral could also be used for future deadlocks if you get to the point where you want to continue in the business.
All that being said, I strongly recommend you seek out a good business lawyer licensed in your state as the first order of business. Good luck.
Aug 23, 2017
Hi Gabriela
Your experience is not uncommon. Business partnerships are just like marriages, some work and some do not. The question is what do you do when they do not work out?
First, as others have suggested and just like marriages, you need to face the issues and accept that things probably are not working for the other person either. As the old saying goes “it takes 2 to tango”, so do not try the blame game.
You need to approach this very much as a matter of factly. You need to approach your business partner (do not get anyone else involved as it will become 2 against 1), and discuss the issues. Make a list but do not get into debates as neither of you are going to change the other person's mind or behaviour.
Second, make sure you have options available as it is no good going to a meeting with a list of problems without any solutions for them. As with all breakups you need to think about:
Division of assets
Division of liabilities
Do not play the blame game (very important). It is over, so you just want to part amicably.
There are options open to you:
1. Your partner can buy you out at a fair price (that is why you do not want them as enemy number 1)
2. You can buy your partner out at a fair price (that is why you do not want them as enemy number 1)
3. If the bar and restaurant are physically separate and/or on different location, one of you can take over the bar and another take over the restaurant (each assuming respective liabilities). If they are co-located then this suggestion will not work on the everyday practical level.
Once you agree on a course of action get a lawyer to draw up an agreement. Make sure you each have a different lawyer as you each want your interests protected. Husband and wife do not use the same lawyer for a divorce nor should you unless it is someone you both trust and have faith in.
Wish you good luck.
Aug 20, 2017
The first thing to do for now is accept that there is nothing you are going to be able to do quickly, the first thing to do is talk to them direct, tell them how you feel and that the business can't go anywhere and will get worse if you don't try and get along and compromise. Doing this will at least alert them to the way you feel and you may be surprised to learn he feels the same way. If the situation doesn't change sometimes it just doesn't work and you have to part company, unfortunate as it may be, I don't agree with carrying on with something if it is hell. The bit about not trusting someone is hard too but we can never really trust anyone one hundred per cent when we are in business with them unless they are loyal family members and even then there can be trust issues. Always check everything, don't be afraid to ask questions and don't beat yourself up if you become suspicious, its your job to make sure you know whats going on in your business. Hope this helps and hope it all works out for you.
Aug 20, 2017
Hey Gabriela,
Me and my partner were working on a website called - https://wheretobuystampsguide.com/ and we were not agreeing on some point. I was about to leave that project and then I read a quote somewhere: "Alone you can go fast but together you can go far". I tried to consolidate my partner very calmly and we decided to agree on half-half opinion. Guess what it turned out to be a great decision and we started many more projects together. Hope you'll solve this matter soon.
Cheers!
I was expecting someone to be as angry as I am but you have really shed some light on what not to do. So I thank you for that! You have definitely changed my perspective and I think we can move forward.