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Starting a lawn care business. How to start a lawn mowing business, lawn care business, or landscaping business. If you are starting a lawn care business, ask your questions here.

Silent partner in a corporation... Help!


Starting a lawn care business.

How to start a lawn mowing business, lawn care business, or landscaping business. If you are starting a lawn care business, ask your questions here.
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  #1  
Old 03-19-2011, 08:21 PM
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Default Silent partner in a corporation... Help!

Has anyone ever used a silent partner?
What kind of split should take place?
I am thinking about offering a "x" earnings on profit margin annually with regained investment over "y" years. I insist that I maintain greater than 50% of ownership.
What would you do?

I am set to open with decent equipment and professionalism but I was called today by a good friend. He wants to start a landscaping or presure washing business but doesn't have the time. He wants me to run the landscape business if that what he decides. I am in the position and already starting a company so I by no means need him as a partner but having a silent investor would be nice.
He wants to go buy a new truck, trailor, zturn and other equipment so I'm stuck with a dilemma.... What to do!
Any and all advice would be appreciated. I have a meeting tomorrow night with him, sunday.
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Old 03-19-2011, 08:23 PM
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Or should I eleminate "y" all together?
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Old 03-19-2011, 10:57 PM
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How it works is if you have a corporation you had to issue shares which at this point you have all of them. Now if you want a partner or otherwise known as a share holder you sell each share for a set price. so if you want to keep control then only sell 49% of the shares.

When it comes time to send out dividends, you get 51% and he gets 49%. There is no adjusting this.

I would recommend that you read "owning your own corporation" one of the rich dad books. It really explains corporations in an easy to understand method. This is not to be used as the final answer, you need to get a lawyer involved to make sure it is all legal.
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Old 03-20-2011, 04:43 PM
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Can you tell us why you would want to do this?

What is the benefit to this for you?

What do you feel is the downside to doing this?
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Old 03-21-2011, 11:42 PM
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Quote:
Originally Posted by Steve View Post
Can you tell us why you would want to do this?

What is the benefit to this for you?

What do you feel is the downside to doing this?
Investor invest money, He spends the money to make more money... He and the investor both make money off of the investment.
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Old 03-22-2011, 06:41 AM
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I have done this quite a few times over the years. Based on my experience profit should be capitalized (allowing the company to grow) with two options in the share holders agreement, one is to pay dividends as declared by the board (cover your butt and set up a small board of directors) and the right to buy shares back at their book value (quite often angle investors will want a buy back at book value x 2 or another multiple). I would not suggest you pay out all profits, every company that wants to grow needs to retain a portion of profits.
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Old 03-22-2011, 07:39 AM
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Quote:
I have done this quite a few times over the years. Based on my experience profit should be capitalized (allowing the company to grow) with two options in the share holders agreement, one is to pay dividends as declared by the board (cover your butt and set up a small board of directors) and the right to buy shares back at their book value (quite often angle investors will want a buy back at book value x 2 or another multiple). I would not suggest you pay out all profits, every company that wants to grow needs to retain a portion of profits.
Andy, what's your view on a start up lawn care business, is this something that should be done with it or do you feel this makes it all way to complicated and it's better just to go it on your own?
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Old 03-22-2011, 08:31 AM
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That definatly makes more sense. I would never pay out all profit. I think I'm going tell him I want to give it a go by myself but would love for him to invest when the time is right. Ie when I get big enough to have multiple crews.
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Old 03-22-2011, 09:39 AM
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That definatly makes more sense. I would never pay out all profit. I think I'm going tell him I want to give it a go by myself but would love for him to invest when the time is right. Ie when I get big enough to have multiple crews.
If you get big enough to have multipole crews I would not offer him a share then. You will have already proven to yourself you can suceed. If yo do it up front I would say 2/3 u and 1/3 for him. and maybe payback initial investment and be sure to investa share of future dividends in growth.
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Old 03-22-2011, 10:00 PM
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Quote:
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Andy, what's your view on a start up lawn care business, is this something that should be done with it or do you feel this makes it all way to complicated and it's better just to go it on your own?
Steve, it all depends on the person who is asking for the money and how well they can manage the business and how active the investor wants to be. I have no reservations going alone or bringing in outside funds, it's the cheapest way to grow any company.

I haven't done it with this landscaping/excavation company, if I were in my mid 20's with the knowledge I have today, I would do it in a heart beat and take the company across the country, however this is a semi-retirement business and it's already larger than I really wanted.
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