Incorporating

"Red"

"Red"

Graphic Designer
My brother has shown a growing interest in joining me in the power washing industry. He insists on being incorporated to protect himself (and his family) from any possible liability. We have different beliefs on the subject, but are working towards a solution that works for both of us.

One of the first concerns is selecting the right type of corporation for our situation (2 guys and a truck). While I haven't considered doing commercial work much, I do believe it will help separate us from the low ballers and the wanna be power washers out there (which seems to be growing daily).

What I'm looking for is information regarding the different types of incorporation and the pro and cons of each as it pertains to a small 2 guy operation. My brother's role will be primarily sales and record keeping while I'll be doing the majority of the cleaning work. We're in Florida so that might have some impact on which route we take.
 
Partners?? No way. I would not partner with anyone, especially family. Someone is always going to feel like they are getting the short end of the stick. In all my life, I have only seen one or two partnerships work. One of them was a Multi million investment advisor. They ended up getting bought out by a BIG bank. They had expectations for each other set out from the start and who was running what. Honestly, I don't know how they did it. I am going to have to ask one of them sometime.
This is a totally different type of business. One is doing physical work, and the other is doing the bookkeeping. The physical guy is going to get screwed. That is just the way it is.

As for LLC, S- Corp, C-Corp, etc. I would talk to both my accountant, and my attorney, to see what they think is best and why. Personally, I am an S-Corp. It works for us.
 
Scott Stone said:
Partners?? No way. I would not partner with anyone, especially family. Someone is always going to feel like they are getting the short end of the stick. In all my life, I have only seen one or two partnerships work. One of them was a Multi million investment advisor. They ended up getting bought out by a BIG bank. They had expectations for each other set out from the start and who was running what. Honestly, I don't know how they did it. I am going to have to ask one of them sometime.
This is a totally different type of business. One is doing physical work, and the other is doing the bookkeeping. The physical guy is going to get screwed. That is just the way it is.

As for LLC, S- Corp, C-Corp, etc. I would talk to both my accountant, and my attorney, to see what they think is best and why. Personally, I am an S-Corp. It works for us.
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Scott, you pretty much hit everything on the head. Already talked to our (future) accountant and they recommended an s-corp. My brother (a/k/a "The Partner") has already changed the original 30/70 split to 50/50 (like I wouldn't notice - ha!).

I just wanted feedback from the guys that have already been down this road.

Thanks Scott.
 
I have seen a lot of partnership business fail, have not seen one personally that succeded here or heard about one, too many issues with personalities, work ethics, the "I work harder than you do" issues, etc.....

In the beginning there is not much of an issue but as time goes on, the issues start to happen and problems start.

It is a good idea to put the rules, roles and responsibilities on paper along with the pay percentages so each can sign and understand that this is a legally binding contract that is written by an attorney so nobody can say they did not read this or that or don't agree to this or that later on down the road. I would also put in writing how things will be divided up when/if a split happens so it is all there in black and white so there are not other issues later if you decide to part ways.

Good luck.
 
I agree with Scott, I wouldn't partner with anyone. My wife is completely 100% hands off on my business.

Unfortunately if something was to happen to me then she would spend a week trying to figure out all of my accounts, when they are serviced on what days, billing, ect. I only write 50% of my schedule down on a desk calendar. The other 50% I just remember.
 
So what's a good recommendation here? He wants the corporation for all the legal reasons and I want the work for all the financial reasons ... let him have/run the corporation side and I subcontract the work?
 
I am in year five of a partnership. I own 60 percent, my partner owns 40 percent. We split all profits 50/50. The agreement is that I secure the work, he performs the work and we both take an equal percentage of revenue. I am in charge but I try always to protect his interests because if he were to get the short end of the stick, he might leave and then I would have to do the work my self.

When he thinks that he has learned enough that he doesn't need to split the profits with me any longer, he can offer to buy me out. He sets the price and then I decide whether I am buying his portion or if I am selling him my portion.

The most important thing to know about a partnership is that it is going to end and the dissolution arrangements are the most important part of the agreement.

I feel sorry for people that have such poor family and friends around them that they are afraid to do business with them. I am blessed in that regard. I once lured my best friend away from a secure government job to work full time for me. We weren't partners but he was my best friend on earth and although he eventually went back to work for the government, we were best friends 'til the day he died. I was a pallbearer. I haven't had a real job since 1991. My wife has always been my partner, office manager and confidant. I really am blessed.

If you are unsure Derrel, sign him on as an employee with profit sharing benefits. Somebody has to be in charge though. 50/50 might work to distribute money but it will not work for decision making purposes.

Best of luck to you in whatever you decide.
 
An LLC or S- Corp protects you from personal liability if your operating under your company..That is really it in a nutshell along with the tax writeoffs you can utilize from your business.. An accountant will best advise you since every state is a bit different..Going into business without an LLC/S-corp/Inc, etc is very risky as you can be held liable personally for your company or anyone working under your company..

Partnerships according to my accountant fail more than marriages..so what does that tell you..
 
"Red" said:
Scott, you pretty much hit everything on the head. Already talked to our (future) accountant and they recommended an s-corp. My brother (a/k/a "The Partner") has already changed the original 30/70 split to 50/50 (like I wouldn't notice - ha!).

I just wanted feedback from the guys that have already been down this road.

Thanks Scott.
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I absolutely would not go in business with him. Him changing the split behind your back is reason enough to show he cannot be trusted. To think he will be in control of the money, too? You are destined for failure and severe family infighting.

Just my opinion, but those are the alarms I am seeing.
 
Scott Stone said:
I absolutely would not go in business with him. Him changing the split behind your back is reason enough to show he cannot be trusted. To think he will be in control of the money, too? You are destined for failure and severe family infighting.

Just my opinion, but those are the alarms I am seeing.
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In all fairness, (and I apologize if I made it sound like he was out to take advantage of me) we haven't formally discussed the financial aspect of the arrangement, those were just numbers he was using during some conversations. As far as family goes, he and I have had discussions far worse that would have sent most siblings in opposite directions. I won't allow anything to come between us, and I believe he feels the same way. Family first, business second. If anything should go wrong, business wise, and I've already told him this, I'll just walk away. I couldn't care less about having a formal company, I just want to earn a good living. Having him do the sales/bookkeeping will definitely increase my work load and provide him with an income either on the side or full time as he sees fit.

Ok, so back to the corporation question. If a partnership is not a good idea, what would be a good way to structure the business that would benefit us both? I'm not keen on the idea of an employer/employee relationship (not at this time anyway). Uncle Sam died along time ago and has been replaced by cousin Vinny so the more I keep the better (not sayin', just sayin'). Personal protection is important to both of us, but I prefer not having all the strings attached if you get my drift.
 
Maybe hire him as an employee when needed.
 
I second Scotts opinion but to answer your questions an LLC or S-Corp is the route to go imo. I've been down that road in another business I owned with my brother and would never go that route again. I also have an uncle and a cousin that went into business together. They haven't spoke in several years after one sued the other and it then pulled in several other family members as the "took sides".

It's one thing if you can cut ties from your partner and walk away. It's entirely something different when your partner is family.

Partnerships are generally bad news... glad to see Tims worked out.
 
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