Very small business partnership heading toward destruction!

So me and a good friend started a very small home business and it comes with a monthly expense. now its 3 months later and my partner is not doing any work and does not want to put any money into the business? we have a contract and share the business 50% each. I don't want to go through the hassle of breaking contract and he will only sell his share for $900 which is way overpriced considering the business has almost no assets, only 21 customers, and we are paying more than we are earning.

So what do i do? my partner is not being reasonable and i am afraid to loose the customers, i want to buy his share but $900 is too much.

Sounds like you needed to spend more time on your original partnership agreement. Partnerships are a lot like marriages, and if the partners don't work well together the partnership won't be successful.

Remember the five P's: Proper Planning Prevents Poor Performance.

I'd say go ahead and make the investment to buy out your partner, $900.00 seems like a very small amount. Or, if you think the business won't be successful, you can also quit contributing and the business will fold, or you can simply bail out and do something else.

Firstly, I'm sorry to hear that your agreement isn't working out as planned. I also appreciate that not everyone has $900 in their back pocket to spare for a make-or-break business.

If you have already had a light-hearted discussion with your partner about this, then I suggest that it is the time to make your feelings clear. Does your agreement state that both parties have to make some kind of financial contribution? Maybe a clause like that clause could save you, as (from what you have stated) they don't seem to be making such a contribution at the moment.

If you're in hosting or a similar industry, then you could always sell off your company and clients for a sum to another company who could manage your old clients - it's a very easy process if your company hasn't been registered, should your partner is willing to commit. Given that this will probably neutralise any existing debts to other companies, and could bring a small return for yourselves depending on company registrations, administration fees etc.

I wouldn't suggest that you continue investing in a tedious business - as it grows, your partner could still benefit from their large stake. At least you have gained something from this for future reference - choose your partners wisely, and as previously stated, ensure solid agreements are in place.

I hope that you make the right decision for yourself, your company and ultimately your paying clients. Best of luck!

Thanks for the great reply, i am considering saving money and buying his share and i will pay for all our fees in the meantime if necessary.

Yes, we are registered, so it is a little complicated and i am close friends with some of the clients so i dont want to sell them.

If you really want to save the business, you don't have any other choice but to continue working on it. Well, for the issue of not working and doesn't want to contribute any additional capital, he's doing the right thing that he needs to sell his share. However, it doesn't necessarily mean that you need to buy his share. He must not even force you to buy his share in an excessive amount. Tell him to find other person who's interested with his share. Do this only if its OK with you...

You don't say how much the expenses are. If they are small just keep paying it yourself. I would send him a bill for the amount due, and just let it add up. Keep working on the biz. If he's your friend you don't want a messy break up. Let him know how you honestly feel (He's being unreasonable) & what you'd be willing to pay or whatever (less his past due amount of course). Eventually he'll owe more than his equity.

Make sure he knows he or the new owner will need to pay you the past due amount upon transfer & you would also want to OK any buyer.

You mention a contract. I assume there is no provision for 1 party basically abandoning the business. Should other options not work I would get something written up to "fire" or suspend him for not upholding his end since that is what he seems to have done

yea, there was nothing in the contract about a partner not paying or anything like that and what happends if one refuses to pay. All it said was that each partner should pay an equal share of expenses.

I got a better job during the summer and was able to take the business and get him to agree to sign a new contract breaking the old contract and selling the business to me for all of the money he put in to the business so far. after i calculated what we spent compared to what we had both split in profits it came down to about $300 which was much easier, now i run the business myself and managed to spend the extra summer money to advertise and get more clients which has gotten me even with fees for each month, or atleast almost even. I am still struggling a little bit with unexpected expenses, but i a managing so far.

Thanks for all the help, this is a lesson for any future business contracts and partnerships

This is a "Classic happening," although I have little specifics.

document your partner's inactivity and move on.

Don't worry about present bills. Grab all the customers you have and inform them. Actually when I think deeper into this, your partner's inactivity is grounds for "breach in agreement."
In other words your partner is liable for suite or natural breach.

Move on and streamline your machine. Keep all the assets that you have attained and defy your partner as he/she has defied you. I suggest giving you partner a written warning listing the problems in the form of certified letter. If he does not respond, this solidifies the breach. Being in business takes courage.

Agreed...