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Getting Out of a Business

Discussion in 'Off Topic [BG]' started by jobu3, Apr 30, 2006.

  1. jobu3

    jobu3 Artist formerly known as Big Joe

    Feb 17, 2002
    Mountain Top, PA
    Myself and a partner have a private speech therapy practice locally. We've given it a go, but now the time has come for me to remove myself from the situation for financial reasons. I have a house to build and things are so crazy with my day job that I just can't guarantee I can devote the time necessary after my regular 9-5 hours.

    It is set up as an S-Corporation. Any ideas as to what I have to do to get out (I hold two officer positions and she has the other two)?

    I have contributed to half, if not more of purchasing all our test and treatment materials and the like. I'm pretty sure that unless we find someone to buy out my half the practice will go under.

    Shilling out the dough for a lawyer seems like it's going to happen no matter what... Anything I need to know before I go to one? :ninja:
  2. Trevorus


    Oct 18, 2002
    Urbana, IL
    flee the country...

    :p :D
  3. James Hart

    James Hart

    Feb 1, 2002
    Endorsing Artist: see profile
    Sorry to hear it Joe... I don't have any advice but hope it all works out for ya.
  4. jobu3

    jobu3 Artist formerly known as Big Joe

    Feb 17, 2002
    Mountain Top, PA
    Thanks, James. I appreciate it. It will actually be a lot easier when I don't have to worry about dumping money into a struggling business and dump it into a mortgage instead. I'm probably going to pick up some per diem work on the side to recoup some of my losses. It's a little depressing to have it end. :meh:
  5. DigMe


    Aug 10, 2002
    Waco, TX
    Sorry to hear it didn't work out, Joe. :(

    I remember this thread when you first started it.

  6. Thor

    Thor Moderator Staff Member Gold Supporting Member In Memoriam

    Unfortunately, I did not see your original post.

    However, for the benefit of future small business
    owners, let me expound on some critical business
    issues for start-ups.

    More than 50% of start up businesses fail outright, and
    many more close because they are only marginally
    profitable in operation.

    One thing to be concerned about when opening a small
    business is 'An Exit Plan'.

    Often in partnerships, one party may decide to sell, retire,
    divorce, move or leave the business for any myriad of
    reasons. This happens quite often.

    The Exit Plan is an agreement of how such an eventuality
    will be handled. It may restrict or open up possibilities
    of who you may or may not sell your stock to. It may
    determine how the company is to be valued and a schedule
    for payment of the value, whether lump sum or over time.
    In the event of a loss or bankruptcy, it may provide guidlines
    on sharing of the ultimate costs involved.

    I highly recommend to all business startups to have this plan
    in place before opening the business. It is much easier to
    negotiate this plan in advance than to do it after the fact.

    Ultimately, go over your partnership agreement carefully.
    See if there are any contingencies.

    If the business has NO VALUE other than goodwill,then sell
    your shares to the other partner for one dollar and be done. If
    it has a monetary value, then you will have to negotiate a
    payout over some period of time.

    If it is owing money, dissolve the corporation and pay the
    debts as an officer of the collapsed corporation. If it owes
    mare than you can pay, you will need to file Chapter 7
    liquidation. Avoid this if you can, as it may affect your
    ability to obtain bank or SBA financing for future ventures.

    You will need an attorney to evaluate your agreement at this point.
    The cheap one you used to set it up will probably
    be the most economical way to go as he will recognize his
    standard template.

    And a decent accountant is in your future as well. Some of
    the losses generated by the S corp should carry over to
    your future tax situation as the profits and losses flow
    through the S corp directly to the shareholders.

    Off topic, if you ever wonder where the 2 necked Benavente
    is, check my closet. It has a warm and happy home with me.

    My take on that as a business person is that your first loss
    is your best loss.Close it, and move on. If your ex partner can
    find a new situation to practice in, fine. No point in losing money
    with you not working and having the biz keep digging a bigger
    and bigger hole while you are trying to find a buyer.

    Good luck.
  7. jobu3

    jobu3 Artist formerly known as Big Joe

    Feb 17, 2002
    Mountain Top, PA
    Awesome post with sage advice... We're going to sit down and try to make a way to make it work for both of us with her buying me out. I don't think we will find an outside party to buy my half. Either way, I'm having our lawyer draw up the note to remove me from the business for next month. Anyways, thanks for putting the time into the post. I appreciate it.

    I'm glad the bass went to a good home... I was actually wondering where it ended up. Let me know if you ever decide to let it go. If I can swing something, I will. ;)
  8. Thor - Great post. lots of good points. Just setup a similar agreement with my partner in my company.

    Good Luck Joe

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