ONE PERCENT BOSS

Everybody’s Uncle,

Thank You for your answer.
 
I am entering an LLC partnership. It’s my deal and the other person’s money. I want to maintain control not being susceptible to losing everything. So, our agreement is going to give me 1% more - 49 and 51% interest.
 
Are there any guidelines as to when I should use my 1% power over my partner?  Should this be stipulated in our agreement some how? Yes? The responsibility of the success of the LLC is going to rest on both shoulders.
 
I would like to know when should I have to use my powers, if ever? I guess I mean in a legal fashion.
What would you do if you were me?

Thanks uncle,
 
Ron

Ron,

I am not a lawyer and can not give legal advice; consult a legal professional before proceeding.

In all agreements, percentages of responsibility (profit and loss) should be declared at the outset. This will appear on your LLC agreement and carries forward to your tax obligation. Before you enter any agreement, be sure to understand your CONTRACTUAL obligations. You should not simply establish an LLC without knowing your contractual obligations from your “hand shake“.

I agree that in a two man partnership one person should have the final say. I see no reason why your 51% interest would not give you control. A separate document could be drafted to avoid any misunderstanding. I think this way: either this is MY operation and you have a piece of MY action or it is YOUR operation and I have a piece YOUR action. [It took me decades to learn that – the hard way.]

I can’t tell you when to use power; that is always a judgment call. The best guideline I can give you in this case is, only as a last resort. Emotionally, pulling rank on a 49% partner that is providing financing can be fatal. Keep in mind that if he pulls out you might have responsibilities to commitments of the LLC.

Contracts (this partnership or any other) do not make businesses successful. The responsibility and commitment to the venture AND to the partner is what counts. Partners usually have differences of opinions somewhere in the course of business. Establishing areas of responsibility and respecting each other’s judgment within that portion of operations gives each partner calculated respect (helps keep egos in check).

You ask, “What would you do if you were me?”

I would give serious consideration to what I wrote above. Keep in mind that partners tend to see thing from their individual perspective.

Example:
OWNER - without my money there would be no company.
PRODUCER - without me there would be no product.
SALESMAN - without me there would be no sales.

Each makes a valid point. Management is the ART of focusing diverse opinions and attitudes on a common goal.

Great question! Glad you are looking before you leap.

Everybody’s Uncle