DEAR NATALIE: In 2021, four of my "best friends'' and I started a business. We split the starting capital of $8,000 evenly and set up the LLC as 20% owners. Friend “A” was unemployed and wanted to work on the business full time, handling the brunt of the day-to-day work. Friend “B” was employed, but after our first event was a success, they decided they would quit and start working for the LLC full-time. Friend “C” was employed full-time and made it clear they had limited time to commit to the business. Friend “D” was pregnant and an independent contractor who also had limited involvement in business after getting it up and running. We worked for several months before our first event, which was an undeniable success. Shortly after, friend “D” had her child. It was also around this time “A” and “B” attempted to be punitive towards “C” and “D” because they felt resentful that they were doing most of the work, and it was harder than they had anticipated. We had been paying ourselves $1,000 for each event (as our revenue was in the $30,000 - $60,000 range per event) to this point. Friends “A” and “B” started pushing "buy-outs" on friends “C” and “D” claiming it was the fair and moral thing to do. Natalie, by our fourth event we had revenue of over $150,000! Their buyout offers were for $5,000 and $8,000 respectively -- those numbers have never been explained. “C” and “D” were shocked and stated they were not interested in selling. They felt that “A” and “B” should get paid employee salaries, and all owners should maintain guaranteed payments of $1,000 per event. Overall profits could be split at the end of the year. After this, since they did not agree, friends “A” and “B” hijacked the bank accounts and have not paid the other owners a dime since. They are of the opinion that they are in the right and that “C” and “D” should just take what was offered to them. Natalie, our business has now made over $1 million in revenue and “A” and “B” still think $5,000 and $8,000 are fair offers. Meanwhile, “C” and “D” have not seen any return on their investments, while “A” and “B” pay themselves whatever they want and have access to thousands of dollars in the piggy bank of cash per event. While it may be inevitable, all four would like to avoid court. There was never an operating agreement put in place. What are your thoughts? Does this situation entitle “A” and “B” to the entirety of the company? “C” and “D” never promised to be involved day to day and were vocal about that from the beginning to manage expectations. Did “A” and “B” let their greed and ego take over once they saw how much money the business was making? Who's being unreasonable here? Your insights are appreciated. – “E”
DEAR E: As someone who has started two businesses – and one with a partner – it is imperative that you get everything in writing. You have to establish everyone’s roles and responsibilities, their share of the company, and many other components that go into having a healthy working relationship. This is even more important if you start off as friends. Think of your operating agreement as your business prenup. Everything is laid out ahead of time so that there are no surprises. Yes, this means you have to connect with a lawyer and spend the money. Now that you are in this situation, there are two ways to play this. Either you agree to use the company money to pay a lawyer to work up an agreement that is beneficial for all parties involved, or you go to court. The fact that “A” and “B” have hijacked the account is of real concern to me. The disrespect that they have shown the rest of the partners cannot be understated. Do you even want to continue with “A” and “B”? Is it a better solution to dissolve the company and work with “C” and “D” on a new venture? “A” and “B” aren’t “entitled” to anything. This is a classic case of greed ruining relationships. It would have made more sense to have “A” and “B” take salaries since they were working full-time and pay everyone as an owner their share of the profits. Instead, they have stolen from people, denied their partners compensation, and even further attempted to gaslight everyone into thinking that they are blameless. The bigger question is: Why work with them moving forward?
DEAR NATALIE: My daughter has talked to me about her relationship with her college professor – he’s being helpful to her academically speaking, but I’m wondering if it’s crossing lines. She’s told me that they spend a lot of time together off-campus. For instance, he’ll be alone for the holidays and has invited her to spend time with him, since she won’t be traveling home to spend it with us. She’s an adult who can make her own choices and navigate her own relationships, but I’m nervous that an inappropriate relationship may reflect negatively upon her, and that he won’t suffer any of the consequences.
– CONCERNED MOTHER
DEAR CONCERNED MOTHER: Tale as old as time, isn’t it? Man in a position of authority falls for a young woman. Relationship ensues and (most likely ends) in a mess. Mom cleans up said mess and comforts daughter. Man continues on, unscathed. Cynical? Yes. Accurate? Also yes. Is there anything you can do? No, not really. If he does show interest in her – she could speak well beyond her years and say that while she is flattered, it isn’t appropriate for her to date him while she’s his student. Once the semester ends, however, things could be different. Will she do that? Who knows? Should it be on her to do that? Absolutely not. Like my grandma always said, “Men think with the wrong head.” You’ve given her your advice but you can’t live her life. The most you can do is be a source of support to her by keeping the door for conversation open. Maybe you can offer her your experience in a similar situation from when you were younger, without getting too preachy. Part of life is the mistakes we make, what we learn and how we grow from them. I wish we could protect everyone we love, but we have to let them go and see what happens. People do surprise me. Maybe things will turn out better than you think.
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