When One Partner Wants to Invest in the Business and Other Doesn't

TheOC16

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10:25a, 9/6/23

AG

Looking for some guidance here. I don't have any real training in running a business other than what little hands on experience I've gotten in the past few years and don't really have all the solutions on where to go for this type of advice. If y'all have direction towards better advice/mentorship, I'd appreciate it.

Anyhow, I want advice for what to do when one business partner (50/50) wants to invest capital in the business and the other doesn't, or can't. There are lots of ways our business can grow and has tons of potential. We will get there one way or the other, but I believe there are things we could do (staffing, marketing, etc.) to accelerate and/or multiply that growth.

I have the capital and the desire to make that happen, my partner doesn't right now. Are we just at a deadlock for the time being? Or is there some way that I can go ahead and put the capital in the business and have an agreement drawn up that gives me a fair proportion on whatever resulting returns?

AggieT

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10:27a, 9/6/23

AG

What does your partnership agreement say?

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txaggieacct85

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10:52a, 9/6/23

AG

is there a middle ground between you?

Fireman

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11:13a, 9/6/23

AG

Put in a temporary arrangement where the partner that puts in more capital gets a higher percentage of net income (equity payments) until he gets his investment back plus a negotiated return (say 10%), and then once that is reached, you go back to being 50/50 partners.

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Diggity

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12:30p, 9/6/23

AG

I would think typically, a partnership agreement would say that a stalemate would result in no action being taken.

Your alternative would be to invest outside of the partnership I suppose.

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500,000ags

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12:58p, 9/6/23

AG

Loan the business the money.

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Red Pear Luke

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In reply to 500,000ags • 1:43p, 9/6/23

Sponsor

AG

500,000ags said:
Loan the business the money.

This is the way.

fka ftc

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In reply to Red Pear Luke • 3:26p, 9/6/23

Red Pear Luke (BCS) said:
500,000ags said:
Loan the business the money.
This is the way.

Would agree this is the way to go if the non-contributing partner does not want to be diluted. Lots of ways to structure the loan depending on what the partner putting up the finance is willing to accept v the non-contributing partner is willing to give up.

We have several different iterations of this from additional capital being dilutive to the non-contributing partners, deeper pocket partners providing loans / guarantees of loans in exchange for compensation.

Best of luck. These things can be tricky but can also be a good test for challenges you may face later on.

"The absence of the word accountability is not the same as wanting no accountability" -unknown

"You can never go wrong by staying silent if there is nothing apt to say" -Walter Isaacson

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txaggieacct85

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3:42p, 9/6/23

AG

seems like you and your partner are far from seeing eye to eye.

Don't know enough details, but could you go it alone?

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10andBOUNCE

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11:09p, 9/6/23

AG

Dave Ramsey always said the only ship that won't sail is a partnership.

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91AggieLawyer

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11:45p, 9/6/23

AG

Quote:
I have the capital and the desire to make that happen, my partner doesn't right now.

You need to buy your partner out and either hire him or wish him well. Partnerships aren't necessarily doomed for failure but it appears yours is. If you then need capital, look at other sources like venture, debt, etc. But right now, he's hindering your ability to move forward.

Now, if he's the brains behind the operation (you said you didn't have a lot of experience leading businesses), that's entirely different. He's leading while you're providing funding and ideas. But you're still stuck. Tread carefully. You MUST sit down and work all this out.

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AggieT

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7:26a, 9/7/23

AG

I agree with all of the above.

1. I mentioned a partnership agreement where stuff life this is spelled out. If you don't have an agreement, this is step one. Do it Immediately.

2. You are likely limited in contributing capital that would dilute him since you are 50/50 unless he agrees.

3. Loaning the money is a great option if you can do it. Pick a term and an interest rate that makes it worth it to you. Make sure that you have the cash flow so that your company doesn't default on the loan.

4. If you and your partner are not on the same page with how to grow your business, either figure out an arrangement that satisfies both of you, or buy him out.

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