Trying to become part owner of small company...advice? opinions? experience?

[dankobrazz]

Hello,

I have been working for a small technology firm for 4 years starting from the entry level tech and working up to the director of engineering. This is a firm of nearly 20 employees and revenues of approx $3m. There are currently 4 partners in the organization, one of which owns the majority and it trickles down from there for the other 3 principals.

I have spoken with my boss, who started the company and is 2nd in command, for years about becoming a partner and it is something that is finally starting to take shape.

I do not have the $30k cash to be able to buy even 1% of the company but my boss mentioned having a payable note that I can pay down with commissions and compensation increases in lieu of receiving them as cash.

My ultimate goal is that i have a true stake in the company and its future, a vote at executive meetings, and a way to be compensated when/if the company is purchased by a larger entity or grows itself into a much larger organization.

How should I go about this? Has anyone else gone through this experience that can give me direction on what types of legal issues i need to be aware of, what % I should request to have a true stake in the company even if it means dissolution from other shareholders, and just general direction on how I should approach this further.

I am also fairly young and just out of college (the 8 year plan as i was working full time), but with almost 11 years experience in the field. I want to make sure i have my ducks in a row and research done to handle the situation accordingly.

Thanks so much!

X

This is one area where you really need to have an attorney who can work with you. I am sure it will seem like a burdensome extra cost, but I have seen too many situations where the person coming into the company was given a document with so many outs for the company that it was effectively worthless. There are too many potential pitfalls to even be able to list them.

When looking for an attorney for this issue, strike a balance between experience and price. You don't need a superstar, but don't hire the lawyer on the corner who handles real estate closings and simple wills and expect him to identify all the issues in this kind of arrangement.

Good luck.

[MamawDenise]

I have to agree with David. You'll want an attorney to work with. I hate to admit that, but there are some very strong reasons to do so. You'll be protecting yourself in the short and the long run .. I also guarantee you that the company will, if they're smart, also hire one to review the documentation. Neither side wants to be "screwed" even in the best case scenario.

[dankobrazz]

I really appreciate the advice, i will definitely consult legal counsel when the time comes.

Thanks again,

X

[Satseldedeemo]

i think what you should do is that you should study the balance sheet of that company and then proceed further...

There are several things you want to consider before becoming a partner/buying into the company. In particular, if one partner is generating the majority of the revenue that could lead to issues when he retires. Further, you need to make sure that you have everything in detailed writing so that you know exactly what you are getting / giving up pay wise. This is a good website that I've looked - some good general content and there was a notice a couple days ago that it would soon be posting some articles on buying a small business.

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