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Starting New Company with Boss

By riverdale.consulting ·
Hi,

I have been asked to join my current boss in starting our own consulting business, it is a flattering offer. Basically our previous company was taken over to acquire other areas of the business, as a result we have not benefited from the take over as others have, despite trying to ?join the party?
The new endeavour comes at a time when we were both thinking about leaving anyway, my boss?s golden handcuffs expire in October and I was thinking about working for myself.
The division of labour would be along the lines of he is the customer face and although he would get his hands dirty technically, I would be the main technical resource (we would employ contractors on an as required basis to fulfil specific tasks)
My main concerns are around things like,
1. Business decisions, he is about ten years older than I am, and will be fronting more cash than I am. How do I make sure I can make my voice heard without having to beat him down?
2. Liability, I am a young man, I do not want to be paying for any mistakes well into my later life.
3. Securing our existing customers, we would stand a good chance of taking the majority of our customers with us due to the fact that they all realise that I am central to my bosses service offering of support and consulting services. But also they would have contracts with our employer.

I do think that this is entirely the right move, as we have secured a large customer already based on our reputations, his from a management/customer prospective and mine from a technical one. But time does not take long in passing, and we are looking for solicitors and accountants to help us construct the company. Does anyone have any further advice for me or both of us in this?

TIA
Michael aka Riverdale

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One thing...

by oleg In reply to Starting New Company with ...

Make sure you did not sign any "non-compete" papers with your current employer...

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by Chris_Muncy In reply to One thing...

Starting a new business between 2 people can be a very scary proposition, but there are several things you need to consider before your company takes off. Most of these are from experience as I have been there and done it, so now you can learn from my mistakes. These are not in any particular order.

Define up front who has control of the company at what percentage. I highly recommend getting incorporated to protect you and your boss. If he is putting more money on the tabe than you, the controlling interest will rest with your boss and the corp needs to reflect that.

Liability insurace. Get it. Fast. Wipe out data and see who's lawyer starts to call.

Payroll. This needs to be defined up front. You might have a range of pay depending on how well the business is going. Remember, the business itself needs money to run too. So there may be times when a paycheck has to be missed to pay a big bill, like a property lease or development software, something along those lines. So, if a paycheck has to be missed, make sure you both feel the pain of no money.

Money/Accounting. I highly suggest geting a contract accountant for your books. THey charge from $30.00 an hour on up. Get one to initially set up some books, ie.. Quickbooks. Remember, most companies fail due to poor money management. You and your boss have to trust each other explicitly on the money side.

This is only some starting thoughts but should give you some ideas about the road ahead.

I say go for it. You have a customer base, you just need to get your infrastructure established and build that trust relationship even further with your boss.

You milage may vary.

Chris

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Think carefully

by craig.columbus In reply to Starting New Company with ...

Congratulations and welcome to the world of entrepreneurship. As someone who's been down that road, I wouldn't trade the experience for anything. However, let me give you some advice that I wish I'd had when I first started my business:
1) Your business will be 80% business oriented and 20% technical. You need to be prepared mentally to spend a great deal of time on the sales, marketing, accounting, human resources, etc. components of the business.
2) Pay for experts who will help you, including accountants, lawyers, etc. Yes, you're probably smart enough to do it yourself. Don't. Let the experts do what they do best and your business will benefit.
3) Network as much as you can with other business owners, even if they're in unrelated fields. Many basic business concepts are universal and you'll benefit by learning from other people's mistakes.

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Beware

by larryspecial In reply to Starting New Company with ...

Hi,
Like the other posts, I would say do it for the experience. Having said that, I can tell you I went into it with a friend, only to discover that his business practices were totally out of step with mine and our incompatibility has put such a huge stress on me (something I never ever had as an employee for 28 years), I am seriously considering taking a full-time job which is on offer. One of our clients wants me in as a full-time IT consultant. The business is doing fine. Of course it could always do better, given a few 'tweaks' in the right areas. This is where conflicts arise, and even though we are 50/50 partnership in a Limited company (incorporated), it can be very stressful, especially when communication breaks down and you can't move forward. So beware! Consider your health first and foremost. Nothing is worth sacrificing that.
For what it's worth, I can tell you from my experience, a business partnership is worse than a bad marriage.

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The relationship is the key

by clay In reply to Starting New Company with ...

The most important thing here is how well you and your 'boss' get along.

IMHO, this needs to be more of a partnership than him working for you, which is what it sounds like. that's good.

Do you trust him implicitly?
Does he truly listen to you? And you to him?
Do you respect each other?
do you like each other?
Do you have FUN working with him?
Will he be willing to teach you and have the company expand so that you can grow (personally and financially) if you wanted to ?

MrAnalogy@gmail.com

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Good Information

by gjames In reply to Starting New Company with ...

All of the replies posted to this thread have good information. I would like to stress a few points:

* Before you begin this venture take a good HARD look at any and all paperwork you signed, including Employee Handbooks. Most companies have a Non-Compete statement that protects their customer base from poaching by employees. Even if there is no direct reference to any non-compete, if significant monetary loss is experienced by the company you are employed with they may choose to bring suit against you even if they cannot win. The act of the suit and probable injunctive acts could freeze your new company.
* Pay for good legal advice. The decision as to the company's formation is extremely important. There are significant differences between and LLC, General, Close, and S corporations and the decision as to which to use is not a simple one. Make sure that the corporation paperwork includes survivorship and buy-out clauses as well as defining the responsibilities/roles etc... for both/all partners.

Best of luck in your new company.

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Not the best of worlds

by X-MarCap In reply to Starting New Company with ...

I can't even tell you that I did the same, but let me suggest at least a C Corp. I would get an LLC...

Tim

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You've been given some great advice

by silentknight In reply to Starting New Company with ...

Particularly in the area of the legal gotchas you need to be aware of.

One thing you and your boss need to do is sit down and develop the "strategic plan" for your business. Basically, where do you want the business to be in the next 3-5 years and how do you plan to get there? What is your exit strategy (do you want to get bought by someone)?
What level of income do you want/need to derive from the business? What is your market niche? Who is your competition?

There's more to it than what I've mentioned, but you get the point. The strategic plan will also go a long ways to helping you resolve question 1 and make sure you are not paying for a lot of mistakes later in life.

If you and your boss can't agree on where the business should go early on, then don't go there.

If you'd like to discuss further, feel free to contact me.

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