Question of the Week:
I wonder if I may prevail upon you to comment on a question/concern I have about a potential business partnership my husband is considering. Thank you
so much in advance for any time or response you may be willing to offer us.My husband has been offered a 25% share in a company. The owner is currently severing ties with his partner because he’d like to focus on a more specific aspect of the work. There is also confusion over shared resources such as administrative and accounting responsibilities. So far (about 3 months) the owner has been unable to provide a balance sheet and or income statement.
Additionally, I am concerned that the owner is divorced and has put the LLC (his company) in someone else’s name to protect any future assets from the business from his ex-wife.
My husband says the owner’s personal life is none of our business and we should give him time to produce the financial documents.
The owner is asking for $225,000.00 to invest in his company and predicts high returns within 48-36 months. I love my husband very much and want to support him but don’t want to get tangled up in a mess.
Confused and not wanting a conflict with my loving husband and father of 4 fairly well adjusted adults.
Thank you in advance,
Sherry K.
Hi Sherry,
First of all, there are all too many women who do not have a loving husband or well-adjusted kids, so you start out ahead of the game.
We see your question as mainly asking how to combine the two contradictory functions of a wife vis-a-vis her husband as described in Genesis as, “a helper opposite him.” That is to say, helper and advisor even when her advice is counter to his wishes.
We have many unanswered questions including about how the two of you have collaborated up till this point. For example, have business decisions until now been made jointly, have you bought a business before, did this opportunity come through a business broker or through relatives or friends, and is there a history of you instinctively reacting negatively to your husband wanting to try new things?
If $225,000 gives you 25% ownership, then the owner values his business at $900,000. How exactly does he arrive at that figure and how does he justify that pre-money valuation without disclosing financials? What is the purpose of the $225,000? Will it pay off debts? Does it go into the pocket of the seller? Who will authorize disbursement? How will decision-making be settled? These and many other questions any competent advisor would encourage your husband to explore thoroughly.
We don’t agree that the owner’s personal life is none of your business. This might be true if he was a shopkeeper in a small town in the Scottish Hebrides whom you’d never meet and with whom you have no business. But for someone who will own 75% of your major investment, almost nothing about him is ‘none of your business’. To put it perhaps more bluntly, if a man’s wife can’t trust him, why would I?
On the more emotional side we have questions as to whether your husband is seeing this as “his last chance” to make his fortune, if he is feeling major financial pressure, or if he is unhappy with his present source of income. Has he been searching for a while or did this opportunity somehow catch his fancy and grab his emotions?
We are not the only observers of the economy to note that for several reasons including demographic, more and more businesses are likely to be on the market over the next few years, so this opportunity should be compared with others.
Your concerns are all valid, but as with many other major life decisions it is vital to recognize that the marriage and couple win or lose together. Your husband must not feel that turning down this offer is a “win” for you and a “loss” for him. There are many questions about the business that need answering, including complete financial disclosure and talking to the departing partner, if possible. Could it be that your husband already agrees that no money should change hands until more information is revealed, but he doesn’t want to reject it out-of-hand while you would prefer to end the conversation now?
We are obviously aware that it is not your husband asking our advice which means that the real question before us is not a financial question but a marriage question. How do we get your husband to see you as a full partner in this next phase of your financial life? There are different approaches and of course we don’t know you both well enough to say which will work. You could put out your concerns and suggestions for moving forward in a letter. You could identify an older and financially successful male friend or relative whom your husband respects or would respect, and ask your husband to discuss the deal with him in a meeting that includes you. You could schedule a min-vacation or retreat somewhere you both enjoy and, away from your usual environment, ask for a full and open discussion of the family’s financial philosophy and goals in the context of which, this deal would naturally be explored. While making it clear that you respect and support his pursuit of a business opportunity, you are eager to explore it with the guidance of an outside party, perhaps a Ramsey financial advisor, whose expertise is in evaluating businesses, spotting both pitfalls and potentials. This person will help the two of you understand what risk is reasonable and what is not, the legal ramifications of whose name is on the LLC and many other details that need to be evaluated before laying down hard cash.
You are fulfilling your role as a helper “opposite him” by not cheerleading unquestioningly any option he proposes. But we’d recommend that you find a way to do this while your love and respect for him is strongly in evidence. This will help ensure that the dynamic is the two of you as a bonded, loving unit, against the outside challenge rather than him feeling ‘attacked’ by you with you undermining his dreams instead of helping him bring them to fruition.
We hope this provides a positive path forward,
Rabbi Daniel and Susan Lapin
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If I may add to your very astute, insightful and thoughtful advice (if this addition is presumption, then please excuse my presumption): an investment banker or business school professor would respond in this way – the vast majority (over 85%) of business failures occur because there is no written business plan, there are no financials (including rational financial projections), and, finally, companies, in part due to the previous two, are underfinanced without recourse to financial markets or the financial assistance (banking for example) they need to grow and survive.
Dear Rabbi and Susan Lapin – Thank you very much for answering my question so carefully. My husband and I were both surprised at how keenly and accurately you seemed able to glean some of the ins and outs of our relationship 🙂 We certainly have the services of our attorney readied for any possible next steps in this venture. The marriage communication question was indeed my real concern and I appreciate your comments directed at how we might both ‘win’. I am grateful beyond words for my husband and children and pray we make the right choice.
Kind Regards,
Sherry Kirkpatrick
Sherry, it is always exciting and gratifying for us when we hear back from the original letter writer. Thank you for taking the time to let us know that our words were apt. We pray that the two of you find the right answer together.
I am a 51 year old Black American female who is a single mother of a 12 year old boy. I come from a very impoverished family who was just surrounded by “low class “ values and people. I too have participated in many low class practices including two divorces and poor financial lifestyles. I am a Christian and I am a 4th Grade teacher with a college degree. I also am recently debt free ( thanks to Dave Ramsey)
I also have managed to have a small amount of money saved.( 6 months of my salary) I have been learning so much about money and my view of it since I recently began listening to your podcast. How can I begin to pass some of these principles regarding finances, family etc … to my 12 year old son if I have been a poor model in the past. My 12 year old son is at risk for all the negative problems that the typical African American male falls prey to. I am not married and there is no male role model in the home. He has poor behavior, he lives in the presence and does not think of the future or consequences. Poor grades, Poor speech, poor work ethics….. I am embarrassed that I am in this situation. This is my only child. What can I do to try and save my child from this???
I hope it is not too late ! Please any advice will be greatly appreciated. Can you recommend any books or other resources. I need desperate help. I am trying to change my family tree.
I love all that you do.
God Bless
Ursula – I can’t answer your comment quickly, but I wanted you to know that we read it and will respond – maybe this is its own Ask the Rabbi question. We actually are checking into an idea for you.
Dear Ursula-
Susan Lapin and I are working on trying to locate a summer program that is experienced at turning a young man’s life around. As soon as we are successful we will connect you. We do understand your feeling of despair but don’t underestimate the lessons he is subconsciously absorbing from the way you now live your life. We are hopeful.
Warmest wishes
RDL
I definitely agree with the attorney’s response! The potential partner is already lying to the courts when he “put the LLC in someone else’s name” to keep it from being part of the marital property. What might he be hiding from YOU? A huge debt load? A potential lawsuit that could kill the LLC entirely?
And who is the “someone else?” What rights does he/she have as the nominal LLC owner? Do they have any legal standing to oust YOU if they decide to (and after you’ve provided funding?) There are too many loose ends here to overlook.
Yes, Jean’s last sentence – “there are too many loose ends here”. It occurs to me that this owner has already divorced his wife (and is trying to “hide” assets from her). He’s in the process of “divorcing” his current business partner (and you don’t know, or didn’t say, if he is being aboveboard with that person). Were the splits amicable or acrimonious? Based on what you’ve said, I’d be willing to bet that they tended toward the latter and personally, I’d be leery of getting involved with someone like that, on any level.
And what the attorney said – “please please please see an attorney”!!!!!!! Unless you have $225,000 to throw away, be sure you’re protected before you do anything.
Good luck!!
Please please please see an attorney before you commit. If this relationship is to be a traditional partnership, you and your personal assets above and beyond your initial commitment might be subject to seizure for partnership debts, judgments, etc. a limited partnership would give you more protection but it is imperative that you (by which I mean you and your husband) proceed in a manner that gives your personal assets protection lest you find yourselves destitute from paying hidden debts of the partnership. Signed: a 30 year attorney with a nose for trouble.