Question about business startup

**maat55** · 03-23-2008, 05:02 AM

Whether you or your family is putting this money up, I would use an extreme amount of due dilligence in this deal. Having nothing to loose in a deal can be an disadvantage. Treat this money like you spent 20 years of sacrifice to get it. Good luck.

**Brokemofo** · 03-23-2008, 05:58 AM

Matt55,

Thanks, and I will be treating it like it is my business even if it isn't. I am looking at it as my final job for the rest of my life and my only livelyhood.

**scfr** · 03-23-2008, 06:26 AM

Originally posted by Brokemofo View Post

They have made it clear the business would be ours, but what happens when teh business grows and they pass on? I don't want to be in a fight with reamaining family members on what to do with the business I've been running, building, and working at when they have had no part in it .

Welcome to the boards.

I'd like to point out that tho you would have been working at the business, the "part" that any surviving family members would "have" in the business after the in-laws eventually pass on would be the money their parents sunk in to the business!

Had they put it in a CD and let it gather interest, that $ would have been split among their heirs.

If you are receiving a salary, then that is something you are getting out of the business already.

If you are a passionate about the business and really believe you can make it work, could you structure the start-up money as a loan, with a repayment schedule? Make some sacrifices, pay back the loan, and then the business truly would be your own. If your in-laws both passed before the loan was repaid, then their heirs could inherit the loan.

If your in-laws have enough saved that they can give you the money to obtain the franchise, they are probably wise folks who would not want to throw their money away, and they believe in you for a reason ... Because you have what it takes.

Being your own boss is a lot of work but can be very rewarding ... sounds like you know that already ... So best of luck to you!

**jIM_Ohio** · 03-23-2008, 06:46 AM

You might be wise to

a) contact an attorney- you need someone to advise what is in YOUR own best interests. Family or not, attorney now will save headache later.

b) be honest with family about YOUR risks. You give 20 years to a business only to lose it to someone else. This is 20 years of earning power, plus the most profitable part of many businesses is the ability to SELL it- you lose this discreet advantage in your case, so IMO I could argue you have more risks than the people putting up the capital.

c) you need a financial plan- investments, cash set aside etc... because running one's own business is lots of work and has lots of risks associated with it- not including the risks of capital to invest/create the business.

**Brokemofo** · 03-23-2008, 06:49 AM

Scfr,

Thanks, for the input. this is the kind of answers I'm looking for really. This is truly in the beginning/planning stages since really a few weeks ago I had no idea of any of it. My Inlaws actually brought up the whole topic, offered it to all their kids, and I'm the only one who seemed interested. Obviously, I need to sit down with my Inlaws to talk about exactly what their goals, expectations, and intentions are. All of this boards feedback should give me a great starting point to begin framing my thoughts about all of this I hope.

**Brokemofo** · 03-23-2008, 06:56 AM

Originally posted by jIM_Ohio View Post

You might be wise to

a) contact an attorney- you need someone to advise what is in YOUR own best interests. Family or not, attorney now will save headache later.

b) be honest with family about YOUR risks. You give 20 years to a business only to lose it to someone else. This is 20 years of earning power, plus the most profitable part of many businesses is the ability to SELL it- you lose this discreet advantage in your case, so IMO I could argue you have more risks than the people putting up the capital.

c) you need a financial plan- investments, cash set aside etc... because running one's own business is lots of work and has lots of risks associated with it- not including the risks of capital to invest/create the business.

Great post,

A. Yes, my Wife has a friend who's an estate planner attorney. I have asked her to pick his brain a bit.

B. I will definitely have to start this dialog. Maybe today since everyone will be here for dinner. I'm sure the topic will come up anyway.
c. Yes, I do need a plan.

**scfr** · 03-23-2008, 08:32 AM

Originally posted by Brokemofo View Post

My Inlaws actually brought up the whole topic, offered it to all their kids,

Those are some amazing inlaws you have! Sounds like they've probably built up a pretty comfortable nest egg for themselves and are looking for a way to pass some on to their kids now. They could have bought everyone a luxury car, or taken everyone on a cruise. But instead they presented everyone with the means to develop a (hopefully) lifelong income stream ... That is awesome!

My only other suggestion is that you immediately start tracking any expenses related to looking in to this business opportunity. If you drive to meet w/ an attorney, keep track of the mileage, etc. If you decide to go ahead, those will be deductible business expenses.

Good luck!

**Brokemofo** · 03-23-2008, 08:55 AM

scfr,

Yes, they are amazingly selfless people. I just want it to be a positive experience for all parties. Thanks for all your advice.

**Scanner** · 03-23-2008, 06:06 PM

Talk to your accountant, but I would recommend signing a promissory note of some kind with your in-laws.

If the amount they are "gifting" you is over $12,000, it could be subject to a lot of tax on your or their part (above and beyond 12K) and unfortunately, that's may be how the IRS sees the money transfer - as a gift.

If you sign a promissory note for let's say 5% for a 10 year term, then it's a bonafide loan in the eyes of the IRS.

This is a discussion that you best have with your own accountant and one they best have with their own accountant, with each party representing their own interest.

**cptacek** · 03-24-2008, 08:57 PM

My advice is to treat the business side as business and the personal side as personal.

I am in business with my Dad and Mom. We ran the numbers, figured up the costs each of us would be responsible for, the work each of us was responsible for, and decided to go over the arrangement every October to make sure the arrangement was still working for each of us. We had a plan to get in, a plan for operation, and a plan to get out. Sometimes I get made fun of by the rest of my family because I make sure that I pay my share and I get my share. That's ok. Dad, Mom and I are in business together. I'm not in business with anyone else in the family, so they don't really have a say.

This may look like a crazy suggestion, but you might go to the library or the county extension agent and look in some farm magazines on going into business with family. Farmers tend to do that a lot, and lots of people have trouble with it. Jealousy from other family members, not having agreements in writing, not having an exit plan, not having actual meetings to discuss business, the person doing all the work (in their mind) isn't getting the money they think they should, all of these "emotional" things can get in the way of a good business.

I know "Successful Farmer" and "Farm Forum" have articles in their magazines almost every month on something like this.

**LuxLiving** · 03-25-2008, 02:36 AM

I'd say you need 1)a really good lawyer 2)an excellent accountant and 3)a solid business plan w/some pretty darn good idea of receivables before you sign any kind of loan, compensation and/or business agreements with the family.

Fast food is a LOT of work.

A LOT...

Of Work. Work. WORK!!

Hard, LONG work.

You may be putting your own little family in a cash flow crisis if you agree to a payback schedule if you make the agreement in some sort of loan arrangements and can't generate enough money to make the 'pre-reality' payments.

Carefully separate your money from the business money. No taking out of your own pockets to put into the business and vice versa w/o careful, CAREFUL accounting.

If you're working 19 hours a day at the place and the franchise doesn't generate enough cash flow early on what are you going to do? Go out and get another job? Ummm. No. Go begging to the inlaws for more??

Yes it is a generous offer. Cover yourself and your wife's behind six ways from Sunday and it might be okay. I'd spend a good deal of time talking directly to other owners of said franchise and ask them about their start-up time investment and how their entry into the franchise was set up.

Me? After having owned my own restaraunt, I'd probably ask that the in-laws gift me with college tuition & a living stipend until graduation instead! And go out and get a degree that would sustain my family in the style which they want their daughter kept! And then I'd repay them every dime they gave me so that I would 'own' my own life.

Being beholden can be a rough place to live from.

Tread carefully.

VERY carefully. You are excited right now. Get your emotions under control and come at it from a Very Practical BUSINESS place. Please.

**InDebtInDC** · 03-25-2008, 05:58 AM

Originally posted by Brokemofo View Post

My Inlaws are willing to put up all start up cash and financing, so I can get into this without any money on my part.

Based on my startup experience, if I were to start another company, I would NOT, repeat, NOT, use friends and family funding.

Because startups are so risky, I would much rather get financing so that I don't risk their investments.

That's just my experience. Take it for what it's worth.

**simpleyme** · 03-25-2008, 06:17 AM

I have to agree with LUX Living if 19 hour days are what you love.......

find someone way outside your area who you will not be in competition with who is doing exactly what you want to do talk with them about the business

**Brokemofo** · 03-25-2008, 05:26 PM

Awesome advice everyone. I really, really appreciate all the wisdom you are sharing. This is a very new proposition in the very beginning stages. No one has investeda dime yet either. We were going to meet with the owner of one of the other local franchises today to see the store and pick his brain. The guy was not there, and when the 4 teenagers in the store called him, he claimed family emergency. I hope all is well for him, but at the same time I was really wanting to talk to him. Went to dinner with the Inlaws, and I brought up the fact that I wanted to get down to specifics on investments and such. I told them I wanted to be fair to the entire family and at the same time protect my Wife and myself. We agreed to come up with some concrete plans. I have decided that even if they want to be on the hook for all of it, that is not what I want. I want us to have a share of the ownership, and therefore a share of the business' success or dare i say failure. Anyway, it looks to be a long road, but one I look forward to taking.

Question about business startup