Partnership Agreement 4 years too late

Also something to consider - 45/45/10 means your Dad and your Brother can team up against you. Make sure the partnership agreement either has you and your father with sole voting rights (i.e., your brother was issued non voting shares, and is entitled to financial rights only), or make sure there is a detailed list of everyone's duties, responsibilities, and the penalties (up to and including, discipline and firing) for acting against the interest of the company. Talking these things through won't be easy, but when millions are potentially at stake for all of you it's worth having a few uncomfortable conversations.

To answer your specific questions, though:

1) You have to separate family from business. I wouldn't expect a non family-member partner to bequeath me their shares, so I wouldn't expect it from a family member, either. It's up to your father whether he wants to do that as a father, but it sounds like he doesn't, and I'd say there's nothing wrong with that at all. Also remember, if his shares are worth anything, then so are yours and the business is being successful. What he shouldn't do is look at the buyout as an opportunity to get rich at your expense. Ideally, he should be able to "cash out" and leave the company in a fantastic position to provide for your and your brother moving forward. Take some time now to discuss how you will value the company in the future during a buyout. In all the partnership agreement's I've signed, there's been specific language about how the company will be valued during any liquidation event - either it will be done by a firm, or you can choose a multiple of previous years revenue or income, etc. It also greatly helps to have a Also, it will help for you to not think about it as you buying his shares. What will likely happen from a legal standpoint is the company will buy his shares and dissolve them. Whether you need to add more money to the company for that to happen is another story.

Another strategy, if you feel things will get difficult in the future, is to consider is adding a shotgun clause to your partnership agreement. The clause is triggered when either of you offers to buy out the other's shares. Let's say you were to offer $x / share to your father to buy out his shares. Since you triggered the clause at $x / share, he must either sell you his shares for $x, or buy your shares for $x, but the choice is his. This typically pushes the price per share closer to reality, as you have to be willing to not only buy at $x, but sell at $x when you make the offer. You can add language to where it isn't required that the deal go through if you just want some assurance the share prices will be fair, but the clause looses a bit of it's teeth.

2) This is going to be tricky, and hear me when I say the last operating agreement I negotiated with a partner took over 4 months and thousands in legal fees, and we still never even finished with it before we parted ways. Most of that was because he was unreasonable, and wouldn't trust our corporate counsel. He took every change to his personal lawyer, creating huge delays and balked about everything that could be used to hurt him, from firing, to responsibilities, to yes... even the "hours" we had to "work". Me, I didn't much mind that language, because we were both on equal footing and I wan't afraid of my ability to perform, but apparently he was. TBH, it sounds like you dad want's to be a silent partner. A 45% equity holder that doesn't work for the business is quite a waste of equity as a motivational tool. If indeed his hobby is taking up more of his time, then make sure you don't rely on him in any significant way, because he surely won't perform. A good way is to say that x% of someone's "professional time" is spent dedicated to the business, and that X hours of professional time are typical on a weekly basis. Short-term deviations are fine especially for vacations and etc, but make sure to put some numbers on it if you want him to contribute. If not, see if he'll relinquish his voting shares for a smaller portion of non-voting shares and a cash payout / royalty so that your brother and you can make the decisions. My biggest issues is someone owning 45% of a company having voting shares but not being involved in the business. It means you and your brother will need to team up against him anyways, so see if you can let him give you guys the voting control now. Perhaps see if you and your brother can buy him completely out now, too: tell him he'll have capital and cash and no worries and can work on his new hobby. Another way to add honey to the pot is give him a percent of any future liquidation, or let him own a small part in perpetuity.

Either way, I'm pretty sure you're not in for very smooth sailing. These things are always tough to talk about, but try to find out what he wants with his time, and figure a way to get him that. If he values his hobby and his free time, perhaps a silent partnership where he just gets money for "nothing" is quite up his alley. Remind him, though, that if he wants voting shares that he needs to be involved with the business full time, otherwise there are too many liabilities that you can't control.

Cheers, and good luck!

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