Going into business with friends.

Da Youngsta

Da Youngsta

Member
What are your experiences with doing business with friends, homies, girlfriends, family, etc?

Situation Given:

Homie A has $15k invested in a home studio and knowledgeable of the music field. Homie B...nothing. A wants to move his studio to its own space and open it to the public. A & B always talked about opening another studio to make money but A didnt want to spend unnecessary money when he already has a studio. A ask B if he wants to go half on the rent and help promote to bring in clients. B says yes. B knows nothing about studio equipment, recording, mixing, making beats, shooting/editing videos, etc. A knows a great deal.

Business starts booming. A is doing all of the studio work and bringing clients. B pays half the rent and brings in clients too. A feels like he is being cheated after few sessions with clients that B brought in. A tells B they should write a business agreement. A suggests a 90/10 split of the $$$ while B suggests a 50/50 split. B gets mad after A declines. A explains to B that he didnt invest in the equipment, does most of the work, pays half the rent and brings in clients. B doesnt like that. A suggests a 85/15 split but B declines and feels insulted. B says hes done and leaves A with the other half of the rent and finding clients on his own. Friendship ended.
 
Then they not real homies...real homies make music together and split evenly no matter the situation
 
If the business is boomimg and B leaves. A was doing all of the work anyway and A owns all of the equipment. A has just been handed a gift. Take it and move on. Hire someone to do what little work B was doing anyway.
 
Nooooooooooooooooooooo!

From my experience that shit was lop sided from the start. So some one should have took the short stick at 7-3....... Or 75 -25...or 10% finders fee.

B should not come out of pocket for the rent after profits start rolling in...Bills or expenses should be paid.

whatever the allot amount is needed secured for emergency or reserves

Whatever is left over can be distributed to the a and b set salaries or varying wages.... .

But b should have taken less than 50 or put in more work.

No skills ..no equipment .. But if b pays the bills and is book keeping ....paper work and finds clients ....then that can warrant a higher percentage.

But if a was doing all that plus the recording.... He was right to ask for 90/10.

Just an opinion though... Could be wrong.
 
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*Meeks* said:
Then they not real homies...real homies make music together and split evenly no matter the situation
Click to expand...

real homies...this is not a street drug deal...this is real business venue
who starts a business partnership without first putting things in writing.. a binding contract??
who doesn't have their lawyer look over all their responsibiliies
who doesn't include in their contact an exit stragety
a.if the business needs to be sold because of loss of profits/no profits(most small businesses go out of business in five years)
b. one party wants to leave (cashout) start another venue???

it's sad how so many ppl want to start a business without considering this
be professional
and friendships will not end on bad terms period
if anyone want to learn more about being an professional
contact me here
check my ads in the side panel for contracts written up by a industry leading ent. lawyer that can be easily customized to a music professional needs
 
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All forms of partnership's and equity sharing are bad. If you have money then you can afford to pay your own rent and hire qualified employee's.

"A" made mistakes by:
Letting B know he has a home studio.
Letting B know he wanted to move to a public venue.
Not generating a passive/reliable income with 15K worth of home studio.
Not securing emergency funds for 8-12 month's commercial rent from 15k worth of home studio.
Giving B EQUITY instead of a SALARY

There is never a need to SHARE BUSINESS. Lawyer's, Manager's and accountant's pull this con all the time but your "friends" ASSUME shared ownership. **** a partnership agreements, write up an employee handbook for whatever staff you think you need and operate on that. Otherwise, cover all expenses by yourself and maintain 100% control and ownership.

Don't save I didn't warn you!
 
I keep forgetting to warn people about that part. My bad!

---------- Post added at 09:41 PM ---------- Previous post was at 09:35 PM ----------

I would have done an llc not a partnership. Just in case you get sued or audited or whatever.
 
Bloody Glove said:
All forms of partnership's and equity sharing are bad. If you have money then you can afford to pay your own rent and hire qualified employee's.

"A" made mistakes by:
Letting B know he has a home studio.
Letting B know he wanted to move to a public venue.
Not generating a passive/reliable income with 15K worth of home studio.
Not securing emergency funds for 8-12 month's commercial rent from 15k worth of home studio.
Giving B EQUITY instead of a SALARY

There is never a need to SHARE BUSINESS. Lawyer's, Manager's and accountant's pull this con all the time but your "friends" ASSUME shared ownership. **** a partnership agreements, write up an employee handbook for whatever staff you think you need and operate on that. Otherwise, cover all expenses by yourself and maintain 100% control and ownership.

Don't save I didn't warn you!
Click to expand...

yep it's best to have one owner
and have someone on salary
and llc. is the way to go...
but it doesn't sound like this situation was setup legally as a business
my llc. will be done in the next 90 days
still getting paperwork and "paper" together to do it.
before I sign anyone to my song development production team it's just a better situation to be in to be legal
and the first year you get tons of tax credit/refunds
 
Equity vs salary
Got to be invested to have equity...

I think the salary would have been better for both parties. But like I said if A was doing the recording and managing too ... He should have got more. The equity part would work if b owns the actual place the business is being ran out of. That way he is not coming out of pocket to pay for the area in the beginning when things are slow. The 1st year is a *****... Some business just takes a while before you even just break even....you wont start a business and just pickup in months. Right now it's worst. Anyway setting a salary is the way to go... A would get the higher salary in the first case .... But if b was an owner of the place of business than I think it would be another story.

---------- Post added at 10:04 PM ---------- Previous post was at 10:00 PM ----------

Keep your business separate form your personal. Get a tax Id and a bank account. And maintain the books... Keep all receipts related to business. Damn I want to go in on this subject but I'm on the iPad ...
 
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Wait Hold Up ! There are so many un answered questions. So I'm just gonna assume that this whole senario is a hood deal... and revert back to my 10% finders fee and remove payment for the place of business that B was responsible for. From the senario it seems that B has not contributed any assets to the company that enable him reason to have stock in the company. Unless he owns said place of business or something. Plus I wonder who paid for the registration of the business and other things like that..... even if B did pay for start up cost... that could be considered a loan instead and been paid back in installments at a percentage. Rent is part of accounts payable which is paid by the company...should be anyway.
Plus the work load does not matter in the deal....unless considered part of the invested interest.. (sounds right)... Who is doing the managing for god sakes? Seriously!!! Cause if it is not B then B is over paid. And A loves B enough to take care of B just cause they close.

If b is looking for clients and
building the website
doing promo
working the books
paying the bills
......then break em off
This is a hood deal or under the table deal... hood deals are enforced by tv court judges...
And no taxes are collected... Yeah man you can't might not want to go to court over this cause small claims may not be worth the fight. And sense it seems like it's just a huslte you would not be making a load of money.If you did make a lot and you went to court over it ... you would have some explaining to do.... at some point cause your business was not in line
 
Kaminota said:
Wait Hold Up ! There are so many un answered questions. So I'm just gonna assume that this whole senario is a hood deal... and revert back to my 10% finders fee and remove payment for the place of business that B was responsible for. From the senario it seems that B has not contributed any assets to the company that enable him reason to have stock in the company. Unless he owns said place of business or something. Plus I wonder who paid for the registration of the business and other things like that..... even if B did pay for start up cost... that could be considered a loan instead and been paid back in installments at a percentage. Rent is part of accounts payable which is paid by the company...should be anyway.
Plus the work load does not matter in the deal....unless considered part of the invested interest.. (sounds right)... Who is doing the managing for god sakes? Seriously!!! Cause if it is not B then B is over paid. And A loves B enough to take care of B just cause they close.

If b is looking for clients and
building the website
doing promo
working the books
paying the bills
......then break em off
This is a hood deal or under the table deal... hood deals are enforced by tv court judges...
And no taxes are collected... Yeah man you can't might not want to go to court over this cause small claims may not be worth the fight. And sense it seems like it's just a huslte you would not be making a load of money.If you did make a lot and you went to court over it ... you would have some explaining to do.... at some point cause your business was not in line
Click to expand...

The business license is in A's name
Lease is in A's name
A has all the assets...B has nothing
A manages & runs the business
A does the bookkeeping with receipts
A built & manages the website
A & B both handle the promo
A & B both pay the rent
B doesnt have a bank account & no credit whatsoever
A looked out for B to help him make money other than dope money


This has been a great discussion so far.
 
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There isn't any more to it really. If A has more invested and B aint really bringing much to the table then it shouldn't hurt if B leaves with his money....on the other hand if B is bringing in business and his rent money helps then A should have something drawn out with the 'real world expenses' drawn out on it----to bring to the table at the time of negotiation......

Way too many cats jump in head first and end up banging they heads. My folks told me a long time ago, define your lane and stay in it. Contracts are essential.

The fact is that contracts keeps both parties on the same page and should have been in place before even considering a partnership (eg:splitting rent) in this business venture.

Same thing with selling beats. This way if something 'happens', you know where you stand.

Live and learn.
 
Going into business with friends is like ****ing a friend of you - once you cross the line, there's no turning back.
 
Da Youngsta said:
The business license is in A's name
Lease is in A's name
A has all the assets...B has nothing
A manages & runs the business
A does the bookkeeping with receipts
A built & manages the website
A & B both handle the promo
A & B both pay the rent
B doesnt have a bank account & no credit whatsoever
A looked out for B to help him make money other than dope money


This has been a great discussion so far.
Click to expand...


Well damn... That is lop sided. I would have been an unhappy camper inthat shit. I kind of agree with everybody else...when they say he should have been employeed and not a partner.... Cause if he was bringing in business then his money should come from that and only that. So if b go 10 % from the profit it would have been cold. And they could have did that off the books.

A better situation where the start up cost was paid by everyone and they all have equipment at their own homes..and each one does something different. One handles recording and mixing production and artist development and the other sells beats online and does other website stuff and the other guy knows is about to graduate from college with a degree in network & security stuff and has brought equipment and gave it to the other member... So he has a heavy stack in the company. Then after that the management responsiblities can be deligated amongst them.
You got to have cats play their parts......

But even in that situtation the money invest and the profit made most be deligated....

Sometimes you can get away with just calling some money recieved an investment or a gift... that was later injected as an asset.

I the first situation you could claim a loss and if you never make any money to sustain... keep claiming loss. Cause you'd be losing! Can't catch feeling behind negociating... I would have just told him that... We need to renogociate and deligate you more responsiblity. I'm dying here and we should have drawn up a contract from the start but it's not too late now that we have started up ....lets see what the real is ... if you don't like it after 90 days we renegociate.... go to a notary too and get that shit stamped.... remember the notary can't be a personal friend or relative.


It would have been different if you had agreement where you would not have to worry about any of the rent and he did not have to be involved in the business... you know like a silent partner. Even if he still brought you clients ... it would have been in his interest to do so. You know to bring in business.

Drug money funded a lot of careers... I don't agree with it but it's the truth.


People get scared when it comes to contracts... but anyone can make one.No one has to win or **** over the other person.


Sit down and write on a piece of paper what each person brings to the table ..money wise and skills. then figure out what is needed to set up and run business and divide responsiblities amongst the parties. You got to list all the assets being injected too. Discuss what if senarios ..... a lawyer can help...After that you can make a contract that states everything discussed terms and pull out terms..... what if someone dies type shit..... hey if this shit don't work I'll y'all my equipment and my portion of the business type shit. But in a contract with friends people tend to want to break even instead of getting their fair share.


But I also wanted to say doing a business like the scenario would be hard work. You'd need other sources of income to sustain. With the growing number of home studios and all... that would be cutting into your profit.I'd get a night a local night club if I was a DJ and start doing shows. I'd use the studio to scout for talent and do a artist management company. Then I'd bring down bigger artist for the local talent to show case for. Soon if you can make the artist that you manage hot enough ... you can start them doing they own shit and profit off of them cause they won't cost as much as bigger name artist ... you could also work out deals with studio time or production... But even if you do that... that's only on average two nights out the week you can bank.... if you don't bring in artist. So you'd still need some more money. You could shoot music videos and comercials too.... that could help. but you would have to have some good turn around... I know a dude that spent 3 months editing... he was starting out though. You could do graphs and sell beats online too... and you could do photograph and get some hood models with the big booties... but don't do the hood porn... just the big booties black men mag shit. Internet radio station where you let the local talent get on ....


Anybody got other ideas?
 
Kaminota said:
Anybody got other ideas?
Click to expand...

You're kinda all over the place...lol. I get it but on the real, most of these cats you talkin to lack the drive and business sense to really make it happen. No hate, just calling it how I've seen it.

I suggest these cats just learn from this experience and try to not make the same mistake again. Focus on a "lane" and stay in it. Clearly draw out some goals and stick with a plan. Thats gonna be the best bet.
 
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I agree.....I was trying to be humorous with that last part.... :4theloveofgod: lol sorry bout that....

I also agree with the lane statement.... but I guess I would not have rented the the place... it would have been better if they did not have to pay for the place of business... I just don't see steady profit. I view a studio as a tool more than a centralized business.

I just don't see how opening a studio up would be profitable during theses times. You'd need other sources of income. That was my point.
I worked with a lot of dudes who own studios and they all do something else besides run a studio. Festival Studios does Jazz Fest every year and smaller shows through out the year for example plus they own a venue. Another guy is a party promoter.... Another guy has a barber shop with the studio in the back... then you got the DJ's and/or Radio personalities.They got some cats out in Kenner that do Audio and Video but the engineer has a part time job . I mean unless you want to be clocking loss left to right.

I'm just saying... you might have to be in more than one place or have people covering that aspect. That's what I've observed.


Shit I can't think of anything else to say...
 
Yup. Even cats that I've met that have 'popular' studios tell me that at times - its just not worth it....and you're right, they have there hands dipped in other things too. Depending on where you are in the game and how many connects you have will be the biggest factors with just how many things you can be involved in...

Keep in mind that the biggest tool in this game is your mouthpiece and how u choose to use it. Utilize it correctly and it'll open doors, use it the wrong way, at doors will close....

Either way, focus on building bridges not walls.
 
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