T Nation

Employment Contract for Small Business


#1

So this may be a long shot, but there are a number of smart folks here, and I'm hoping someone will have some insight. Cliff notes at end.

My fiancee left her job in the financial industry (in NYC) to help her dad/with her dad's company. She is VERY good at it. She's smart, she's innovative, she's generated millions for the company. She's technically a VP. Everything should be going great, right?

No. The problem is her dad. He's a control freak who's happy to let her do the work until the last minute, then jump in at the end and put his "I did this" stamp and take credit. An even bigger problem is that he doesn't pay her constantly. In fact, he really only pays her when it gets to the point (like it is now) where she's threatening to leave, and she still doesn't get all the money owed. Right now she's owed at least 10k based on their current, unfair, agreement.

I'm in a transitional phase myself, and started doing a couple hours of consulting work for them a week. They're a month behind in paying me.

We both went on a trip this Christmas to visit my dad who lives abroad, and basically have both ended up in positions where we have no money because without being there to make sure something happens, neither of us have gotten paid. It's made our trip very frustrating. I'm used to working with/for people who pay you when they say they will, in the amount they say they will.

She's invested a lot of time and energy in building this company, and it could really turn into something great for us, if she were ever given the reigns as promised, and if she were ever paid, as promised. She does not want to walk away.

However, we're at the point where she's ready to walk away. What we're willing to do is create a new contract for the terms of her employment/relationship with the company. Something very generous, since the company will pretty much tank if she leaves. We are talking a share (maybe 20-30% of the company, it's all privately held by a single individual right now) of the company, a decent salary, with a bonus structure tied to the growth she generates, as well as putting her in a position where she "has the keys" and is able to make sure that she, and the other employees get paid, on time, in the amounts agreed upon.

This is where we need advice. How does one structure such an agreement? Do we need a lawyer, an accountant, or both, to help us structure this? Or maybe that's premature: first we just need to put forward the proposal. What's a good way to link salary/bonuses to company growth?

Any advice on the situation is much appreciated.

Cliff notes:

Fiancee has generated millions, and has made her dad's dying (and mismanaged) company profitable.

Dad is a habitual lair/manipulator, won't pay monies owed, will say whatever is necessary and pay "just enough" to string her along, and is a total control freak (likes to have his hands in everything: not do the work).

We're looking to structure a contract (or whatever would be necessary) to give her equity in the company, guarantee she gets paid and is able to make sure other employees get paid on time, in full. And create something in the structure to link her pay to the growth of the company (so when she single-highhandedly generates $1million+ in profit for the company, she sees some of it).

Need help with the 'contract' or advice on the approach.

To be clear, she is ready to walk away, right now. Our Christmas trip getting ruined was the final straw, so she's ready to make demands that are borderline unreasonable. It's also a waste of time if the arrangement cannot be legally enforced.

Thanks

Edited because cliff notes are not footnotes.


#2

I think what she needs is a labour lawyer (not sure if right term). A lawyer who's specialized in contracts/business thing.

You know, when I studied business creation and management, the teacher always recommended to stay away from relatives and close friends when it comes to this. It makes things much harder when there's a problem.
And the problem is that your girl just wanted to help...and she gets this.


#3

Yeah, speak to a lawyer.

I'd leave, personally. I refuse to work for/with someone who has no business ethics with co-workers.


#4

If she is pretty much the brains behind it all, so to speak - could you both not set-up on your own and take the customer base?


#5

Is he not paying because the company is strapped for cash? or because he is not willing to part with his money?

If the latter, then no matter how much money you guys generate for this company, you will always be getting the short end. As for the contract thing, just go to a liar and tell him what you want and they should be able to draw up a contract agreement for you.


#6

Why would you start consulting given the scenario? And you never work with family.


#7

^this... Almost.

Working with family is hard enough, when you do not have a good relationship to start the shit is Hell on earth.

Either way get that shit in writing. get a lawyer.


#8

Yep.

Leave the company. Immediately. It will only get worse, and your fiancee WILL lose her relationship with her father if she stays there.

You give the guy an ultimatum - either he hands over the company as he said, or she leaves. Or more simply, she just leaves.

Either way, this must end with her leaving.

This will only get worse.

If she doesn't leave, you guys deserve what you get.

PS - How long do you think it will be before money concerns put a strain on your relationship with her? You're playing with fire here.


#9

And by the way, the shit at the bottom where you summarize everything are called cliffnotes, not footnotes. Footnotes are for citing sources. Which you don't have.


#10

Something doesn't add up here.
Is she generating millions in profit or just millions to stay afloat?
If the latter then she needs to understand that the company was probably in a huge hole and she can't reasonable expect to take home a huge payday right away. Especially if she was just 'helping out' as you put it. From what you said she wasn't an employee and was helping out her father, and then expected to be compensated generously for her 'help'. Doesn't seem fair.

The first step should be for her to set herself up as an employee of the company with an actual contract that outlines when she will be paid, what she will be paid for and the amount.

Then if it doesn't happen, she leaves.

My best guess is that the company is just getting back on it's feet so don't expect the big payday just yet. You have to be patient and wait it out. (if that's the case). Taking all the profits now won't allow for proper growth.

Mind if I ask what type of business?


#11

Yeah. Total brain fart there.


#12

x2. If she is running the entire business herself, why doesn't she just start her own competing business and generate millions for herself? She doesn't even need to take the old client base is she is truly generating the company millions, she should just keep doing what she is doing under her own company. It makes no sense to work for someone else given those circumstances..


#13

Why are the notes on a cliff? Are they suicidal notes? Wouldn't it be better if these notes were on the foot of the cliff? That way no note harming is done?


#14

That would be because it's CliffsNotes, not cliff notes. The founder of the company is named Cliff.


#15

I, ummmm...didn't read all of that, but I am sure that if you put it in her pooper, than everything would be just fine.

no, don't thank me....


#16

Sounds like she's not an employee, she's his daughter- and he's going to treat her how ever he damn well pleases because he's her dad.

She should get regular job with the usual terms of employment and leave the old man to fuck himself back into the hole from whence he came.

People like that do it to themselves.


#17

This is really where we are on this.

We wanted to have something in writing, where we could have one more chance to sign on the dotted line, and if he's unwilling to that, she walks away.


#18

I haven't read all the responses but have dealt with similar situations (not with family, though) so I will give you a little input.

In all likelihood, the father is treating the business as a source of cash flow instead of living in a reasonable fashion from the profits it is generating (assuming there are any worth talking about). What this leads to is he is basically leveraging debt (wether from outside sources or just digging a hole telling himself he will 'pay it back' as things improve) and in all likelihood is doing a terrible job ov managing the overall financial side of the business. This is a disaster.

It sounds to me like he has been in dire straights for a while and this is his mode of operation. This is actually a pretty common pattern of behavior for business owners who are/were running a company into the ground. Basically, rob Peter to pay Paul. The problem is, he is always Paul and good luck changing that. Simply stated, it won't happen. It's a strange phenomenon but one I have observed over and over and over.

In this scenario, a contract won't amount to a pinch of shit. The only time it will be valuable is if you leave and then plan on initiating legal action to recover what is owed, but even then good luck collecting.

You guys are in an impossible situation with basically no way out. If he doesn't care enough about you and your wife that he leaves you high and dry like you have described, run. Run like the wind, Forrest.

Cut your losses. If your girl is as talented as you say, she will be just fine. She just needs to find a business to get involved with where the owner isn't a lamprey.


#19

The only other thing I would add is if your fiance is producing at the level you have described (millions), and you are hell bent on trying to work this out, in all likelihood the most lucrative thing for her to do is structure a commission based contract with production points where she either gets a greater percentage or a bonus structure. It should appeal to her father and if you are smart, you can structure a very lucrative deal that will be difficult for him to wiggle out of.

Just make sure you write into the contract that she gets paid based on production (deals she negotiates that close) as opposed to leaving the company and forfeiting payment due. Alot of commission based agreements are written so that the producer forfeits any money due if they leave the company. In other words, if she has X in commission coming her way and resigns, she is only paid based on things that close before her resignation date. This can make it very difficult to leave an organization. Your argument for structuring it this way is that it will incent her to continue producing as opposed to sand bagging and riding out what she has closed before she leaves.

A lot of people view working on commission as a lesser deal but the reality of things is I have never met an above average individual contributor who would not much rather forego a base/bonus structure (unless they are leading a team) for a commission only plan if it is structured correctly.

What you are describing in her father is basically a hit list of the top traits you do not want in a boss. Additionally, I can assure you his financial behavior is largely fear based (he is hoarding because he has likely lived beyond his means for so long) and this is a brutal pattern of behavior to break. I have watched business owners perpetuate this behavior even in good times and it is a big part of what keeps them from ever hitting full stride because it is inhibitive and leads to really poor decisions and never allows them to hire/retain the level of talent they need to be successful.


#20

A) Never work for relations
B) Everyone thinks they are more important in a company than they actually are
C) I didn't bother to read most of the wall of text