Going through a closeout. 50-50 profit share allocation, but my business partner has been using the venture money at their personal piggy bank (hence the breakup). My accountants say because we agreed to 50-50 shares, the leftover money has to be divided equally.

They spent $100k in the last month on random "work stuff" but bought a new car, etc. Now I have to pay for it with less equity return!

Just wanted to rant, I'll probably never go into a partnership again.

likesmart
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Not necessarily. If his spend was not to support business growth (personal expenses), these should be treated as distributions, which would reduce his basis, adjusting you guys to a more appropriate allocation. Talk to a different accountant.

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Thank you, this is good advice. If the accountants have no backbone then I will use this way.

I did the non 50-50 calcs because we needed to decide who gets what asset but also decided to cover expenses and revenue. The numbers shows my business partner owes $100k to the business and they balked because they "didn't know the gap was that wide". 🙄

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Do you have a partnership agreement? Personal expenses are distributions to the partner.

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We do, but if they list expensive cameras and PC builds as "office equipment", that's not a personal expense (even though it really is).
Honestly I'm okay with that, but the amount is what I'm not happy about.

"Hey I spent $30k on a PC, you should too".
"You know the money you spend is less money that gets evenly distributed right?"
"Yeah but I was going to buy it anyway."
"Really? You were going to buy a $20k PC on your own dime?"

Get a lawyer involved.

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That’s so stressful I’m sorry. For a lessons learned, do you think you’d partner with someone if you had a better agreement to prevent stuff like this from happening?

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Thank you for your words. I'm really depressed about this. Purely logically speaking yes, I can put in controls such as "you're not allowed to approve your own expenses" but I generally don't run finances, I run engagements and leads.

"Emotionally" speaking, this partner is (or was) a VERY good friend of mine. Their normal behaviour vs what the accounts say are almost polar opposites. I think because they grew up poor /didn't have good financial literacy, putting them in charge of the books was the big mistake.

Yesterday while looking for a transaction myself (we are now barely talking, they don't respond to my questions about the books anymore), I found my partner took out a nice bonus for themselves this year (from an account they said is only for incoming revenue so don't bother looking at it) but never told me.

Basically skimming at this point. I think they realised I trusted them and managing over half a mil with no controls got to their head.

So while I might consider partnering again, it's hard to trust after this despite controls. If your best mate can steal from you...

That's wire fraud, embezzlement, and tax fraud (including claiming it as deductible business expense). You could be on the hook for the tax fraud too.

You should really talk to a lawyer.

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You own the car too.... 50/50

If it was purchased with business money, it is an asset of the business.

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