I won’t pay you $5,000 now, but will pay you $80,000 in 2 years’ time!

What if you were given a choice? You could pay a legal lawyer $5,000 now or you could decide to wait and pay them $80,000 in two years’ time? It does not sound like a great deal if you were to wait 2 years.

But, believe it or not, this is exactly what has happened to my clients in the last month. It gets worse. Because, in addition, for no additional fee they get to cry a lot. The stress is free too. But the whisky and vodka they drink to drown their sorrows have to be paid for and so far the local bottle bank is overflowing. This needs to be added to the $80,000. Obviously.

So what happened and how do you ensure you don’t end up paying $80,000 in legal fees in a month and end up at the local Alcohol Anonymous club?

Well, two years ago, my clients decided to set up a medical practice and came to me for advice on the best way to set up the practice. The idea was to open more practices. I got the impression that they were good medical technicians but not great as business owners. One of them would concentrate on operations and the other as a GP.

My advice was they should spend time getting their systems and procedures right. More importantly, my advice was that they should see a lawyer and get a proper shareholders agreement in place. The shareholders agreement would determine each partners pay and, should they decide to separate and go their own way in the future, how the medical practices would be valued.

The cost of the shareholders agreement was $5,000. My clients decided it was not worth spending this and did without.

Unfortunately, six months ago one of the partners found out the other appeared to be taking more money out than expected. A whopping $190,000 more than expected in fact. These are still allegations and the other partner believes that as he was working more and as the business had expanded he was entitled to it.

It has become extremely messy and complicated. Both partners are throwing accusations at each other and trust has disappeared. They communicate via lawyers and are arguing about how the businesses should be valued. The business has suffered too with income decreasing. In the last four weeks alone the legal bills are estimated at $80,000. And my fees have not been included yet. There does not appear to be an end in sight so I expect a lot more in legal bills in the future. At some stage one side will run out of money. Or Energy. Or Whisky. Or maybe Vodka.

But here’s the thing. This will not be the first case and it will not be the last one. Out of every ten businesses I advise in getting a shareholders agreement prepared only one will follow through. So if you have a partner in your business and you do not have one, don’t be surprised if you find yourself sitting in front of a man in a suit who calls himself a lawyer and be prepared give him your salary. Stock up on some whisky and vodka too. You are going to need it. Or you can pay $5,000 now and have a good night’s sleep knowing should something go wrong, you won’t have to sell your house fighting for what might be rightfully yours in the first place. Oh, and the weekly trip to Alcohol Anonymous won’t be necessary either.

If you would like to know more about how our bookkeeping Brisbane can save you time and money, please contact us.

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