I’m Selling My Shares of the Business to My Sleazy Business Partner

Summary

Summary of "I’m Selling My Shares of the Business to My Sleazy Business Partner"

Episode Release Date: July 26, 2025
Podcast: The Ramsey Show Highlights
Host: Ramsey Network
Duration: Under Ten Minutes

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Introduction

In this episode of The Ramsey Show Highlights, John reaches out to the Ramsey Network seeking guidance on a critical business conflict. Over a span of three and a half years, John co-founded a successful painting business that has expanded to 12 employees and operates from a shop in New York. Despite initial disagreements with his co-founder, the partnership seemed manageable until recent events eroded the trust between them.

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Description of the Problem

John outlines the escalating tensions with his co-founder, which have culminated in deceitful and fraudulent actions. He explains:

John [00:42]: "I have worked tirelessly for the past three and a half years to build the business to what it is today and what's it's cash flowing at today. Now these disagreements between my co-founder and I have come to a point where a lot of trust is lost."

The issues include:

• Resource Misappropriation: His co-founder started other businesses within the same shop, diverting resources meant for their joint venture.

• Fraudulent Activities: John details instances of his partner manipulating accounts, such as placing incorrect items in the paint store's accounts and issuing sketchy checks. Specifically, he mentions:

  John [01:21]: "Like six of six. Like we're talking $6,000."

Rachel [01:22]: "So fraud."

John [01:26]: "Like six of six. Like we're talking $6,000."

These actions have significantly strained their relationship and jeopardized the company's integrity.

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Legal and Financial Steps

John has decided to take decisive action to protect his interests and the business's future. He outlines his plan:

John [01:39]: "And you know I'm going to be hiring a very good lawyer. Good. During this process along with a forensic accountant."

Recognizing the lack of a formal operating agreement, John explains how his co-founder unilaterally drafted a 20-page agreement without his input, containing hidden clauses that favored him:

John [02:23]: "He hid a clause in there where it basically assigned him as the executive manager and put me as just a member of the company."

Rachel and Dave from the Ramsey Network advise John on the importance of thorough legal and financial assessment before making any decisions:

Rachel [03:26]: "Hold on, hold on. Stop. You got to do this in the right order. If you're hiring an attorney and a forensic accountant, wait till they... Wait till all that smoke clears before you accept an offer."

John concurs, emphasizing that his accountant is actively gathering all necessary financial information:

John [04:26]: "And my accountant is working on this as we speak, gathering together all of the information."

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Valuation and Sale of Shares

John shares his intention to sell his shares to his co-founder at a fair market value, estimating the potential payout between $300,000 and $600,000:

John [03:26]: "Now, today I am selling my shares. I'm getting everything together and making sure that it's right... anywhere from, I want to say, 300,000 to $600,000."

Rachel cautions against premature decisions, highlighting the complexities of accurately valuing the business:

Rachel [05:08]: "You have to do a net present value on the company. You'll have to depreciate all of the stuff you have inside... It's just going to be a nightmare untangling this."

In response, John reveals that they are scheduling an appraisal:

John [06:07]: "We are hiring an assessor on Sunday. We're all going to meet together and determine the assessor to assess the business's value."

Dave acknowledges John's proactive measures:

Dave [06:20]: "Great."

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Future Plans and Personal Well-being

Shifting focus from the business conflict, John contemplates his life post-sale. Initially, he expresses a desire to pursue personal passions and invest wisely:

John [06:31]: "What am I going to do with my life... I want to ski. And I want to paint luxury houses by myself... I want to invest my money smart in a smart manner."

He further reveals a sense of burnout and a longing for a lifestyle change:

John [07:09]: "And before that as well, I, I'm so burnt out. I am so drained from this entire thing and the litigation that's about to happen. I'm going to take my ATV, put it in the back of my truck and travel the entire United States coast to coast, visiting all of my friends and locations that I wanted to."

Rachel and Dave provide grounded advice, urging John to remain financially prudent even as he envisions his future:

Rachel [09:09]: "Don't go visit your friends, take two weeks off... you can't cash out of life."

Dave [09:13]: "Beware spending money before you get it. Beware."

John acknowledges the importance of making wise financial decisions as he moves forward.

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Conclusion

John's story highlights the complexities of business partnerships and the critical importance of formal agreements and trust. Through the guidance of Rachel and Dave from the Ramsey Network, he is taking measured steps to resolve the conflict legally and financially while contemplating a significant life transition. The episode serves as a valuable case study for entrepreneurs facing similar challenges, emphasizing the need for vigilance, proper valuation, and thoughtful planning in both business and personal endeavors.

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Notable Quotes

• John [01:26]: "Like six of six. Like we're talking $6,000."
• Rachel [03:26]: "Hold on, hold on. Stop. You got to do this in the right order."
• John [07:09]: "I'm so burnt out. I am so drained from this entire thing."
• Rachel [09:09]: "Don't go visit your friends, take two weeks off... you can't cash out of life."
• Dave [09:13]: "Beware spending money before you get it. Beware."

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This episode underscores the importance of strategic decision-making during business disputes and the value of expert advice in navigating complex financial and legal landscapes.

Transcript

[John]

Brought to you by the EveryDollar app. Start budgeting for free today. I have a little bit of a situation happening right now where I have started a company with a co founder three and a half years ago. We. And from day one we've had some disagreements. But throughout those disagreements we've always been able to come to a compromise and we were both very hard working. Over the period of time, the company has grown to 12 employees with a shop in New York and everything that you could possibly need to do a beautiful paint job on your home.

[Dave]

Nice.

[John]

I have worked tirelessly for the past three and a half years to build the business to what it is today and what it's cash flowing at today. Now these disagreements between my co founder and I have come to a point where a lot of trust is lost. He started other businesses within the same shop, taking resources from my business. Wow. Simultaneously, I mean anything from, you know, putting wrong things at the paint store on other accounts. X, Y and Z, sketchy checks.

[Rachel]

So fraud.

[John]

Cashed in his other bank account account.

[Rachel]

So fraud.

[John]

Like six of six. Like we're talking $6,000.

[Rachel]

So he's stealing from what from. He's stealing from you? Yes, that's what that's called. It's called theft and fraud.

[John]

I. And you know I'm going to be hiring a very good lawyer. Good. During this process along with a forensic accountant. Perfect. And I've had a ton of advice from people that have run businesses, done this type of thing. Now moving forward here, it came to a point three weeks ago, two weeks ago, where he had handed me an operating agreement because I had never fully signed into an operating agreement with him. And 50, 50 since one day one. And I was going to get an operating agreement, draft it up and make sure that it's legit. But you know, without which I never did. Now he had gone to an attorney without including me in the conversation and he had drafted out a good 20 page operating agreement stating every last thing in the company. He was pressuring me to sign it one day while I was at the office. Like, you have to sign this, you have to get it done quick. And I go, no, I am reading this, I am reading this thing front to back and what'd you find? Oh, so he basically 10 pages deep within the document. He hid a clause in there where it basically assigned him as the executive manager and put me as just a member of the company.

[Rachel]

So how can we help?

[Dave]

We see that he's, we see that he's duplicitous. We See, like he's a nefarious fellow. But you didn't sign it. Great. So what can we do for you today?

[John]

Now, today I am selling my shares. I'm getting everything together and making sure that it's right. I did get him to agree to pay out fair market value on my portion of the company.

[Rachel]

Are you selling it to him?

[John]

Determined. I am selling it to him. Oh, wow.

[Dave]

Okay. Interesting.

[John]

Based on a fair market value of what my company is worth.

[Dave]

So what will you get?

[John]

I. So I don't know yet.

[Rachel]

I have.

[John]

I have.

[Rachel]

Hold on, hold on. Stop. You got to do this in the right order. If you're hiring an attorney and a forensic accountant, wait till they. Wait till all that smoke clears before you accept an offer.

[John]

Absolutely.

[Rachel]

Because you don't know how much money's been coming going out the back door. And you don't know what money is your business money that's used to buy other equipment for his business. You don't know how much he's taken out loans in the business's name to buy. Like, you have no idea how bad is.

[John]

And my accountant is working on this as we speak, gathering together all of the information.

[Dave]

Listen, you've done. You've done the right things. Tell us what we can do for you today.

[John]

So once I get this money, which should be anywhere from, I want to say, 300,000 to $600,000, what is going to be the. It is a gap because he's going low. I'm going a little.

[Dave]

Well, you. But again, to John's point, you don't even know what you're basing it off of, and that's the hard part. So we could. We can spitball with you and say, well, if it's 300, maybe do this, and if it's 600, maybe do that. But we are literally speculating.

[Rachel]

You have to do a net present value on the company. You'll have to depreciate all of the stuff you have inside. You'll have to take the. The building that you've bought. I mean, you have to. It's just going to be a nightmare untangling this. And by the way, the attorneys and the accountants, God bless them, have a vested interest in going through every receipt because they get paid every six minutes. Right. And so if you and him can shake hands on something or get. It's kind of like a real estate person for businesses to come in and do a net present value assessment and give you a. If you want to do that. But, man, you're. He's going to offer you something ridiculous. You're going to make up something ridiculous, but y' all gonna have no numbers to actually base this off of. But somebody needs to come in and do an evaluation of your company. And you'll need to agree probably in some sort of settlement, some sort of like, agreement. We're both agreeing that this is the person, and that person will do an assessment.

[John]

We are hiring an assessor on Sunday. We're all going to meet together and determine the assessor to assess the business's value.

[Dave]

Great.

[John]

Great.

[Dave]

So let's, let's, let's pivot off of that because I think you're doing all the right things. Let's pivot to your question, which is what would you do with the money after selling your business? Right. That's the real question here.

[John]

What am I going to do with my life or your life? Okay, let's get to my life.

[Rachel]

You tell me. What do you want to do?

[Dave]

Do you want to open another painting business? You know how to run it?

[John]

Absolutely. Absolutely not. Is. It is. No, no. It is a nightmare running a business now.

[Rachel]

It's awesome. You just had a bad part for me, but. Okay, so you don't do that. What do you want to do?

[John]

I want to ski. And I want to paint luxury houses by myself.

[Dave]

Okay.

[John]

In a mountain town somewhere. And I want to invest my money smart in a smart manner that, you.

[Rachel]

Know what else I want?

[Dave]

Hallmark movie.

[John]

Yeah.

[Rachel]

I want a million dollars. And I want a new Gibson Firebird. And actually an old, new Gibson Firebird. And I want to, like, go to space.

[Dave]

But wait, no, no, no. Wait, wait, wait. I, I, I'm not gonna be as facetious as John, because I actually don't think what you're saying is, it's not.

[Rachel]

It'S not far off dream.

[Dave]

No, I think that, yeah, you ha. You were doing something on a very grand scale. And you're like, hey, I just need to back it down a little bit. I don't need a business with 12 employees. I just need me. I, I'll go out and paint. I can make enough live enough of a living for me to sustain my lifestyle. And if I can do that in an area that I love, someplace where there's mountains I can ski in the winter, that would be great, right? Is that what I'm hearing?

[John]

That is what you're hearing. And before that as well, I, I'm so burnt out. I am so drained from this entire thing and the litigation that's about to happen. I'm going to take my atv, put it in the back of my truck and travel the entire United States coast to coast, visiting all of my friends and locations that I wanted to.

[Dave]

Well, now, now we're getting into John's world.

[Rachel]

Why.

[John]

Is that a smart idea?

[Rachel]

Is that like, no, that's your version of like, I'm taking my ball and I'm going home. Like, why?

[Dave]

Well, do you have a bunch of money? Tell us what kind of money you have because that could influence whatever you.

[Rachel]

Think you're going to go home with. Here's what's going to happen. You've already done the math on 600,000. And if you get an offer for 450, you haven't taken out taxes, you haven't taken out attorneys fees, you haven't taken out assessor fees, you haven't taken out tax fees, you have to take any of that stuff. And if you get an offer for 450, which might be a super fair offer, you're going to feel like this partner just took took 150,000 from you because you just made up a number. And so, dude, don't go visit your friends, take two weeks off. That's all fine and good, but bro, you can't cash out of life. And by the way, it's your right to be tired on the front end of this. It's fine. Just get through it and make good choices on the way through.

[Dave]

Beware spending money before you get it. Beware.

[John]

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