Got offered partner at work - there's a catch...
Joey_V
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Just got offered partnership at my job. Partnership is basically this - you are allowed to buy in. There is no technical pay increase when you become partner, but you have the opportunity to earn more money if you put in money.
The question is, is it wise? The ROI is high, but there is fine print I've noted.
I will lay it out simply.
1. You buy in only in June of every year. You can cash out only in June of every year.
2. Shares are $X, you buy in whatever # you want, but there is a limit per year and a limit for the entire lifetime of the partnership (so no one partner gets a majority over the senior partners). You can also cash out.
3. You get 2 ways of making money - dividend pay out every quarter and also shares increase in value.
4. Last year, the dividend pay out (return of investment) was approx 20%. The shares also increased by 20% in addition. For the past 25+ years, the dividend (ROI) has been between 20-25%... far better than any mutual fund I know.
Now, it seems great but there is a catch - if I get fired or we lose contract where I work (and get laid off), they will buy out my shares at 50% of what I paid for....
So, thoughts? Already spoke to a financial planner - says it should be a go, but I wanted more opinions. Obviously, I have my reservations.
The question is, is it wise? The ROI is high, but there is fine print I've noted.
I will lay it out simply.
1. You buy in only in June of every year. You can cash out only in June of every year.
2. Shares are $X, you buy in whatever # you want, but there is a limit per year and a limit for the entire lifetime of the partnership (so no one partner gets a majority over the senior partners). You can also cash out.
3. You get 2 ways of making money - dividend pay out every quarter and also shares increase in value.
4. Last year, the dividend pay out (return of investment) was approx 20%. The shares also increased by 20% in addition. For the past 25+ years, the dividend (ROI) has been between 20-25%... far better than any mutual fund I know.
Now, it seems great but there is a catch - if I get fired or we lose contract where I work (and get laid off), they will buy out my shares at 50% of what I paid for....
So, thoughts? Already spoke to a financial planner - says it should be a go, but I wanted more opinions. Obviously, I have my reservations.
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Buy out your shares at 50% ? Why not wait until June and cash out ? Or is that a more immediate requirement if you get fired or laid off ?
Is any part of this negotiable ? Should be....it is a contract. I would try and erase that 50% thing as to me that's an incentive to let you go at some point, for any numerous reasons, so the rest of the partners can profit.
Ask if anyone else has ever been fired or laid off. Personally I find in your field that's pretty unheard of unless malpractice is involved or some other extreme circumstances. Make some calls to friends and see what kind of contracts other partners are getting and if this is the business norm for your field.
I see this more so as a way of locking you down so you don't leave for a better position or go out on your own. Also find out if this money is invested or simply pays dividends off the contracts. If it's invested, you'll have some concerns as the market is due for a tailspin.
If not....find out how these contracts are obtained and what forces are involved that may limit their value.HT SYSTEM-
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Sounds like one of those things that you could only turn down once.My New Year's resolution is 3840 × 2160
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Thanks guys - and Sean.
So, the 50% buy out has a 7 year clause. So if I lose my job or choose to leave, I only get reimbursed for 50% of my initial investment, but I get to keep all the dividends.
Technically, the financial advisor said this - if the ROI is close to 20-25% per year, then in 2 years, technically I break even EVEN if I lose 50% of my initial investment. Get it?
The field is stable - in it of itself. Contracts are always in flux and that's essentially what worries me. That said, I've been in the same job for 3 years so there's no change there.
My director for our contract (my local boss) became partner last year:
Initial investment = $150,000
ROI for the year/Divident payout = $30,000
Stock worth now = $181,000 (increase of $31,000).
Total increase in value/income = $30,000 (dividend) + $31,000 (stock value increase) = $61,000
I can't get that with any mutual fund.
BUT, again - the catch:
Bought out (fired, laid off, move to different place) = 50% of initial investment
But if I survive 7 years, I get full value of all my shares.Magico M2, JL113v2x2, EMM, ARC Ref 10 Line, ARC Ref 10 Phono, VPIx2, Lyra Etna, Airtight Opus1, Boulder, AQ Wel&Wild, SRA Scuttle Rack, BlueSound+LPS, Thorens 124DD+124SPU, Sennheiser, Metaxas R2R -
Best case scenario is if it goes well, probably top off at close to 7 fig in 5 years. With dividend pay out of 20-25% per year after that while it still goes up in value. It could be a game changer.
Worst case scenario is what I'm worried about.
Currently we only have 1 contract in Dallas region. The company has 20+ contracts in Austin so if we were in Austin, I would have no problem with this. But I'm in Dallas and that's why I'm concerned.Magico M2, JL113v2x2, EMM, ARC Ref 10 Line, ARC Ref 10 Phono, VPIx2, Lyra Etna, Airtight Opus1, Boulder, AQ Wel&Wild, SRA Scuttle Rack, BlueSound+LPS, Thorens 124DD+124SPU, Sennheiser, Metaxas R2R -
I would invest if I were you, but conservatively. For instance if you are able to put 20k in the bank in a given year, then invest 10k.
It seems as if your a little nervous, and I can understand that. The way I see it is that the current partners see some quality that they like in you, and want to protect their investment, that being your talent. That would be the reason for the buy out clause. I really don't see the downside, but would get a lawyer that specializes in contracts to read, and explain it to you.
Doesn't hurt to get an independent opinion. -
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I would invest if I were you, but conservatively. For instance if you are able to put 20k in the bank in a given year, then invest 10k.
It seems as if your a little nervous, and I can understand that. The way I see it is that the current partners see some quality that they like in you, and want to protect their investment, that being your talent. That would be the reason for the buy out clause. I really don't see the downside, but would get a lawyer that specializes in contracts to read, and explain it to you.
Doesn't hurt to get an independent opinion.
Thanks!
Putting in 10 or 20 isn't going to change much and it's not going to earn much. It starts to pay out once you start putting in a lot. But I hear ya, you were making an example.
I was thinking really going big so that this pays out but then the amount I could lose is significant. If I could make it to close to 7figs on my 38th birthday, it would be very very easy from there.Magico M2, JL113v2x2, EMM, ARC Ref 10 Line, ARC Ref 10 Phono, VPIx2, Lyra Etna, Airtight Opus1, Boulder, AQ Wel&Wild, SRA Scuttle Rack, BlueSound+LPS, Thorens 124DD+124SPU, Sennheiser, Metaxas R2R -
Joey, if you want to consult a lawyer, I can refer you to one of the best in the Dallas area (no kidding) and bills very reasonably. Just let me know.
I have a lawyer on retainer but I'm open to your rec skip
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Is this a publicly traded company, and that 20% yield is what any shareholder would receive?2007 Club Polk Football Pool Champ
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Have no enlightened advice as im not experienced in that field.
But I want you to know Im throwin a prayer you come to the right decision.
Only advice I have to give real world is how do you feel about the people who you are
dealing with, It means the world, their integrity.
If they are asking you to take the right amount of risk for the right amount of possible reward, It sounds fair, but then again, Its just my instinct.
god bless,
SADhumpty dumpty was pushed -
I worked in the HR field and designed a number of executive comp programs -- restricted shares, options, bonus plans, sales comp plans, etc. -- but never for a partnership. I've never seen one quite like this, although "buying in" to a partnership is common practice.
With that said, it all seems to me to turn on your tolerance for risk:
Are you working toward a vision of wealth? Or, do you prefer working for a secure -- albeit DEPENDENT -- income?
If you are a "vision-of-wealth" guy, you'll never reach your vision of being independently wealthy unless you dive into the potentially "destructive element" of risk and go for it.
If you are a "secure-dependent-income" guy, you may not achieve a vision of wealth -- a truly independent source of income -- but you are less likely to fall down, have to pick yourself up and start all over again -- a la Diana Krall.
If putting a significant amount of cash at risk on the table would keep you up at night, then don't dive in.
If you relish a challenge that could pay off big, go for it.Family Room, Innuos Statement streamer (Roon Core) with Morrow Audio USB cable to McIntosh MC 2700 pre with DC2 Digital Audio Module; AQ Sky XLRs to CAT 600.2 dualmono amp, Morrow Elite Speaker Cables to NOLA Baby Grand Reference Gold 3 speakers. Power source for all components: Silver Circle Audio Pure Power One with dedicated 20 amp circuit to main panel.
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Seems to me this is a type of "Golden Handcuffs" personal services contract that has become common in the medical industry, which is usually intended to keep highly specialized talent that is in short supply tied to a company through a financial inducement (potential profit sharing promises) so it can get its business accomplished while keeping turnover of their needed talent at a minimum. The company calling it a partnership is probably over selling the arrangement, but on the other hand there is more than likely no harm in it other than tying yourself to the company financially for a while. However, it is a business contract and as such it is absolutely necessary to get a lawyer who understands contracts to look at the agreement if you have any concerns about it. A financial planner, while they are good at calculating potential returns on investments and basing their advice on what they are familiar with, isn't the best source of info on what can be a unique contractual arrangement.
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Joey,
I would rather hedge and diversify. Why put all your eggs in one basket? I don't want to open up the 401K type snake oil mathematics of a decade ago,
Becoming a partner.... Ernst and Young, Accenture.. Whatever. Last years statistics only hedge against this years.
The big picture is financial freedom. But that is hard to define, as the meaning is different to everyone. Dividends and payouts are snake oil terms. Sure, profit margin is large. But on what scale?
DFW is one of the largest, strongest economies and markets in existence today. Land is large and the population growth is the largest. The $5 billion mile is actually even more now, the $2 billion City Line too. We have Dubai, yes Dubai investing in DFW. Condos went up over $100 g in one year.. One....
Land is large. I would hedge part of it. Where else could you build up with more buyers than sellers now?
Halen -
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halenhoang wrote: »Joey,
I would rather hedge and diversify. Why put all your eggs in one basket? I don't want to open up the 401K type snake oil mathematics of a decade ago,
Becoming a partner.... Ernst and Young, Accenture.. Whatever. Last years statistics only hedge against this years.
The big picture is financial freedom. But that is hard to define, as the meaning is different to everyone. Dividends and payouts are snake oil terms. Sure, profit margin is large. But on what scale?
DFW is one of the largest, strongest economies and markets in existence today. Land is large and the population growth is the largest. The $5 billion mile is actually even more now, the $2 billion City Line too. We have Dubai, yes Dubai investing in DFW. Condos went up over $100 g in one year.. One....
Land is large. I would hedge part of it. Where else could you build up with more buyers than sellers now?
Halen
Good point halen....
btw, I got your texts tonight but was at work, got out at 1130pm and wasn't sure if you were still up.Magico M2, JL113v2x2, EMM, ARC Ref 10 Line, ARC Ref 10 Phono, VPIx2, Lyra Etna, Airtight Opus1, Boulder, AQ Wel&Wild, SRA Scuttle Rack, BlueSound+LPS, Thorens 124DD+124SPU, Sennheiser, Metaxas R2R -
Moose68Bash wrote: »I worked in the HR field and designed a number of executive comp programs -- restricted shares, options, bonus plans, sales comp plans, etc. -- but never for a partnership. I've never seen one quite like this, although "buying in" to a partnership is common practice.
With that said, it all seems to me to turn on your tolerance for risk:
Are you working toward a vision of wealth? Or, do you prefer working for a secure -- albeit DEPENDENT -- income?
If you are a "vision-of-wealth" guy, you'll never reach your vision of being independently wealthy unless you dive into the potentially "destructive element" of risk and go for it.
If you are a "secure-dependent-income" guy, you may not achieve a vision of wealth -- a truly independent source of income -- but you are less likely to fall down, have to pick yourself up and start all over again -- a la Diana Krall.
If putting a significant amount of cash at risk on the table would keep you up at night, then don't dive in.
If you relish a challenge that could pay off big, go for it.
This was spot on.
If I don't take big risks - I will still be very comfortable in the end. Comfortable enough to hit 8 digits going at the same rate I'm going. Probably won't fall down like you said.... but I will not be independently wealthy.
Your thoughts on "vision of wealth" is definitely to be independently wealthy early and before I'm in my mid 40s. I can get there if I play my cards right, but there is a "destructive element" to it as you said.
You are absolutely 100% correct.
Stay the course and be well off?
Or do something that might just get me to become independently wealthy?
It's a very tough predicament. I told my coworker and soon to be partner that in the end, it doesn't really matter if you have 10 mil when you retire or 20 mil... we all die and it just passes on.
And if you look at statistics, generational wealth is a bunch of baloney. It never lasts more than 1 or 2 generations before it's all used up... either through a bunch of poor investments or poor financial decisions by your kids and grandkids.Magico M2, JL113v2x2, EMM, ARC Ref 10 Line, ARC Ref 10 Phono, VPIx2, Lyra Etna, Airtight Opus1, Boulder, AQ Wel&Wild, SRA Scuttle Rack, BlueSound+LPS, Thorens 124DD+124SPU, Sennheiser, Metaxas R2R -
As an aside to my reply above... the one thing good about hitting it big earlier is that you can retire earlier... so I guess having more does make a difference.Magico M2, JL113v2x2, EMM, ARC Ref 10 Line, ARC Ref 10 Phono, VPIx2, Lyra Etna, Airtight Opus1, Boulder, AQ Wel&Wild, SRA Scuttle Rack, BlueSound+LPS, Thorens 124DD+124SPU, Sennheiser, Metaxas R2R
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If you can afford it do it. If you plan on leaving soon or have seen high turn around in fellow personnel, then don't. But, if you are good at what you do, then jump on it.Onkyo TX-NR636
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You are young enough to take a risk like this. If in 7 years every thing pans out, great! If not, you still have made a significant income and you will only be in your early 40s?
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In with 52.....for when Joey hits it big 10 years down the road and wants to Karma those Strads.
What ...too soon ?HT SYSTEM-
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Tony - if the strads get kharmad, that prob means I'm dead.
I'm worth more dead than alive as my boss says.
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Now, Joey, is the time to make your choice -- and never look back!
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Moose68Bash wrote: »Now, Joey, is the time to make your choice -- and never look back!
Good luck!
I need to re-watch "Wolf of Wallstreet" again to get pumped about this...Magico M2, JL113v2x2, EMM, ARC Ref 10 Line, ARC Ref 10 Phono, VPIx2, Lyra Etna, Airtight Opus1, Boulder, AQ Wel&Wild, SRA Scuttle Rack, BlueSound+LPS, Thorens 124DD+124SPU, Sennheiser, Metaxas R2R -
I need to re-watch "Wolf of Wallstreet" again to get pumped about this...
Yeah, it really turned out well for that guyOh, Listen here mister. We got no way of understandin' this world. But we got as much sense of this bird flyin in the sky. Now there is a lot that bird don't know, but it don't change the fact that the world is happening to him all the same. What I am tryin to say is, is that the course of your life, well its changing, and you don't even see it- Forest Bondurant -
My sister in-law is an attorney with one of the best firms in the country. Her partnership is almost identical to yours.
She has been investing for a few years now, all I can say is this:
She has ZERO concern for money at the ripe old age of 36...
To not lose money, you need stayed employed with the business for about 2 more years. That goes by QUICK. The only real concern is the fact they have only 1 contract in Dallas.
If that contract is lost, can you move to Austin to maintain employment? I would think that you would have the right to bump a non-partner in Austin so that you can stay in the firm that you have part ownership in. Your contract should state that you should be one of the LAST people to be laid off, unless you refuse to move.
What are the prospects of new contracts in Dallas? -
jeremymarcinko wrote: »
Yeah, well without the cocaine and the sleaziness... lol....
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Upstatemax wrote: »My sister in-law is an attorney with one of the best firms in the country. Her partnership is almost identical to yours.
She has been investing for a few years now, all I can say is this:
She has ZERO concern for money at the ripe old age of 36...
To not lose money, you need stayed employed with the business for about 2 more years. That goes by QUICK. The only real concern is the fact they have only 1 contract in Dallas.
If that contract is lost, can you move to Austin to maintain employment? I would think that you would have the right to bump a non-partner in Austin so that you can stay in the firm that you have part ownership in. Your contract should state that you should be one of the LAST people to be laid off, unless you refuse to move.
What are the prospects of new contracts in Dallas?
Prospects are good, I am sure they are working on it.
I can move to Austin but that would be not in the plans... that would be like plan D.
I spoke to the CEO, if we lose contract, we get full 100% stock price back...
However, there is a stipulation of a noncompete. If I get fired or leave, I cannot work within any contiguous county for 2 years... so that would also suck.
Definitely "golden handcuffs"...Magico M2, JL113v2x2, EMM, ARC Ref 10 Line, ARC Ref 10 Phono, VPIx2, Lyra Etna, Airtight Opus1, Boulder, AQ Wel&Wild, SRA Scuttle Rack, BlueSound+LPS, Thorens 124DD+124SPU, Sennheiser, Metaxas R2R -
However, there is a stipulation of a noncompete. If I get fired or leave, I cannot work within any contiguous county for 2 years... so that would also suck.
Definitely "golden handcuffs"...
People do get scared of non-compete clauses, but when they terminate you, they are really difficult to enforce.
You should be able to have it re-written that if THEY decide to terminate, the non-compete is void. That's pretty standard.
Non-competes, by law, are supposed to prevent people from jumping ship with a ton of secrets and hurting the business. Not give a company free reign to screw you over. -
However, there is a stipulation of a noncompete. If I get fired or leave, I cannot work within any contiguous county for 2 years... so that would also suck.
Definitely "golden handcuffs"...
That's what I was thinking the case would be. It's a pretty standard industry practice in some parts of the economy where there's potentially a lot of money to be made and a limited number of people who know how to get the work done. Sometimes it's to prevent someone from joining another company, but often it's to prevent someone from setting up their own firm and stealing their contracts!
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