Percentage Ownership 1

[kastanza]

Does anyone have an idea of the percentage of ownership that a Civil P.E.(seventeen years experience) should shoot for in a start up company when have finanical backing from an established technical service / construction company?

 

[Ron]

That depends on what you want out of it, how much control you want, etc.

If you want to control your "destiny" and set the stage for your professional independence, you need to control over 50 percent of the ownership. If you will share a Board of Directors with your financial partner (which is most likely), then you need to make sure that the bylaws are written so that your vote counts for your percentage of ownership and your ownership matches the bylaws majority requirement, otherwise you'll never win a vote in a typical 2/3 majority bylaw requirement. The Board of Directors should be at the least balanced such that you each have at least two members and keep an even number of directors.

Since you are looking at entering an agreement with a construction firm, but you are an engineer, make sure you don't put yourself in a position of having your ethics or professionalism compromised by your financial condition with the construction firm. Remember, some things that are commonly practiced in construction are unacceptable practice for engineers.

 

[jheidt2543]

Ron,

I agree with most of what you have said, but when you say:
"Remember, some things that are commonly practiced in construction are unacceptable practice for engineers." You are showing your prejudices! When it comes to money out of their own pocket, I've seen some pretty sleezy things done by engineers too!

The main thing is to know who your getting in bed with in a buisness deal. You are going to be locked up for a good long time so, you want to be sure you can at least get along in the same office building. Engineering and construction can make good bed fellows (to continue the analogy), as long as they each respect the other's professionalism.

 

[Ron]

jheidt2543...Busted! Yes, I agree I've seen some engineers do things to rival even the sleeziest. I'm primarily referring to items such as the "bidding mentality" and the tendency for contractors not to understand the need for the evaluative process....just decide and go on!

ps...I'm also licensed as a General Contractor and Roofing Contractor, so I guess I was doing a bit of self-slamming!

 

[kastanza]

Thanks Ron for the good advice, I will keep your suggestions in mind.

 

[jheidt2543]

Ron,

Understood. I guess I'm a little sensitive, since I've worked most of my career for a couple of good general contractors. We've worked with, hired and fired a variety of engineers, architects and surveyors. A good one is a joy to work with, a bad one is agony.

While I'm at it, I've had the pleasure of working with a few really good field superintendants, who, if they had had the opportunity would have made great engineers.

 

[Ron]

jheidt2543...I agree. One of my better clients is a "self-trained", extremely knowledgeable contractor who understands and knows more than most engineers. He keeps me on my toes when I'm dealing with him!

 

[kenvlach]

While Ron gave the basics, you should really check with a corporate law attorney to find out exactly how much your state law protects minority owners. Right to see financials, proportional share of dividends, etc. In California, if less than 20% (not positive on the exact figure), the majority partner can 'freeze out' the minor partner from the books, take all profits as salary, etc. Above that cut-off, you can use the court system.

Also, you need an equitable buy-out agreement signed in advance. Share value in a closely-held corporation can be manipulated by majority partner, i.e., made worthless.

Still trying to collect from a crooked bastard past partner,
Ken