I'm in a Partnership - What to Know

Welcome everyone to the Main Street Business Podcast with Mark Kohler and Nat Sorenson. We're just delighted to be with you today with another amazing topic which Mark would like to introduce.

Yep. The topic is today. Some of you may have just fallen upon us and we'll introduce why. We're kind of making jokes and a little dorky here in a moment. But our topic is I'm in a partnership. And the reason why I wanted to introduce this topic was last two weeks I've been on the road doing my two day workshop and wonderful experiences, meeting people in Dallas and then in Chicago. So many small business outlets, business owners out there just anxious to talk about their tax plan and their structure and building their business. We had a little of everything. Their 10 year plans, their board of director meetings, their tax write offs that are the most valuable. It was an Orange county is sold out right now unless we get a new venue, Hawaii. We're waiting to hear on Covid rules for groups. Anyway, it was really a great experience and I said to Matt, do you know what? And he didn't know this was interesting. I didn't expect this either. The number one topic that I think got the most hands up in the air and hey, could you explain this more? And in the back of the room at break was what do I do? How do I structure this? Do we do an S corp? Do we not? What do I need? Can I do a jv? Can I, you know, where can I cut corners to save money? Common question and where should I not cut corners? And. And then I did an attorney training meeting with our associates. I had all of them captive on Monday for a full day. So I went from training our clients to training our attorneys, which was a great experience to let them know what's out there. And people are asking about and their number one request is can we talk more about partnerships? That's just a tricky area. And I told Matt, I think this is it. This is our topic. Yeah.

And since Mark and I have such a amazing partnership together.

True.

And since we've helped a lot of clients through some successes and failures, you know, let's be honest, sometimes the lawyers get called when there's problems. I think we really have a good insight on what you should be thinking about, planning for in making sure this partnership is a success. So we'll break that down from like what you should just be thinking about and structuring and talking about with your partner what you should do from a legal standpoint. And then also what are some of the tax considerations you need to think about to really have a good comprehensive partnership plan and structure for your business or investment. Right. Well, we want to make sure everybody knows the answer to why do Witches Wear Black? And we're not going to give you that answer. You need to go buy a book. You can go to why Do Witches Wear Black dot com. This is a book written by Jaron Burgessen, who's an attorney in our office. We had him on the podcast maybe three or four months ago to talk about writing a book. This is a children's book he wrote on Halloween, which is very cute. Awesome Halloween gift or thing to do with the fam. Why Do Witches Wear Black? It's only like 10 or 15 bucks. It's not.

And, you know, it's. You know, when I was raising my kids, you could go to a children's bookstore and find good books all the time for your kids. Now there's just. They just don't exist. Exist, you know, that, you know, store around the corner. Shop around the Corner brand by, you

know, Barnes and Noble. Now the ones that are left, at least.

Yeah, that's right. So. But this is a cute book. I'm holding up for those on YouTube. We'll get some images out there, but this little book is a great one to have in time for Halloween and read it to your kids. It'll be in your family library for many years to come. Why Do Witches Wear Black? So excited about what Jerem accomplished there.

Yeah.

All right, well, thanks, everybody.

Go to Reminder. You can go to where Do Witches Wear Black dot com. It's also on Amazon. But why Do Witches Wear Black dot com? You can pick it up there.

I love it. I love it. For those that are new, quick intro is we, yes, we are both partners in a law firm where we serve clients nationwide in business structuring, tax planning, asset protection, estate planning. We're lovers, not fighters. Generally, if there's any fighting going on, we have to figure out what's going. You know, it's true, though. I had a crazy week last week. I say that that's what we do. And I called Matt on Tuesday and go, it's been a crazy week. I go, I was in. I was in criminal court on Monday with a helping client's son with a reckless driving issue. And then I was in a divorce mediation with all these lawyers. And I hate talking to other lawyers because it's always a fight. It was like, ah, you know, and this mediator that was a little crazy. But Matt's like, what are you doing? This is, this is. And I go, who are you and

what did you do with Mark Kohler?

I know I said I stayed in a Holiday Inn the night before, so I was.

What was the charges? Tax fraud. This divorce case. There's got to be. There's a business angle to this. Right.

But there was business valuation issues, so that's why I was kind of in the mix. But. But I. So it was a little out of my comfort zone, but it was great experience. I got to bone up on several Law and Order episodes. Watched Lincoln Lawyer just for the to. For good measure, since Matthew McConaughey. He's my man crush, you know, so. All right, all right, all right. There's our studio producer, Corey, doing a great job keeping me on my game. But anyway, so we'd like to have some fun here. So hopefully you'll get a good feel for what we. We're tax lawyers. Matt's really a tax lawyer, expert in self directing retirement accounts, which is another partnership issue. So many people want to, you know, partner with their retirement accounts.

Matt.

Which brings us up to the summit, which is almost sold out, too. Do you want to throw it out? Yeah.

Self directed IRA summit this coming October 22nd, 23rd. That's next week, guys. Next week.

Well, and if you're seeing this podcast, hearing it, I think podcast comes out. We're recording right now, but it'll be on Monday. So this week you want to say this week.

Okay. It's October 22nd, 23rd. Let me just say that. And that's a. We'll do a full day on self directed IRA strategies. Mark and I, some other speakers. There's a charity golf tournament and some networking involved here in Scottsdale. The weather here is amazing right now. That's why I'm looking tan now.

Yeah, you look great. No, it's all about lighting.

I stay inside all time. I told. I. I admitted to Mark before I got on that I've been using some self tanner, you know, some moisturizer. I just put it in the moisturizer. Cute little trick.

Yeah. Let me just say you look great, you know.

Okay. Self tanner. Thanks.

Some of our regular listeners sometimes appreciate this banner. We'll. We'll save some banner for later. Let's get into it.

All right.

Okay. I'm gonna say what I think is the first big issue, if I may, in partnership, if someone called me, if any of you called me and said, I got a partnership, if we're in the back of a room at a conference, if you raise your hand in A conference and go, I've got a partnership. The first thing I'm going to ask you is, is it short term or long term? Or is it ordinary income or passive income? Or is it operational or holdings? I think those words are very interchangeable. And if you've heard Matt and I's dog and pony show before, we're going to put a line down the middle of the paper and we're going to put operations on the left and holdings on the right and partners can occur on both sides. And how we respond next is based on that answer to the first question. Is it holdings or operations? Yeah. You may ask if they like long walks on a beach or whatever their sign is. But that's the question I want to know.

Okay. All right. I mean, that starts the conversation, of course, on how we're going to structure and think of you from a tax standpoint. Now, I'll say this just out the gate. We're generally using LLC either way.

Yes.

All right. A lot of people are familiar with, well, I have an S Corporation for my short term stuff, or I've listened to you guys and you say operational businesses. I'm selling goods or services, you know, use an S corp. I get it. Use an LLC for my rentals. But in a partnership, we like using an llc. Either way, this is going to be the main entity.

If you think of even what your S corp would be a partner of on that side.

Yes. Short term. Yeah. So just even think of Mark and I and our partnership. We have our law firm, which is an llp. It's basically an llc. Okay. That's the business that gets the income. It pays employees, it pays our expenses. But Mark and I don't work for that company. Our S corps own it. Our S corps get a share of the profit and then we pay ourselves out of our S Corps. So now, now Mark and I also have real estate together. Okay. That's also an llc, but that's on the right side. That's on the holding side of this diagram here. But our S corp's involved over there. Nope. It's an LLC that Mark and I own. Or our trusts own. 50. 50.

To put a finer point on that. Or did you say not to put a finer point or may I put a finer point? Whatever. You, my friends, say something. And I was listening to Justin Timberlake on the way in here. Just say something. It's a great, great song. Gotta watch the video. It's one simultaneous take up in a warehouse in Portland. So cool.

Oh, that is cool.

Yeah. It is. Sweet video. Justin Timberlake, so talented. Little shout out, you know, since we're buds, you know.

Yeah, he's a listener. He's. He's appreciates that.

Yeah, he appreciates it. Good guy. Here's the finer point. In any partnership you do, frankly, you're never going to own it. Either your S corp is going to own it if it's a operational partnership, or your trust is going to own it if it's a hold. If I see your personal name as a client of mine on any LLC partnership, I'm gonna say, what's going on here? Where's your trust if it's a hold? And I'll say, where's your S corp if it's an operational? And if they go, well, my IRA owns it. Well, then I better see your IRA. I better see your 401k. None of you. I think I could say that across the board. I should never see your personal name on a partnership.

The only carve out for that may be someone starting an LLC new that doesn't. They don't have a lot of income yet. They don't have enough revenue where they need the S corp and they can add the S corp in later. So this might be, you know, you and your partner, or there's going to be more than one partner. It's not just people of two, but, you know, you and your partner partners, and it's like, hey, our first year, we're going to maybe make 10 grand. Maybe this is a side hustle I'm doing with someone else. We have the llc, obviously for asset protection, business structure, but we're not netting a lot of money yet. So I'm not doing an S corp. I'm just, you know, it's gonna. It's gonna personally flow down onto my tax return.

I like it. Now, to give an example. And these ladies were super fun in the Chicago workshop. They were from Dominican Republic and they were sisters. Another maybe carve out. And they said, yeah, we're in an LLC together. We share everything. Both of them were unmarried and they're like, we're just going to make an S election on our partnership. And even then I said, you know what, what happens if you want. One of you wants to travel or pay for a new laptop or whatever, you're going to have a hard time writing that off. You need to ultimately set up 2S Corps to own that partnership LLC. But for now, they weren't making a lot of money on that operation. So he said, I like what you said, Matt. Keep it in your own name, but you know, you're going to slide in your S corp down the road, and so

that might. That's a good example. I was thinking actually the same thing. Like, it's just the small business you have with a sister or someone else, like that partner, where the LLC is awesome. Add in the S Corps as you need it, with the income. But can I say, once you've figured out this long term, short term, I think there's a really important thing that needs to happen in the conversation with your partner.

Okay.

Can I talk about that? Are you ready for this?

Yeah, I. I'm. Have we talked about this as a partnership? I'm a little nervous. Have you and I had this conversation? Are you. Are you breaking up with me? Is this the it's not me, you know, it's not you, it's me conversation? Which one is it? I'm a little nervous. Yeah.

So let me just. I just want to hit a couple preliminary things about just partnerships in general.

Okay.

Because I see this particularly in real. I see this in. In real estate quite a bit.

Okay.

It's like, someone that they barely know, and they're like, let's be partners. Let's go do this deal together. And, like, maybe I met you at an event, another real estate thing, or you're a friend of a friend. I don't really know you.

Are you talking about partnerships or Tinder talking about partners. Okay, keep going. You lost me. Okay. Am I not swiping in this example? Okay, so.

No, you're not swiping. But you know what? You might want to go past the picture on the profile and maybe read what they're interested in. You know, it's their prior relationship history. Okay. Do they have pets?

Do people do that?

You know, pet projects. Okay. You want to know your partner a little more than, like, on a friend basis.

Okay. We need to test this. Corey, our producer. Do you read that profile or do you just. Oh, really? Just once in a while. Okay. It depends. So if the picture is, like, questionable,

they're on the, you know.

Yeah. Also, if they're on the bubble. Okay. If they're on the bubble.

All right.

Okay.

Okay.

Yeah.

Well, in business, you want to do a little more than what you may do on Tinder.

Yeah.

Let's inspect things a little more. All right.

Yeah. All joking aside, I like what you're talking about, Matt. It's like, have you really done the due diligence? Is this someone I want to work with? And especially if they're family if they're in your community, if they're in your church, a lot of people just think, oh, they would never take advantage of me. You've got it. It's got to feel good in your heart, in your mind that I'm doing all, I'm checking all the boxes here because people, it's not worth it. Yeah.

And then here's. So do your due diligence on your partner. All right? The second thing I would say is you're going to do a partnership agreement. And now in an llc, this is called an operating agreement. But you need to have the conversation. You need to have the talk with your partner. All right, But I'm serious. The process of going through this, which sometimes you're going to ask some tough questions and you have to make some decisions, you have to do that before you start putting time, money, dreams, you know, all these things that happen when you start a business, it starts to consume your thoughts and everything. Before you get to that. Yeah, you need to have this hard conversation with your partner to make sure you're on the same page. A lot of people just talk about, well, we're going to be 50, 50, okay, what the heck does that mean? Are you putting in each 50, 50 of what money's needed? Are you just sharing profits? What if there's a loss? Are you both going to put in to cover a loss? You owe someone money, like what? So you got to talk this through.

Yeah. And even more so than money is sometimes, are you both putting in equal effort?

Yes.

And sometimes people have a very different understanding of what that definition of effort is. And so let's check some boxes here ourselves. Okay, I'm going to back up because some of you are like, oh my gosh, these guys are throwing out so much. You're considering a partnership. You're out there thinking, I'm going to buy a rental with someone. Maybe I'm going to open a little, you know, restaurant or catering business with someone. I'm going to start an online business. We want to make sure. Is it left side or right side? Do you need an S corp? Do you already have an S corp? That's going to be a tax consideration. It's probably one of the only big tax considerations because if it's a long term hold, it's going to be pass through income or pass through losses. We're going to deal with that on your individual return. But if you've got a partnership that's going to operate, you need to have this conversation of, do you have an S Corp. Do I have an S Corp? Every dentist partnership, every brokerage with realtors, partnership lawyers, accountants, online marketers, they're going to, they're going to be their own S Corp and we're going to set up an eight. So that's, I'm going to check that off as box number one. Is there a tax issue here? Thinking left side, right side. The second point that I, and I'd love that Matt's gone here is you've got to do a really reality check on is this someone I want to be in partnership with and what's the business model? What's the business plan, what's the strategic plan? What are my expectations and their expectations? I have a whole chapter of this in my book. Matt and I have several podcasts that if you just search our podcast for the word partnership, you've probably got four to five podcasts you could listen to. Please listen to them all. We've done, I think, 10 things to ask your partner before. Da, da, da, da, da. Yeah, that definitely is box number two. Before we get into this LLC or how am I going to document it? That's going to document that conversation, which I'm going to say is number three. And so Matt, I'm going to ask you put a little finer point.

Yeah. On that.

What about a JV agreement? What about this? LLC operating agreement. Talk about that a little more. So you've, you've had the conversation. You feel like I'm comfortable moving forward with this partnership. What else would you say about documentation?

So whether it's a joint venture agreement, llc, operating agreement, partnership agreement, these are all a contract. All right? These are all a contractual thing that you and your partner are going to say. Who's putting in what. Okay. Any of these documents need to say this. And generally we're going to be doing the LLC operating agreement. But the first thing you want to say is who's putting in? What are you putting both putting in money? Is one of you putting in money? Are as one of you putting in work? Are you both putting in work? Is this a full time thing for both of you? Part time for one. Like say what each of you are putting into the deal to get your

ownership stake and I'm going to throw this out. What are the consequences if they don't carry their weight? Define it in advance, people. It's not always going to be, you know, sunshine and roses and butterflies and unicorns or all those different terms, but there's not. Storm clouds are going to come and there's going to Be a day when you don't have enough money in the bank. There's going to be a day where you've got to work till three in the morning. And are you going to be there by yourself or is your partner going to be by your side? I've been lucky enough shout out to my partner, I'm going to take an opportunity here. We partners. What are 10 years now? 10 plus 15.

2008. 2008.

We're coming up 14. Coming up on 14 years. And I've been so lucky to have a partner that there's times where he works harder than me, there's times where I work harder than him, there's times where we disagree. But we've always kept the long term mindset that there's going to be months and weeks where there's things that are not always equal or Matt's going to get his way here or I'm going to get my way here. But we've been always able to talk through it. I've never walked out of a room mad at Matt. I don't. Have you ever walked out of a room mad at me? You've been okay.

No, no, no.

But Matt is so smart and I love him and I'm lucky. And when you find a partnership, I talked to someone in Chicago who said, I hate partnerships. I'll never do them. Well, I don't think the word partnerships is the problem. You may add the wrong partner and sometimes if you go and peel back the onion and find out how much due diligence they did, they'll admit they maybe should have never partnered with that person. But Matt, I love you, man. You're good.

Oh, I love you. I think you want to find a partner that also complements you. Sometimes you don't need the two people that are exactly the same. Mark and I have some things that we're both good at together, but we also have strengths and complement each other and we can make up for each other's weaknesses. You also want to find a partner that pushes you to be better. That's one of the things that I love about Mark and always have is he's always doing something. And when he's like, yeah, I wrote my fourth book, I'm like, damn it, I better get the second edition of my first book out. You know, so. So you always want something, somebody that kind of pushes you too, and there's. And especially that person's gonna be a partner in your business and your dreams and vision for what you're trying to build. So I know it's not always easy to find that person, but they're out there. They. They really are out there. It just takes a little bit of looking and, you know, so you got to swipe left on some people here and there, though.

Yeah. And now for any of you interested, we are holding a marriage seminar this weekend in Phoenix. Come with your couples. We'll be going through all of this and more because we want you to have a good partnership. You know what's funny? You know, I know it sounds common, but some of you are like, this sounds like marriage. It is, it is. Do you know it's easier to get out of a marriage than a partnership? Think about that, people. There's divorce courts. Divorce lawyers divorce this. There's drive through divorce locations around the country that try to play off this. There's mediators for divorce. But you get into a business partnership, civil lit, civil litigation, write a big check, you're going to court, baby. And there's no simplified, you know, hotline for how can I get divorced fast? I mean, it's not like that. So, yeah, you really want to consider that partnership as a marriage. Speaking of complimenting each other, we try to improve each other's game. And if you're watching on YouTube, I dressed up a little bit today.

You.

I did want to bring a little definitely.

For the podcast. Mark speaking afterwards. I already know.

I don't lie to my partner. Honesty in a partnership is very important. I am speaking at a little gig here after this. And so I would say part of it was for the podcast.

Mark's wearing his university professor look. Is that what it is? Like the cool professor vibe? Look? That's what I see. Yeah.

I wore the tweed for that. I just, you know. You picked up on that. See, look, I am.

I mean, you're killing it.

It's. I'm speaking at a college campus in an hour and I'm like, I gotta look like. I was thinking of picking up a pipe. I really don't smoke, but I was thinking I should have a pipe.

Yeah, that's a good prop. It's a good prop.

That's a good prop. You know, I just pull it out and go, listen here, youngster.

Okay, back to the show. Back to the show.

Oh, yeah, sorry. Back to the show.

You said, who's putting in what? We said, who's doing what? But I think there's two things. Who has the responsibility to do something? You know, like, you're supposed to do this in the business and you're not going to Be able to define everything in your documents. Let's just be honest. You're going to say general broad strokes of who's supposed to do it. There's going to be stuff day to day that like, you need to have an agreement with your partner on who's doing what things. And as you grow your business and have success, you're going to both have to work on different things. You can't both be involved in everything all the time. So you're going to have to have some dialogue on this. But it's really important to say whose responsibility is this? But also who has the authority to do it? You know, like, okay, let's just take. You're gonna flip a property with someone. One person is the work partner doing all the work managing the contractors and the rehab. One person's the money partner. Well, if the, the work partner is managing, has the responsibility to manage the rehab, do they have the authority to make all the decisions? Do we want to put a limit on that? Maybe a decision over ten grand? The money partner needs to be involved, you know, so like, you want to be clear on who's doing what, but also what authority do they have in terms of making decisions? I think that's really important.

I like it. Okay, now with the accounting hat I'm going to put on for a moment, let's go back to another important topic in all this. Everyone, no matter what business it is, if you're going in a partnership, you have to have a healthy respect for bookkeeping and banking. That's where a lot of the fights begin and end. You know, someone was pilfering the bank account or paying for something they shouldn't have, or taking money out or someone put money in and the other partner didn't even know. And so when you form a partnership, just, I'm telling you right now, just go in expecting we're going to have a bank account, we're going to have a joint bank account for the rental property, for the operation. We're going to have a merchant account, we're going to have a PayPal account, a Venmo, I don't know, you're going to have a website with a shopping cart or you're going to have a, a method for tenants paying rent. Are we going to have a property manager collecting the rent? But you need to know where the money's going, how it's being spent, who's spending what. And there's got to be in a regular accounting and so build into the budget right out of the gate. That you have a college student, a part time accountant, whatever it is, one of you. But someone's got to be in charge of the books. And you're going to be doing a tax return, something you're like, well, I'm going to do a JV agreement and we'll just going to put it on each other's schedule E. Bull crap. If you get audited, the IRS is going to require a partnership. Every partnership, whether you have an LLC or not, requires a partnership. 1065 tax return, period, period. Don't let anybody tell you any other thing. Otherwise, have your account put it in writing. If they tell you something different.

Yeah. And that 1065, there's no tax due on it. Right. It's a partnership that just says, here's the income, here's the expenses, here's our profit and loss. And then you know, if you're 50, 50, here's your half, here's my half, and we. And then you both go pick that up on your personal return. But this, I also think it's really important that both of you have access to the bank accounts. So every partner should have access to the bank account to log in, to look at what's going on, to view the transactions. We want to trust our partner, of course, but you need, as Ronald Reagan said, trust but verify.

Okay. Oh, now, Ronald Reagan quote. Wow.

Trust and verify.

Yeah, you don't want to be Bon Jovi living on a prayer. You want to be Ronald Reagan.

Trust but verify.

Yeah, trust but verify.

But here's important. I mean, I'll be. This is a quick story. My neighbor growing up was. Had a business partner and his business partner was embezzling money from him. My neighbor growing up went over to his business partner's house, killed him and buried the guy in his own backyard.

I've known you how many years? This is the first I've heard of this.

Yeah, I mean, what? Yeah.

Oh my gosh. Did you get interviewed for Dateline or anything good?

No, I mean I was like 12 or something, but like, man. Yeah, this like totally happened. Like my next door neighbor going up. Your next door neighbor murder from a. From his business stealing from his business partner, stealing money.

Why?

And he went over there in a rage and literally killed the guy and buried him in his own backyard.

Which was your next door neighbor yard?

No, no, it was the business partner's backyard. So the. My neighbor went over to his business partner's house and killed the guy at the business partner's house. I mean, totally sad story like, but

apparently he got caught.

Yeah. Yeah.

Okay. All right.

Yeah, this is.

You're not disclosing some inside information here that, yeah, he's on the list.

Okay, yeah, yeah, yeah, he's behind bars. But, you know, the rage. I mean, this is a normal guy. You know, he played football at the University of Michigan. Like, he was a. He's a normal guy, you know, And. But the rage that can happen with that is, obviously you never want to be the type of partner that would steal money in the first place or kill someone, but. Yeah, but, you know, this issue of the funds and being careful with it and, you know, you can be a little more gung ho with your own money in your own escort bank account, so to speak, but, you know, these funds you have with your partner, you want to be careful, be on the same page about it, both have access, have the accounting like Mark talked about, that just keeps everybody on the same page. But it's also good for your bookkeeping. It's also good to, like, know how your business is performing so you can analyze things better. So just.

And on that note. Yeah, well, for some of you that are listening to this podcast, we just had a big annual anniversary, and it wasn't our partnership anniversary. It was October 15th this past weekend. Big day. Big day. Well, I literally, the call I had right before I closed my laptop right here, before the podcast recording began, and I was talking to my accounting partner about tax returns, and 1065 is for this client and all the partnerships and where the K1s are going. And a lot of partnerships start with, the sky is blue and the, you know, the sun's shining and we're going to make all this money, but they forget I got to do a tax return at the end of the year. Are we putting our money back into the business? One partner wants to take draws. Are we going to pay taxes on that phantom income if we leave all the money in the business? Make sure again, you have your accountant involved early on on what you're doing. Accountants, we hate it when a partner, when a client comes in and goes, okay, my tax return. Da, da, da, da, da. And we were working on their tax return for weeks or months, and then at the last minute, oh, and I had a partnership last year. What? This is the first I'm hearing about this. What? And then you're like, well, show me your llc. Well, it's one sheet of paper. We didn't wanna hire a lawyer. Okay, jump. Partnership agreement. Well, we have a couple of emails and we have a napkin from Denny's or Waffle House. Oh, my gosh. And so. And now we know they didn't want to bring it up because they knew it was messy, they were embarrassed, and then they threw this on us at the last minute. We got more accounting fees. They're mad at us because things cost more. We're like, you're the one with the mess. And so just be organized, damn it. Yeah. Yeah.

Like I said before, I think, like, if you're not organized and tracking this on an ongoing basis, you have no idea how your business is performing. How can you be reactive to what's working, what's not, what expenses you're wasting money on, and you're not. So you're gonna have to do this one day, you know, so you might as well stay on top of when you know what the heck's going on and remember what expenses are. Okay, I want to talk about one other thing.

Okay. I also need to disclose. I feel bad. I've been kind of picking at my fingers here on YouTube. For those that have seen. I. I was up until midnight, actually. 1am, frankly, tiling a little rental property with my daughter and son in law. And my. I can. I can throw up some drywall. I can frame.

I was tiling a bathroom tile, apparently.

Yeah, I can tile a tile. And the mortar and the.

Oh, my gosh.

And all the caulking and everything. My hands are a disaster. And so I apologize. Some of you, like, is, what is he doing? And so, yeah, my hands. But you know what?

Go get. Go get a manicure.

I know I need a manicure, but, you know, I'm a renaissance guy, you know? See, some of you, like, well, these are just lawyers. They don't. They don't really get their hands dirty. Nope. Right here. See it on YouTube. This is working in a rental property till one in the morning, I can throw down. So there you go. Okay. You're. One last thing. And then I'll say one last thing too. Okay.

Okay. So we have the four Ds.

Okay.

Oh, ooh, the four Ds. I'm gonna hit these quickly. Just need to know what they are, and just a couple ideas to address them. This is death, divorce. I know. This is all great stuff.

I know. You're like, just mister. You know, good news today. Your neighbor killed someone and buried him. Okay, now we're on. Okay. Okay.

I say the four Ds were good, but these are the things you want to plan for in your partnership agreement.

Same again. Same again for everybody. Okay.

Your partner are you dying? What are we gonna do? Okay, divorce. One of you gets divorced. What are we gonna do? The business gets put up in the divorce. I mean, am I. Is there newly divorced spouse that hates them now? My new partner, too. Okay, disability for one. If one of you becomes disabled or departure, one of you just wants to sell and get out. All right, so our LLC operating agreement goes over those items. Let me just. I want to give a couple quick ideas just on how to approach it.

Okay.

All right, so let's talk about death. If one of you. Let's go. This two people partnership, it works the same three, four, doesn't matter. But if one of the partners dies and there's a surviving partner left, that's going to have the business and need to run it. Well, do you want that deceased partner's kids or their heirs, whoever they may be, to become your new partners? You know, I mean, are they the right person? Just think of Mark and I, you know, in our law firm, I actually can't have his kids or spouse become a partner. They're not a lawyer. They can. They do the work. No, so what you do is you have an agreement that says if one of the partners dies, the surviving partner buys out their estate. Let's say Mark dies. I don't want to be the one that dies in the example here, but fair enough. Okay, whatever. Yeah. So his estate, though, needs money, right? So I would. There would be a valuation of what that interest is, and I would buy out his estate, his surviving spouse or kids, as the case may be, and they get, you know, they get bought out. And now I carry on and own the business moving forward. Okay, so you want to provision there for death.

Yeah, but if Matt came over and killed me in a moment of rage, buried me in my own yard for a short while, the buy, sell agreement, he'd get the business, but then once, you know, the bloody shovel was discovered.

Yeah.

You know, they. They would come after Matt and then Myers would get the entire business for. Due to Matt's bad actions.

Thank you. Thank you for putting a complicated spin on that.

I thought that was pretty straightforward.

That was a great story, but I. I just want to make sure everybody gets that point.

Yes. Yes.

Once when your partner dies, you want to be able to carry on partner is to run the business. You typically don't want their spouse or their kids, whoever their heirs may be in their estate to be the partner with you. Now, you may use life insurance to fund that. Like Mark and I have a life insurance policy against this that Policy is used to then cash out that their estate so that because you may not have the available cash to just go throw and pay off, pay them off. So you can do this. Life insurance, typically called keyman insurance or Buy Sell, but this is a buy sell agreement, sometimes called keyman insurance, can help fund that to actually fund the buyout in the event this happens. I love it.

And Matt, I love that you dive deep on the Buy sell agreement in the event of divorce. And due to our time constraints with our podcast, I'll say this, it's really essentially the same process for the incident of divorce or disability or someone wants to leave. You need to have that buy sell section that addresses when someone gets bought out, what to do if they can't stay in the business or they're part of their. In fact, to be more specific in that section, we talk about bankruptcy and a couple other issues, you know, where someone's not carrying their weight, they don't want to depart, but they don't want to help. What do you do? So you've got to. So the four D's gets the discussion going. It should be a section in every one of your operating agreements. This is why we have a cleanup service at our law firm where if you're like, I've got a partnership and all we have is one sheet of paper, let's get that partnership agreement completed, let's get the operating agreement done, let's get you holding regular meeting minutes, let's get organized. And so if there's a. We're going to. I'm going to leave you hanging on those last 3Ds, because we could talk about them for another hour. But these are things, hopefully, that have got your mind racing. And I need to have a partnership meeting. Matt and I, this morning, did we not talk about when are we going to go to Park City and meet as partners and talk about the upcoming year? We try to do that every year, Matt. It's annoying because I have to meet him on the bunny hill, you know, do the rope toe, talk business, and then I leave him there and then I go up and ski my Black Diamonds and, you know, do all that, but then come back down to the bunny hill and see how he's doing and.

Yeah. Yeah.

Was I not supposed to share that? Sorry.

Yeah. I mean, a good partner would have, like, you know, just kept that info to themselves.

No, Matt's a great skier. We can ski all day, not fall once. You know, not saying we're doing the Black Diamonds, but we're we're killing it. All right. I had one last tip, and then. But my final shout out is this. You want to think of a want match before you're doing a partnership? Make sure that you talk about that whole vision with your partnership plans, what you envision, what you're doing. My life coach was like, you want to. You want to think. Want match, like, where we are aligned. We may not want everything, but we're close enough that we're. We're really. We're. We're pretty aligned on what our vision is of how to operate, run, and do the business. And so that's my final tip. Just kind of measure those things, talk about it, and if it doesn't go well, it's okay. You'll find another partner. So, yeah. Yeah.

Stay out there looking.

All right, well, thanks, everybody. This is a great topic. Get out there, work on your business. Partnering's okay. It's just finding the right partner and documenting it, and it'll. It's good. It's good. Matt thinks you're awesome.

Yeah. Thanks, partner. Bye, everyone.