You Decide Week 5

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We are Chris and Pat Smith, and we are entrepreneurs with five years of experience and we like to invest in small businesses. We decided to invest in this catering company with the two chefs J.P. Martin and L.L. Miller, who have culinary science degrees and five years of work experience, which includes winning a prestigious prize in a gourmet food competition. So we all decided to set up a catering service called “At Your Service”. This catering service was set up to provide services for wedding, parties and other sociable function that would take place around the surrounding areas. Unfortunately the business did not generate the expected profits therefore we are in the process of dissolving the business. How will we split the $15,000 left in the investment?

Well developing a contracted agreement, there was no agreement set forward in which an exit strategy needed to be planned. Which we failed to do so, and should have been planned a head of time. As far capital distribution goes, at the beginning of the partnership, we put $25000 and the chefs put $10,000 plus $10,000 adding up to $45,000 for 100% of the shares. Each share is worth $450; therefore we own 55.5% of the company while chefs own $45.5%. Now we have $15,000 left to be split. If we split this capital according to the ownership percentage, we should receive $8,325 and the chefs should receive $6,675. But we do not think the chefs deserve this as they caused the business to fail. Also we will need capital for our new venture, in which we are looking forward in investing in, therefore we should only give them $3,000 and keep the $12,000. In order to get them agree on this distribution, we should use the kitchen equipment as a negotiation factor. We can not utilize the kitchen equipment in our flower shop, but it is essential for the chefs. How to handle the lease on the kitchen space, which has 18 months more to run? As far as the kitchen space, we will need that space to rent space for our flower...
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