Your friend does have some sweat equity in the project and if it came down to a legal battle he could sue for compensation for his work. It is a tricky situaton and one that is best worked on from the getgo. Ususally when people get into this situation it is at the end of the buidling process or when the studio starts to make some money. Then everyone connected to project wants what they consider to be their fair share of the profits even if they are not really "their" profits. Since your friend was with you building the studio he may think he has some rights to the studio or to the money you are making.

I too had a problem with a partner who wanted the profits from the partnership but did not want to do the work that went along with the profits and we parted ways. Luckily for me he did not have any money or time invested in the operation so it was just a parting of the ways. In your case this could get very ugly very quickly. I would talk to a lawyer very soon and before this gets ugly. If this ever happens to you again this will be a good learning experience and you will know that it is best, even with your BEST FRIEND to get everything in writing from the GETGO and then there will be no misunderstandings later on. In this situation I think your friend does have some rights but only a lawyer can say for sure.

Best of luck!

You would have to pay him for the work done and for his part of the risk in the operation, IF you tell him to leave BEFORE you close the studio in January (if that is what you plan on doing).

Otherwise, if you close the studio down then, everybody took a risk and a loss and that's it. The question is: did you tell him at any time that he was going to be part of the operations? What was the nature of your partnership? How did he come to help you with the construction?

IN other words, did you have a shared decidion making?

It sounds like you built a nice facility, and the overhead seems quite low, but of course it depends on location.

Hope you can work out a compromise that will suit your needs while fairly addressing the time/effort your friend put in to the project. As far as the workload/money/employee issues, there are plenty of engineers out there who would be happy to work on a per session basis. If you give them a portion of the hourly rate, you are paying them only while making money. This will also motivate them to bring in clients and help build up the operation. You may not be making as much per hour, but if you get real busy you can expand. Of course they should certainly be competent and able to handle the work, it's all about the quality of the engineers. Just my 2 cents.

Ok

Your story sounds very much like mine, except we had things in writing. But it still becomes a problem.
It took us 3 years to show a profit. You're right , 1 yr is not enough. Everything takes much longer than expected.
We busted our asses in the beginning. Ran special deals, flyers, handed out biz cards. My 'partner' was similar to yours. Although mine had some money in, (about 25%) and because of that he felt like the place was his. He was only interested in doing the 'easy' work.

However, it might not be too late. But there's 2 things that you must do.
1- You must must must have a business bank account and put in enough money to cover at least 2 or 3 months of expenses, and you must be prepared to add to this safety net if needed. You can get paid back once you start making some profit. This is where most businesses fail. You've got to have that financial backup. If you don't have. Then cut your losses and get out now.

2- Start putting down in writing any conversations that you've had with your 'partner' about what his compensation is to be. If this is not going to be a partnership, then he needs to give you a bill for the work done with payment terms.

3- Okay there's 3 things - If your 'partner' is willing to take a loss on his construction contribution, then that sort of constitutes an investment, in which case he's entitled to a percentage of the profits. So it's really going to be best if you spell it all out. It doesn't have to be all legalize. Just write down what you guys discuss so everyone will remember later. Then sign and notorize. That should hold you for the short term.

You'll probably lose money the first year or so. You've got to invest so much back into the biz. New equip, repairs, lightbulbs etc. IF you do good work, you should start to break even in the 2nd year.

4- Oh crap, there's four things. Watch some of those TV court shows every once in awhile (People's court etc) surprisingly, there's some good info there about keeping good records, receipts, documentation etc.

I have one: What are you guys living on!?!? Do you have food bills, personal expenses, automobiles, medical insurance? Spouses, dependents? How long do you have before the Utility Company shuts off the power? This sounds like a financial time-bomb about to go off....

Your partner is either a sponge or a slacker or "dumb like a fox". Perhaps this is just a hobby for him, or yourself?

Sorry if I sound harsh (and I don't mean this PERSONALLY, just business-wise). But somoene's got to get-wise, and FAST. Contacting your attorney would be a good start. You may want to ask this guy to leave and set up a time-based buy-out, if you think you can still afford it.

A small business loan might help you through the worst of it, but you're going to have to have some assets (and a good biz plan) to convince a bank to loan you some capital to keep this thing afloat.

Going into something as risky as a professional "For-hire" commercial studio is a huge undertaking, and it sounds like at least one of your small company is completely unprepared or naive about what's involved. I applaud your efforts to build a great studio, but you may be finding out that it's sometimes better to do these things on your own, without dead-beat "partners" that are really just along for the ride.

Your partner sounds truly delusional at best, and toxic at worst. If he's not serious about finding work for your JOINT venture, and if all he really wants is a free place to record (and chase his dreams), then you've got a really simple decision to make: Put up with his foolishness, or find a way to buy him out. Or close up shop altogether.

Sorry if I sound harsh; you sound like a nice person, truly dedicated to what you're doing. I just think you're being taken advantage of, and like many things in life, "nice guys" finish last.

At least call that attorney, NOW, and find out what your options are. (Try your local Legal Aid society, as well......I'm guessing you don't have $$ to pay a $100/per hr legal-eagle, either!)

GOOD LUCK, and I really mean that. 8-)

... I guess I should finish my story....
After 3 years we finally started to have a few bucks left over at the end of the month. By this time, my partner decided that he had had enough. (although he only had a 25% share and was doing only 15% of the work.)
But even though we had things in writing, it was still a hassle come break up time. I wanted him out, but I didn't want to have to pay him money that I didn't have. How would that look? I'm in debt up to my eyeballs, and he walks away with money in his pocket?
But in the end, that's what happened. I paid him, and got him out of my hair and MY studio.
And the next month, after all the bills were paid, I was left with a gleeming 20 dollar bill left over. And it was all mine. Hoo-Wha.
And the next month, I managed to double it. Things eventually really took off, and I had a really good 25 year run, even built a 2nd studio, and enjoyed pretty much all of it.
So it is possible. And working a couple jobs until you get the rocket off the ground is also a good idea. I did that too. (maybe we've all done that)
That's what responsible, dedicated, positive thinking people do. Whatever it takes to get the job done right.

JOEH and the others above pretty much said it all.
You've got to nip this problem in the bud now.
Either your 'partner' is a real partner with all the rights and privleges of such, or he's a work for hire, or an investor, Or he's a Klingon.
Partners = Share income AND expenses
WorkForHire = Get their invoices Paid
Investor= Get's commisions.
Klingons= Set Phasers to "cut loose dead weight"

Here is the simple answer to all this. Odd enough it comes from Kanye West and it's the only words I know to any of his songs...

"Holla We Want Pre-Nump!"

When and if, I get my own space. I am going to own it, not rent. Besides the issue of getting your friend to step aside without paying him off, you're still gonaa have the issue of paying rent.

Well.. im sorry to intrude.... But,

If u have no partnership deed in paper (did I read correct ? ), and all registrations, licences are in your name (again, am i correct?), whats wrong in just asking him to leave ?

I fail to understand the legal implications, he hasnt invested anything... and all u have is a verbal understanding, which really is not binding in any way (where im from), sure ud spoil a realtionship, but it really isnt going anywhere either...

Sidhu

You might be on to something there, Sidhu.....it sure would be a shocker of a wake-up call.

But he may need a court order and some serious new locks if "Mr. Star Boarder" doesn't go away quietly.

I am not a lawyer but I think you should talk to one before you decide what to do. There are many things that can take place here when you decide to lock him out and I think you want some legal advice before hand. He does have some sweat equity in the building of the studio and he can slap a mechanics lean on the work he has done and not been paid for which would require you to do a lot of legal work to get it removed. There is also the chance that he has access to your business contacts and can do some considerable damage to your reputation as well as direct your clients elsewhere. This is not a black and white event and there are many shades of grey that will have to be addressed. I would really talk to a lawyer before you do anything for your own protection.

MTCW