Expert: Shirley McAllister, CPP, PHR - 7/9/2010

Question
I have been in the restaurant business for 30 years. 3 years ago I purchased a business solely in my name. However I ventured this business with my boyfriend. He has been a mechanic by trade until I purchased the restaurant. He has worked the business with me day in and day out. He has refused to take a paycheck. We live together, have vehicles together etc.. all which are in my name. Whenever he needs money to pay his personal debts he insists on me giving him cash from the business and proceeds to use a cashiers check. What is his share of this business? I am concerned with the cash only. It seems to me that he does not want any proof that he has been an "EMPLOYEE". I am concerned

Answer
He is a partner as he has worked the business with you for the last 3 years. If you want him to be an employee than you have to put him on the books as an employee and pay him a wage and collect and file all the appropriate taxes.

What you have been doing is giving him draws as a partner in the company and it is legal to do this as long as he is running the business along with you.

At some point you need to write up some type of business agreement and both of you sign it to be legal have it notarized by a notary. The document should say how much stock you have and how much he has in the company. Yes, by running the business for 3 years he should have a stock in the company.

The amount needs to be agreeable to both of you. You put up the capital so either he gets a smaller stock or he must repay you half of the original capital put into the company. You should both get regular mgmt fee draws.

Shirley

Shirley