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Posted: 5/2/2003 10:54:11 AM EDT
I work for a large manufacturing corporation in management. Our executives have decided to discontinue the manufacture of a specialized product line (system). Some of the equipment we use to produce a major component in the system is located at my facility. A group of people in the business of installing this system came to us and offered to buy the rights to the system, including equipment, with the idea of manufacturing, marketing, and installing it themselves. It will be a multi-million dollar business for them. As part of 'due diligence', members of the buyers' group have come through the plant looking at the equipment and asking lots of questions. Well, the principal of the group and I 'hit it off' and we are now informally discussing the idea of me setting up a business to do some of his manufacturing with equipment that will be taken out of my plant. What my role involves is buying the base stock which is still made here where I work now, adding some value through simple machining, and then shipping the stock out to the partners' locations throughout the eastern U.S. It's all doable financially, but here's the catch. I am concerned about the reaction of my employer when they find out I am buying the raw material from the company. The machining business isn't lucrative enough to allow me to retire yet. There are no competition issues here, since the corp. is out of the business. However, as a manager, I would be responsible for order fulfillment to myself, have to investigate my own complaints, etc. I don't want to discuss this venture with anyone here, even though I can't find anything in our corporate policy-and-the-law guidelines that addresses this conflict-of-interest situation. I'm thinking of putting everything in my wife's name and letting her be the principal, but she is completely ignorant about manufacturing and business. The buyers' group principal is willing to entertain just about any arrangement. What do you think is the best way for me to proceed and still keep my day job?
Link Posted: 5/2/2003 10:56:27 AM EDT
Who says you have to tell anyone? And no, I'm not being a wiseass....
Link Posted: 5/2/2003 11:02:13 AM EDT
Originally Posted By Zaphod: Who says you have to tell anyone? And no, I'm not being a wiseass....
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Good question. I don't want to tell anyone, but my actions will tell the story because this is such a small community. The minute I start shopping around for a building, an electrical contractor, and file for an air quality permit, etc. people will start talking and figure out what's going on. It's only a short time before the boss hears about it.
Link Posted: 5/2/2003 11:02:29 AM EDT
[Last Edit: 5/2/2003 11:03:40 AM EDT by DPeacher]
Do the work yourself, but do it under your wifes maiden name. She can remain as oblivious about the details as she is now, but you would still be collecting from the new revenue source. For some reason this sounds too simple, but the simple plan most often the most successful. Good Luck!
Link Posted: 5/2/2003 11:05:19 AM EDT
Originally Posted By DPeacher: For some reason this sounds too simple, but the simple plan most often the most successful.
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It is incredibly simple. This is one of those opportunities that rarely comes along.
Link Posted: 5/2/2003 11:22:05 AM EDT
[Last Edit: 5/2/2003 11:24:54 AM EDT by Oslow]
So, if your employer is going to find out about it eventually, why not have a discussion with him up front? Sounds like his company benefits from a new customer for what he is selling. There is no conflict of interest if everyone knows the business arrangement. Keep it clean. Of course, if you thought that was going to work you would have gone ahead and done it already, right?
Link Posted: 5/2/2003 11:24:41 AM EDT
Originally Posted By Oslow: So, if your employer is going to find out about it eventually, why not have a discussion with him up front? Sounds like his company benefits from a new customer for what he is selling. There is no conflict of interest if everyone knows the business arrangement. Keep it clean.
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Amen. Upfront and honest.
Link Posted: 5/2/2003 11:28:43 AM EDT
If I understand correctly: The executives want to sell off part of their business. The buyers are more likely to buy it and be successful if they have you working with them. Having you involved makes the deal more possible and better for both sides. Your company may like you to also be a customer by buying the raw materials. I recommend talking to your boss about this arrangement in a way that your current job will not be threatened. Let them know you want to help the deal go through for the benefit of everyone. It may benefit your company more if you are the one getting the raw materials instead of another company getting the raw materials elsewhere. As far as conflict of interest is concerned, maybe someone else can oversee your purchases and order fulfilments. If the deal involves any kind of performance incentives, then both sides will want to make it happen and be a successful as possible.
Link Posted: 5/2/2003 11:31:51 AM EDT
Why not talk to your boss? Management buy-outs are nothing unusual and he might be glad to sell $whatever to you.
Link Posted: 5/2/2003 11:36:07 AM EDT
Does your company have an Ombudsman program? You might be able to front the question somewhat anonymously through them to the legal dept. and if it flies there, approach your boss.
Link Posted: 5/2/2003 11:39:53 AM EDT
ask em up front- if they say no, then you avoided a mess if you didt it and they found out. If they say go for it-(may want to get in writing) you got it made!
Link Posted: 5/2/2003 11:53:32 AM EDT
Originally Posted By Axel: Does your company have an Ombudsman program? You might be able to front the question somewhat anonymously through them to the legal dept. and if it flies there, approach your boss.
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I have a friend in our legal department and am toying with the idea of discussing it with him.
Link Posted: 5/2/2003 11:59:02 AM EDT
Set yourself up as an LLC, or a small corp, then it isn't you buying from the company
Link Posted: 5/2/2003 12:06:20 PM EDT
If it is not specifically forbidden in the company's policies, then you have no worries, but I would do it through your Wife's name to avoid a appearance of any conflict of interest... [sniper2] ____________________________________ [b][red]The 2nd Amendment - the original homeland security bill...[/red][/b]
Link Posted: 5/2/2003 3:58:30 PM EDT
[Last Edit: 5/2/2003 3:59:25 PM EDT by AeroE]
This is a conflict of interest, because there [u]may[/u] be the perception that you [u]might[/u] have influence over the cost or availability of the product that you buy from your employer, or worse, someone decides that you aren't buying it, you are stealing it. There are a lot of "mights" and "mays" and so on, but your best course is to avoid the appearance of a conflict of interest. Another issue is the interpretation of non-compete - your employer's lawyers might not see it the same way you do. A clean break by quitting might not even be sufficient, depending on the agreements you are under as a condition of employment. Your instincts for caution are dead on.
Link Posted: 5/2/2003 11:35:03 PM EDT
And don't let yourself become wedged between the two, as a pawn in the negotiations. Like in, "well, if we can't have the Commissioner running our operation, that means we'll have to rethink how much we can pay for the system". Or, "jeeze, you're going to take away my best talent, he's damn near irreplacable. If the talent goes with the system, you'll have to pay for that, too." Is there an alternate supply for the base stock? And are they offering a contract of several years? You do not want to be looking for another job.
Link Posted: 5/3/2003 4:33:59 AM EDT
Link Posted: 5/3/2003 6:23:34 AM EDT
Te real question is that if you are your own customer, can they make you kiss your own ass? [:D] GO FOR IT!!!!! You want a separate corp anyway, so just file and do the deal. You always do have the wife option. I have used that several times myself, as a result, my wife is a wealthy young lady and I am a pauper.
Link Posted: 5/5/2003 6:42:36 AM EDT
I'm really impressed with all the thoughtful advice given by those who replied to the thread. Thanks to all who weighed in. Another reason why AR15.com is the premier gun board! I think this is the way to go: 1) Set up a LLC in my wife's name. The company will exist to do nothing more than perform light machining of the component for the customer's system and ship the component to him. This way I can legally claim no ownership. 2) The customer will purchase all the raw material from my employer and own both the finished and unfinished inventory in my shop. All I will own is the machining equipment and other related equipment. This way the customer does all the dealing with my employer. All ordering, billing, pricing, complaints, etc. will go through the customer, not me. I have no 'outside' relationship with my employer. Since my employer is exiting the business, there is no competition. The machining is going to be done somewhere, if not locally by me, then in other places at a higher cost. Since my employer wants to get rid of the machinery (in the way for future expansion), it's in their best interest to allow the quickest transfer. The way I see it, it's a win-win all the way around.
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