How to let a partner go without rocking the boat?

[Hawsley13]

For the past two years, my friend and I have been in the works of creating a corporate entertainment/team building company. Let me give you a basic idea of the services we provide. Comedic murder mysteries or regular improvisational comedy shows for corporate banquets/Christmas parties/fundraisers. Amazing Races, Scavenger Hunts, Survivor-type team building events. As we expand, it would be nice to offer improv classes, and do some charity events. We live in a city that really has VERY little competition for this. We both have many years of experience in the industry, and have many connections/contacts we can call upon. We also see this type of company can work. Both of us have worked for a similar company, however the company is based outside of the province and has expanded all over North America and has even done some work in the UK. We believe that money should stay right here in our city. This company pays their actors very little and pockets thousands just or sending out a couple of emails.
My friend and I know the inside and outs of this competing business and we also know the quality of talent they have is next to none.

I have my own small carpet cleaning business in which I control everything right down to the books. Sole proprietor. So, I feel this is a good asset to bring to the table. I also have a keen eye for the needs of others and I love being a promoter.
My friend and room mate, has great experience working with actors, directing, and is a good writer. He was also the top salesman in his previous job.
Now for my concerns. We are starting this thing from the ground up with our own money. I have a good idea in which direction to head and where to start but I just can't figure out whether going the partnership route is the best. Yes I could potentially do it myself but it's nice to have the assistance with the start up capital. I'm unsure whether making him partner will be the right decision. He is acting and advertising for another dinner theatre company and this takes up his time. When I tried to explain to him the conflict of interest he doesn't seem to understand and tries to say we are different companies. For our company, I'd like to advertise to both the commercial and private sector.
I'm thinking in our partnership agreement I should put in something about not working with competing companies. I can see him having a bit of a problem with that because they're "his friends". Any advice here?

On top of that, he has another screen writing company with a few of his other friends (they went incorporated and haven't sold a thing in their first year). This takes up a lot of his time as well. I expect him to be committed to the company but how can he if he is dividing his attention amongst 100 things. He's the type of guy who likes to say yes to everything. To help people accomplish their dreams. He will act for anyone for free or very little pay. He just finished wrapping up 3 weeks on set where he "might" get paid if the movie makes anything. Jeez.
I feel like maybe I'm pigeon-holing him into something he doesn't really want. He wants to spread him wings and help with this, and then write this script and then audition for these guys. And I"m focussed on our own business.
Or, do I give him some type of compensation he'll be happy with, and make him my employee. He did write half the script and he did put some planning into this with me. But now he no longer feels like the best partner for me.
Ultimately, I'd like to run it myself but I don't want any harsh feelings. Also, it's nice to have the help with the start ups costs.

There are other reasons I'm unsure of him being my partner. For example, I fear his social media posts are more of a downer for everyone.
Another time, he dropped our price on a client because it was his sister. She had been given him the "oh but please! we don't have the money" speech. When we arrive at the event, we find that she had hired another entertainment group as well, so they did have the money.
So I really do feel doing it by myself is best, but how do I break it to him? Write a contract that he won't sign? Tell him straight up and hurt his feelings? Then I'd have to rewrite an entirely new script and I'm not a writer. I want to make use of him script. Maybe I could offer him a cut of each of the shows as well.
Thoughts?

[tallen]

Have him as an employee rather than an equity partner. If you want, and he agrees, you can still structure his compensation, in part or in whole, based on some percentage of net, as if he were a partner at some level, but he just wouldn't have any ownership stake.... If you need his funds to help with the startup, you could set that up as a loan rather than an investment of equity.

I don't have any advice on how to break it to him, but you just have to sit down and have a conversation about your respective goals for this business, and the time, effort, and money that needs to be invested to accomplish those goals, in the context of each of your lives. Hopefully he would see that you want to go "all in" (as it were) while he would recognize that he has a lot of irons in other fires, and thus might come to realize that at 50/50 partnership would not be fair and so would become open to other possible arrangements.

Good luck!

[Harold Mansfield]

I agree with the above. He's already invested time and money so it wouldn't be fair to try and get rid of him completely. However his focus isn't the business, and from you said he's not a great business manager.

I'd draw up an agreement as said above that he's a silent partner and give him a title that says he's in charge of sales or whatever, but make it clear that he's not a managing partner.
You have good reasons for this and you need to explain them to him. If my partner gave a family member a discount without even discussing it with me I'd be livid. That's not how you run a business. That's how you run a hobby.

There's really no method for insuring that it won't cause a tiff. He may understand and be happy with the new structure and his role,. or he may not. One thing is for sure, if you don't handle it because you're scared to confront it, it will be SO MUCH WORSE later when it gets so bad that it's costing the business money and opportunity.

[ExeterStudios]

I had this exact problem when I started. The partner didnt put in the work needed and it became a bit of a mess. In the end we just parted ways and I retained 100% of the business in formation. I then had to double down my work to get stuff done and try and keep up. Its better if this type of action occurs earlier rather than later. Either way its going to rock the boat a bit.

[Smith's daughter]

Did you guys establish the terms and conditions of this partnership before starting out or was it more of like a spontaneous thing?