[Recked]

I figure it can’t hurt to get some anonymous internet feedback. This question is probably gauged more at the older/more experienced crowd here.
Started with my sole/prop firm/employer in 2001 as an intern, and full time in 2002.
Did not apply for the CPA by 2009 when NYS changed the education requirements from 120 to 150, so in the mean time I got my EA, and waited out the clock on the 15 year experience pathway to CPA (instead of getting a masters).
In 2012 I figured out I was grossly underpaid for education and experience, and received a minimal raise, and I agreed to stay under the condition that I was earning in equity into the firm aka, building something for the future. (For reference, someone I know was making 60k/year 5 years out of school in industry with no CPA.)
My employer is now 74 years old, works part time, and is pulling about 50% more in comp. He says he can’t afford to pay me more, yet pays for 2 BMWs, always gets the newest iPhone, travels for a month every Dec-Jan including international travel, etc etc etc. He’s very much broke and lives above his means. When I got licensed I received a large raise $25k to keep me here, but then lost my $10k post tax season bonus that I had received the year before, effectively cutting my raise, and I brought in enough new work to pay for the rest of the raise. It’s coming up on a year and 9 months and we’ve made no progress on the negotiations. He keeps stalling and postponing conversations. I thought I had already “paid my dues” but after I got licensed he wanted to start me at 20% and work me up to 50% over the next 4-5 years, without a change in compensation, and he won’t make a move unless I agree to buy the other half at 100% of receipts. Internal acquisitions are averaging 75-80% based on numerous sources I have talked to.
The firm has grown from about $200k in 2002, to a little over $400k in 2019, which is decent for only 2 professionals. The way I see it, is if I keep bringing in work for every dollar I bring in, I am increasing my buyout by 25cents, and seeing no increase in comp for the extra work. I have received authorization to start a side practice which I did this year, but that just means working even harder just to try and get ahead while still being employed full time.
I feel he wants to have his cake and eat it too, collecting 50% more comp now, and then wanting 100% for his half on the back end as well. If I were to leave I estimate about 100-130k of the business going with me, which doesn’t get me to my 50% which is why I’m stuck. I have evidence of the verbal agreement, but no specific terms were laid out. Employer and I share a friend who is an attorney who is trust worthy and I bounce ideas off of, and he has recommend that I seek counsel so I have an appointment for Monday.
In 2002 I started at $30k a year. Comp for each year as follows. All comp figures include wages, health, and any other benefit I receive, except CPE.
2002 – 20k (Part year)
2003 – 31k
2004 – 34k
2005 – 35k
2006 – 37k
2007 – 39k
2008 – 40k
2009 – 41k
2010 – 42k
2011 – 42k
2012 – 46k
2013 – 55k
2014 – 56k
2015 – 64k Licensed EA
2016 – 73k
2017 – 89k
2018 – 101k Licensed CPA (mid year raise)
2019 – 107k (First full year with raise)

Did I get screwed or am I way off base? I realize a lawsuit is going to completely blow this thing up. I live small, save big, and have no debt. My unemployment can be measured in decades before I am in dire straights. I also have other offers, one of which is Tax Director for another area firm with comp of about 140k and fast track to shareholder, but it would require a change in work life balance that I’m not looking to accept at this point in my career. Opinions?

[Recked]

Had a good chat with attorney this morning.
First some responses.
–
We currently have a little over 500 personal clients, and 100-150 business entities.
Unfortunately we don't average anywhere close to $700 per return, which goes back to the old school rates and charging too little.
I have instituted a $300 starting price for a return, but we still have some leftovers that are charged only $150-$200.
–
Regarding being paid 6 figures. Keep in mind those figures include my health insurance, which happens to be a very good perk, but costly.
I have a no deductible plan which runs about $1100 a month, which has a material impact on my wages, per say. So comp is 6 figures, but salary is not. Same basket though.
–
Speaking of wills, etc. He has actually mentioned to me numerous times that he intends to put me in his will, but he's been saying it for years, and at 74 years of age, it seems to be more lip service with no action on his part. Not sure what he's waiting for if that's his true intention. But then again, if the bank owns everything, what are you leaving to someone in your will?
He has no immediate or close family. Life partner, so no kids. His brother died a number of years ago, and his only direct family is a grown niece and nephew who don't even write or call to wish him a happy birthday. I am literally the closest thing he has to family besides them. The life partner and I are no longer on speaking terms due to the oil incident, and my demands to get more of the pie, directly reducing the disposable income available to them.
–
Very valid points regarding a bad partner. Based on the way this whole thing has gone down I am not too excited about being a partner with this individual. My end game would be more comp, or the ability to take more clients and be on my way. Who wants to be partner with someone who lets the payroll taxes get 6-9 months behind.
–
ATTORNEY UPDATE – So we had a good chat. Hearing my side of the story, the attorney has concluded that I have been taken advantage of, which I think we all agree on. But again, you're only hearing my side of the story. He is going to do some research but there is very slim chance of a suit on the verbal agreement due to the “meeting of the minds” part of law. You can have an agreement to have an agreement, but that ultimately means nothing because there were no specifics to the terms. Where as I thought the difference between what I should have been making based on comparable education and experience, vs what I was making, was going towards my equity position, he could hold the position that he was thinking more like 1% a year, or something similar. So no real meeting of the minds on that front.
–
The good news, and something he will research further, is that no written agreement cuts both ways. The attorney is thinking that if I have no non-compete or anything else in writing there is nothing stopping me from leaving and contacting whatever clients I want. I have firm clients that know of my side practice that are eager to make the switch so I derive the benefit of my work, and directly get their money. He's going to do some research and then we'll have another meeting. I'll keep the thread updated with any possible news, half education/half entertainment for you folks.
–
Now everyone knows why I keep saying in all these threads to GET IT IN WRITING. Should have taken my own advice 7 years ago. Live and learn kids. Learn from my mistakes.

[aaronmo]

^^^ Keep in mind that agreement or not, he will likely go to litigation over those clients, and I think that's an easier claim than yours. Whether he has a case or not, there will be a cost to respond.

I suspect that, in this case, and given his age, your best bet is just to break off, take as many clients as you can…let him come after you and fight as needed. He's not young, so he may have limited energy/time for the suit. He's also going to be awfully busy with no help during the season.

[jenpen]

@Recked – Just checking in to see if there's an update to your story.

AUD - 56 - 68 - 61 - 9/8/16
REG - 75
FAR - 7/15/16
BEC - TBD

Wiley CPAexcel and NINJA 10 Point Combo

[Recked]

There is an update. I'll try and keep it concise.
Sent an email to boss 11/15/19 (This was probably the 6th email over 21 months, but I finally revealed that I have other offers.) Email text as follows.
I figured I should let you know.
I’ve made numerous contacts in the last 6 months and I now find myself in a position where I have multiple offers and opportunities presenting themselves. There are multiple baby boomers that are looking for a transition strategy in the local area, as well as an offer that includes the title tax manager, a substantial raise, and a very clear fast-track path to shareholder.
I’ve been requesting additional information from you, including a clear path in what it will take to become partner, and a timeline for when I could potentially start to earn a CPA level salary.
I would greatly appreciate if you can share any additional information as soon as possible that would help make clear exactly what sort of future I have here.
Thanks
–
Meeting with the attorney as stated previously, forget the exact date.
–
Dec 19th, the day before boss leaves for about a month vacation he finally decides to talk to me after I had been reminding him daily that I was awaiting a response. (He conveniently waited until I got the new computers up and running with the transition to Win10.)
Boss says in as many words, it sounds like you could do a lot better somewhere else and I don't want to hold you back…
I explain that if I leave that will not make the “whole” for all the years of working at below market rates with the dangling carrot of sweat equity. He wants to retire soon. He says he can't afford to pay me more. Working on getting the house ready to go on the market but that could take a year. I ask if he is still looking for 100% of gross on the other half and he said yes, about that. I said if I leave obviously people will go with me and he said yes, SOME people, I understand that, there's not much I can do about that, if someone says they want to go with you I can't say no, that's what happens.
–
Received written legal advise from attorney dated 12/31.
No specifics put into writing regarding the verbal agreement so no “meeting of the minds”. “Because of the lack of specificity of the oral conversation I do not believe you have a viable claim to sue.”
I am free to entice clients of the practice to leave. “While your conversations with -employer- concerning ownership equity were too vague to make a viable lawsuit, the vagueness works in your favor allowing you to take his clients.”
–
Current game plan is to continue on course. Side practice is up a running since summer of 2019.
I will continue to be employed on salary, and I will continue to build the side practice. I'm currently not poaching any of the legacy clients, but anyone that I brought in since I have been licensed I consider to be my client.
–
Very expensive life lesson for me, but karma will get ya.
If I outright leave I can probably take about 25-30% of gross. If I wait until he tries to sell and people have a choice between a completely new face, or me who they know for 20 years, I think the choice will be clear and I'll make out better in the long run if I don't terminate the relationship prematurely. Either way, my parachute is packed. Car is paid for, house is paid for, no kids and I live on less than 50% of my take home.
–
Any thoughts or opinions welcome.

[aaronmo]

Well, you have a plan, you have an answer, and you have talent. Long term, given how it's gone, I'd probably offer to take anyone who contacted me, legacy or not, but would not contact anyone who didn't contact me first. I'm a pretty fair minded guy…with my old firm, I'd have offered them a cut of the gross and work out a deal, but they were also always open and honest with me. Your guy sounds like he played games.

What you're doing is a scary transition. I've thought about doing it too and haven't had the risk tolerance. YOu have the talent…you'll make it work!

[FutureCPA]

Recked, I always look forward to your post because you are from Kingston. I know where Kingston is.
Your situation is above my experience. I am still young in my career BUT I have been in a situation where I have been taken advantage of and it suck. Not only that, but years after it passes you won't forgive yourself for not giving yourself the worth you deserve and allow others to take advantage of you. It does a lot to the self esteem. If things are really the way you say they are then you need to run. I don't think this is something about it being a new year and you want to live your best life crap this is a problem. You are a CPA with so much experience. I am sure you haven't been playing games at the office but instead have gained some valuable knowledge. So yes, you might walk and not get the equity making it seem like it wasn't worth it to work below market value but you learned a lot. That means something.

I need to pass before busy season.

[turo9992000]

@Recked, If I was you, I wouldn't stick around any longer. Cut ties and either go with another firm that appreciates you or start your own thing. If you have a good 6 month parachute open now and work hella hard to build up your reserves during tax season. In the long run, you'll be much happier if you put this whole thing behind you.

[Recked]

Thank you for the input everyone.
Current plan is to cut back and work a relatively easy (no more than) 40 hour work week this tax season.
I figure if he wants to pay me 2/3 of what he takes from the business, then I should work 2/3 the hours, but I'm not sure that's realistic if he's only working 30-40 hours a week.
This should give me more time to devote to my side venture, and we'll just see where the path takes me.

[Author]

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