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Becoming an associate in a firm
My son has been working with a company in a skills-based capacity for several years. He is self employed and has a contract with the company. His work is highly appreciated. He's just been approached to become an associate, but they yet have to meet to discuss. The company has about a dozen associates.
He's digging up the internet, but knowing how sometimes a question here can yield very useful information in a few lines, I would like to ask the following.
1. What are the most important things to ask the company about?
2. What are the potential risks or drawbacks?
It's not clear from your post, but when you say, "associate", do you mean "associé" in French? Are they're asking him to be a shareholder / partner in the company?
Well in that case, it will depend massively on the cinditions they're asking him to be a partner. If they are giving him existing equity and diluting the other partners, that is the lowest risk. However if they are asking him to put money into the company, he should ask for a few sets of management accounts for the past 3 years minimum and then he should take them to an accountant to discuss.
The biggest risk is that the organisation has accumulated debt and, if you become a partner, you will assume responsibility for that debt - in other words, the equity that you will be given comes with a negative (possibly substantially negative) value. Follow ANON's advice (even if they are giving you existing equity), ask for sets of the management accounts for at least the past three years and take them to an accountant to discuss. Even that won't be foolproof, but any good accountant should be able to smell a rat.
