The Entrepreneur Forum | Startups | Entrepreneurship | Starting a Business | Motivation | Success

Partnering with folks for business startup

bosco

New Contributor
Dec 31, 2007
60
6
17
I am partnering with 2 other people on a startup. I had the idea, some connections, and some cash. One is comming to the table with cash only and will not actively participate and the other is comming with limited cash but will actively participate. Question is, what are some options for structuring the agreement with respect to share in the profit. 1/3 split all the way around or should there be a different share in the return based on cash invested?
 

Don't like ads? Remove them while supporting the forum. Subscribe.

Cmbilt

New Contributor
Jan 25, 2008
32
2
9
Just my opinion, but it sounds to me like your one partner just wants to act as an investor, and your other partner wants more responsibility. I would structure an agreement in terms of you and the partner who wants to actively participate as in the number of hours required for him to work each week, or maybe a workload schedule. The other partners agreement could be in the yield, or return on his investment each year or month. Hope this might help.
 

White8

Contributor
Dec 6, 2007
272
45
30
47
Salem, OR
Partnerships can be interesting...

First off, I would issue stock based on the percentage of cash brought by each investor. You, and the partner who will be working in the business should be drawing an agreed upon salary, even a deferred salary since working in the business will be your "job" If all goes well, at the end of the year you can pay dividends to all investors.
 

kurtyordy

Bronze Contributor
Aug 28, 2007
2,376
277
70
41
PA
here is some advice from experience- get everything in writing

exit strategies- what happens when someone wants out, what happens when two want one out.

Roles- who will do what, what hours will be put in, what happens to a partner if they do not put in the agreed upon time

Compensation- what will partners get paid for time/money put in.

As far as structure, a lot depends on how much money and how much time. If money guy is putting in 1 million and you and the other partner are only working 20 hours a week, he is going to feel pretty jacked if the split is even. On the flip side, if he is putting in 20k to start it, and you and other partner are working 80 hours a week, you guys are going to feel pretty jacked if you all are making 80k a year in profit.

Open and honest communication on the front side will save you much pain on the back side. This I learned from experience.
 

Create an account or login to comment

You must be a member in order to leave a comment

Create account

Create an account on our community. It's easy!

Log in

Already have an account? Log in here.



Don't like ads? Remove them while supporting the forum. Subscribe to become an INSIDER.

Post New Topic

Please SEARCH before posting.
Please select the BEST category.

Post new topic

Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Monthly conference calls with doers
Ideas needing execution, more!

Join Fastlane Insiders.

Top Bottom