Partnership Percentage

5mcdonag

I am starting a business - my idea, my money - too much work for me to take on myself although I have already done a large amount of work. I need somebody to help with the workload. I have enlisted somebody who will do this part time, as I will, because we both have other commitments. We will both do 50% of the work. I have had several businesses and she has never done something like this. I am thinking 60-40% ownership and profit splitting. I would prefer a partner rather than paying her a salary as it will give her more commitment to work hard and takes some of the responsibility on board. Does this sound fair?

Graham

Really hard to say without more detail. How unique is the business idea/concept, how much effort have you put in so far, how much money have/will you be putting in? What are the expectations of your potential partner?

5mcdonag

Graham wrote: »

Really hard to say without more detail. How unique is the business idea/concept, how much effort have you put in so far, how much money have/will you be putting in? What are the expectations of your potential partner?

No other business like it in Ireland so extremely unique. I have put in all the initial research, made contacts with suppliers, done a marketing plan, secured a domain name and enterprise board grant. Putting up 7500. Potential partner has zero expectations. She has never been in business before and trusts that I will be fair which is what I want to do. I have been in business but never had a partner.

Graham

I don't think you're going to find a formula for working out what's fair but if your both happy with the 60/40 split it doesn't sound unfair. Just make sure all the legalities are in place.

Have you discussed who decides or how it's decided when you can take cash out of the business? Is that €7500 available for you both to draw as salary etc.

5mcdonag

Graham wrote: »

I don't think you're going to find a formula for working out what's fair but if your both happy with the 60/40 split it doesn't sound unfair. Just make sure all the legalities are in place.

Have you discussed who decides or how it's decided when you can take cash out of the business? Is that €7500 available for you both to draw as salary etc.

Thanks. No, we have committed taking nothing out of the business until the loan is paid back. So, for now, we're working for free! God bless free enterprise!!!

Bandara

I wouldn't give 40% off the bat

You've no idea if she will be any good/able to do the work/will leave etc etc

Just my opinion but Id offer her something along the following lines:

40% of any profits after the loans have been cleared, 10% ownership of the company after year one, another 15% end of year two and her final 15% end of year three.

With you having an option to terminate the agreement if you wish with a compensation to her of the amount of her shareholding valued against the previous trading years profits.

I'd also have a complete get out clause for you up to end of month 6 without her being entitled to anything.

Your not getting a hardened proven performer here, so don't reward until they deserve it.

Good luck with it

5mcdonag

Hammertime wrote: »

I wouldn't give 40% off the bat

You've no idea if she will be any good/able to do the work/will leave etc etc

Just my opinion but Id offer her something along the following lines:

40% of any profits after the loans have been cleared, 10% ownership of the company after year one, another 15% end of year two and her final 15% end of year three.

With you having an option to terminate the agreement if you wish with a compensation to her of the amount of her shareholding valued against the previous trading years profits.

I'd also have a complete get out clause for you up to end of month 6 without her being entitled to anything.

Your not getting a hardened proven performer here, so don't reward until they deserve it.

Good luck with it

That sounds perfect. I didn't even consider this. It makes a lot of sense. Thanks!