Percentage Split between 2 partners in small business

[Heena]

I am entering into a two person partnership. We are currently trying to figure out how we should split the income percentage wise. Both of us are investing equal amount of money into the company. It is a rental dresses company we are starting. My partner is already running the same business in one city. We are opening a branch of the same company in other city. I will be taking care of everything in this new branch. (Design, production, marketing and delivery). I will be basically doing all of the work. My partner will provide his inputs regarding running the business and he’ll be accompany me for marketing / production sometimes. Without me, my partner wouldn't be doing this so I am a valuable asset to my partner. Just my partner benefit is that he is an experienced one in this business as he has started the same previously in his city.

My partner proposed that we do a 50/50 split. He gets 50 and I get 50 percent.

I'm wondering what a fair split would be? Also would it be a good idea to actually do something like at 70/30 or a 75/25 split or commission based on specified amount or per order or % of sales, net profit, or any other value

Any feedback on this would be much appreciated.

[paul89]

Hello Heena,

It's fair to split 50/50, till everyone of you gives as much work and time to the buissnes as normal. What I mean by this is that everyday you and your partner give the same energy. E.g if you do a lot of things, spend every day at improving the buissnes, and your partner don't, then he shouldn't get 50% of profits.

[Heena]

Hi Paul,

Thanks for the reply. I am gonna handle the whole things over here. My partner wants to just expand his business in new city. and in new city he cannot come and settle down there forever. so I come into picture. I will be operating the whole business. he'll come here sometimes, Just for some inputs such as designing of new dress and may be sometimes initially to do marketing to establish and to be famous. also, he is my relative. feedback is appreciated

[turboguy]

Another option would be for ownership to be 50 50 but for you to take a salary off the top.

[Heena]

Another option would be for ownership to be 50 50 but for you to take a salary off the top.

Thanks for the reply. Option of Salary off the top of ownership could be considered. can we not consider this case as a case of franchise buying. Additional is that my partner is also investing the equal amount of money. can we not have royalty fee instead of partnership percentage? feedback is appreciated

[turboguy]

You can do anything you both agree to but with both parties investing and equal amount equal ownership with an appropriate salary would be the fairest.