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tdmillerjr
07-26-2010, 04:25 AM
I am wondering what percentage I should ask for in a new business partnership in a situation where the partner has an established small restaurant and has approached me in opening a small brewery. He has extra space attached to current building and this is where he wants to open brewery. He wants to sell the beer through his restaurant but he wants the two businesses to act as seperate entities. We are in the middle of forming an LLC and I was wondering since I am going to be the one making the goods for sale and paying for half of everything should I request more than a 51/49 split? I am wondering should I ask for 60/40 or what? I'm new to this and I don't want to hurt myself in the future if and when the business is very profitable. Any information would be a huge help. Thanks

Business Attorney
07-26-2010, 09:27 AM
There is no magic number in terms of ownership split. Some questions to consider: Will you be getting a market rate of salary or will you be contributing services in addition to cash? How much of the brewery's revenue is expected to be directly attributable to his existing restaurant? Are your skills unique?

Since this is all new to you, you should get help from professional experienced in these issues. There are a myriad of issues that you should be addressing in the LLC operating agreement besides the simple ownership split.

Good luck.

partnershipcoach
07-26-2010, 08:13 PM
My question is why are you partnering at all? Do you already have a brewery that you'll be moving or expanding into the space or is this a start-up venture for both of you? I agree with business attorney...there are a lot of questions you should be asking yourself and each other before forming the LLC. I would have each of you list out specifically what you are contributing to the new entity (money, expertise, sweat equity, recipes, etc) and attempt to place value on each. I also think you're on the right track in thinking about the future. If through your hard work the brewery becomes successful, will you still feel the split is fair given his initial contribution to get it started and your ongoing contributions to grow it?

Good luck!

vangogh
07-26-2010, 11:52 PM
I had a similar question. You mentioned the owner of the restaurant wants the businesses to act as separate entities so why form an LLC between the two. Couldn't you work something out where you lease the space for the brewery and then operate as two separate businesses? The risk there is he might now renew the lease at some future date, but assuming your beer is going over well with his customers he'd have incentive to renew. You could also work out arrangements to brew in other locations just in case.

If you do decide to form an LLC then I would think the split should be the entire company which would include the restaurant as well. If the LLC is only for the brewery I'm not sure why he needs to be involved. You did mention you would be paying half the costs, which implies he's paying half the cost as well. In that case then I could see there being a partnership for the brewery alone and I would think you'd be entitled to more for doing the work as well as splitting the cost. I'm thinking more along a 75/25 split. I'm thinking running the brewery is half and the money is half and he's only contributing half the money. Unless he's covering cost and giving you the space for free. Then maybe the 60/40 split is more reasonable.

Ultimately you should try to get the best deal you can get. Some of that will come down to reading him and thinking about how much you can get. Some of it comes down to you deciding on a minimum you'll accept and refusing to take any less. There's certainly no single answer here and I'd also agree in seeking the advice of an attorney or accountant or some professional. The cost of who you hire to help could pay for itself the moment an agreement is signed.

I'll also add good luck. I hope this works out for you. I live in a microbrew town. Most every restaurant here in Boulder seems to brew their own beer. I'm not really sure how most of them have things set up. Sometimes the beer and restaurant have the same name, though other times the names are different. Most of the beer is also bottled and sold around town as well.

tdmillerjr
07-27-2010, 02:44 AM
Thanks so much. This is very helpful.

vangogh
07-27-2010, 12:49 PM
Glad we could help. Feel free to ask more questions if you have them and also let us know how everything turns out.

Rzacny
07-28-2010, 12:57 PM
Vangogh has some quite good input here as to what truly is going to happen to this whole arrangement. I know a lot of people 'hate' the idea of writing a business plan, but for sure you and the 'other' guy must prepare some type of written document that would indicate how you plan to operate this venture. But, the attorney here is really giving you some good advice. There are quite a few issues that need to be addressed in an LLC 'partnership' agreement in addition to just the 'split' of the ownership. What happens if one of you wants out in a year or two? what happens if one of you 'dies' some day? What if either of you wants to sell their 'position' to another person? etc., etc. etc. You will need some good help from a competent attorney to establish a good and effective 'LLC partnership Agreement.

vangogh
07-28-2010, 02:27 PM
Thanks for the compliment. I like the idea of writing a business plan too. I'm more the informal business plan type and use the plan mostly to think through ideas. In this case it might be good to make things a little more formal, since there are going to be agreements signed between parties. Bringing a professional (lawyer, accountant) is probably going to be a good idea.

Rzacny
07-30-2010, 12:25 PM
I agree with the concept of informal that Vangogh talks about, except...
when we get into partnerships or business relationships with two or more people, the need for some rigidity and formality becomes important. I've worked with too many clients wherein they didn't put together a written Operating Agreement, and found later that they each had a 'different' thought about what certain operating elements meant. Also, the problem in how stock is to be issued and controlled, etc. becomes an important part of the agreement. I don't like people trying to be a 'John Grisham' in writing out their plans, but a good attorney now can save a lot of headaches later. There are on-line sites such as legalzoom.com or nolo.com that can be at least a guide for the info needed. As always...best of luck in all you do.

vangogh
08-02-2010, 12:20 AM
True. When other people are involved you do need to formalize things more. I kind of forgot what this thread was about when I was writing my post above :) With other people you do need to dot the i's and cross the t's to prevent future problems. When things are in writing and you've both agreed to and signed documents it helps if an when issues arise down the line.