Partnership Percentage help!

[ucomllc]

I was asked by an old work acquaintence/investor to help them out with a newly created business. It is a sales business utilizing my own current companys design capabilities. They presented me with a contract specifying I was to receive 50% profit (not net or gross. Retail price less the cost of goods and sublet) for everything I sell. We are reducing from this the sublet design work to my personal company.

The investor is paying for business licensing, sales tax, and software. I am being paid as an independent contractor. I am not paid a salary and do not have any specific roles or titles in the company. The problem is that there is another part time employee/principal of the company that occasionally sells also. I have on occasion helped this person with a few accounts to help push orders through.

This company has alot of potential and I am more than capable of putting in the work needed to make it extremely profitable. I have not yet signed the contract because I do not think it will work out very well as it is written. Profit is subject to invoicing and the lack of structure and accounting makes me extremely hesitant.

I would like to propose a structure that either monthly or quarterly would have a "bonus" or "payout" calculated after all profits were balanced with all expenses. Doing this I would also like to establish a small salary that would cover my travel expenses, promotional time, advertising expenses, as well as networking and prospecting. I will be establishing vendor and customer accounts and will be primarily in charge to maintaining these relationships.

I want to make sure that if I am doing media blasts and I am not the one that sells a resulting job, I will still be compensated for the increased revenue. Does anyone have an idea of how I can establish this as a profitable venture for both parties? I am not investing money into the company but I will be investing the majority of the sales and growth.

[vangogh]

Welcome to the forum ucomllc. I hope you don't mind, but I broke up your post into paragraphs to make it easier to read. It was hard to follow as a single paragraph.

I'm going to say the same thing I do every time someone asks about how to make a partnership agreement fair. Ultimately I think it's something only the partners can determine. Each person has to agree to something they consider fair to them. The rest of us will never have enough information to really know what's best.

Having said that I'll do my best to help. From what you're saying this doesn't sound like a business partnership. It sounds more like your old work acquaintance is going to be the business owner and you'll be contracting for the business. However you'll be paid a % of the profit for everything you sell. I think you're hesitancy is telling you the contract as written isn't a good deal for you, or at least one that carries too much risk. Since you have a different structure you want to propose, I think the best thing to do is propose it. Bear in mind if your proposal isn't agreeable to the business owner, he or she will likely want to negotiate and you'd probably need to compromise if you want to get a deal done. I say that because you might want to ask for more than you really want in order to have some room to give back in negotiations.

It does sound like you'll be contributing to all sales made with the online marketing you'll be doing and as a result deserve something back for any sale the company makes. You might ask for some additional % for all sales or a salary for doing the marketing. It's conceivable you might be asked to then give back some of the 50% profit you'd make per each of your sales. I'm not sure what the right %s would be, but there's probably something in there that's fair to everyone involved.

Mostly I think you should come up with some workable numbers and then present everything to the business owner. If you explain why you think you deserve something for sales across the board and present some numbers you should be able to negotiate something everyone is still happy with.

Hope something in there helps.

[Evan]

I agree with the sentiment vangogh expressed. What is "fair" only both parties can agree. Maybe 80/20 is fair based on the extent of your involvement.

[tmerrill]

Have you discussed your concerns with your partner?

It may be possible to find a way to create a profitable venture for both of you. But unless you know what your partner is willing to do, it will be hard to give advice.

I would also suggest that you have any contract between you and your partner reviewed by your attorney. You don't want to get stuck in something you hate. You might also ask your attorney if he has any suggestions. He probably sees many different contracts like yours. He may know of a better way of setting up this partnership.

Good luck!