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Sepia
11-02-2012, 06:41 PM
I'm in the process of forming a new partnership with one other person. The company is web-based and entirely built upon intellectual property at this point. There is no overhead whatsoever, and thus far, nominal out of pocket expense. I've just wrapped up a long-term project, so my partner has done a more work than I. She also brings a lot to the table in terms of contacts. We're in the process of structuring the finances and responsibility of the company. Here is what she has suggested:

*70 / 30 ownership: her to me
*50 /50 financial responsibility
*50 /50 work responsibility
*The new company remains under her already branded LLC (no association with my brand)

I'm fine with the 70 / 30 split of ownership, but am in no way comfortable with the financial responsibility or the company remaining as her already branded LLC. Since nothing other than sweat equity has been put into the business so far (and I have done quite a bit of work as well), and there is no burden of cost with office space, etc. It seems rather upsided in her direction by a long shot.

For what it's worth, I have approximately as much experience as she, as many degrees, and as big of a network.

If anyone has advice, I'd appreciate your input. Just want to make sure I'm getting input from other before I respond.

vangogh
11-07-2012, 11:40 AM
Hi Sepia. Sorry no one responded to your thread until now. I agree with you. It does seem one sided. If she's going to get the 70/30 split I would think she should also be responsible for 70% of the financial responsibility and the work responsibility. Are there things she's contributed to the business more than you have? You mentioned contacts. How about the intellectual property? Is she more responsible for it's creation than you are?

She's basically saying we're equal partners when it comes to what we have to put into the company, but she's the majority owner when it comes to taking anything out of the company. If she's contributed more then the ownership split seems fair and you seem fine with it. It doesn't sound right though that given that ownership split you should be responsible for putting so much in.

What it everything was 60/40 across the board. She still owns more, but now also contributes more.

Hope that helps and again sorry there's been no replies till now.

nealrm
11-07-2012, 12:20 PM
That split is for the birds. Basically it is saying that you are giving her a check for 20% of the worth of the company with no string attached. If the company fails, you will pay for 20% of her loses.

I have a hard time recommending any type of partner split. When you have two people equally in charge you end up with one of two outcomes; either no one is in charge or you end up fighting about who is right.

Here is what I suggest. One of you owns the business. The other will enter into a profit sharing arrangement. It might be that the arrangement states that person will get 100% of the profit of any business they do, or a specific share of the total profits. The advantage is that there is one person in charge and the company goes in one direction. When everything is going good, this has all the advantages of a partnership. Should the worse happen and disagreements arise, dissolving the relationship is easy.