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Thread: splitting profit between investors

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    Default splitting profit between investors

    I have been in fashion business for about 6 years and I really want to expand my business and luckily I found an investor in my sister, but I don't know how the sharing formula will be in the long run of the business, I will be doing all the work from marketing, purchasing of the goods and the sells ,I will be fully in it because that's all I have and she will only be investing her fund of about the same amount that my business worth. So please what should be the right sharing formula of the profit.
    Also I will be reinvesting my own profit back to the business as time goes on. Should the sharing formula be constant as time goes on or should it decline ?

  2. #2
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    Welcome to the forum lucia. Ultimately this a question only you and your sister can decide and I think when doing business with family you have to remember that family is more important. I'd take less money working with my brother if it meant we had a better relationship.

    That said there are definitely some guidelines you can use to help. One question I have is are you planning on having your sister come in as a partner or is the money meant to be more like a loan? If it's a loan you can set up an agreement about when you have to pay the money back and what interest, if any, there might be. I'm guessing you're thinking of this more as a partnership in which your sister will own a percentage of the business.

    In the case where you each own part of the business and are trying to decide what a fair split of the company will be look to what each of you will contribute over time. Will your sister invest again in the future? Will she be working in the company in some way? Or is this a one time investment? If your sister's contribution is mainly this one round of money, you can give her a higher percentage at first with that percentage decreasing over time. Or you might decide on some amount of money should she ultimately get back and you'll work out how and when to pay her the money, similar to a loan.

    The main thing is to think about what each of you is contributing to the business now and over the next few years. Then figure out something fair to both of you based on each of your contributions. And remember that your relationship with your sister is more important in the long run than having her invest in the company.

    Hope that helps.
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