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Thread: Partnership Percentage

  1. #1

    Default Partnership Percentage

    Hello,

    A friend of mine has seen a great opportunity in food business, but no finance to support.
    so we are looking to hook up as partners.

    #1 I will provide all the finances 100%
    #2 My partner will do everything.

    any idea of the sharing? 50-50?
    I know there may not be a rule on these, and will still depend on our agreement, but I need some baseline...

  2. #2
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    My rule is you never want a 50/50 partnership, because then no one person is really in charge, because it requires both of you to agree to get any decision done.

    If it's all your money, you should own all of it (you have the biggest risk on the table) and then have them work for their equity, which increases over time as you get paid back and as the business prospers. If you have to pay them a salary to work, the more you pay them in cash, the slower their equity should increase.

  3. #3
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    The first question to ask is, "Are the profits from this business worth loosing my friend". Most of the time those type of arrangements are a no win scenario. If everything goes well and the business is a success, then after the loan is paid off, he will start to resent you for taking half the profits for no work. If things go bad, then you will start to resent him for not paying back the loan.

    I would be better if you owned the business outright. Then tie most of his pay to the profits of the company. For this to work, you will need to be involved in the business is some way.

    The second way would be to loan him the money and have him own the company. You would need to determine a fair ROI on your investment. But once the loan is paid off, you are done with the business and he owns it all.
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  4. #4

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    The thing I got no choice Coz am out of the country, won't be able to oversee as much as I would love to.

    Hmmmmm

  5. #5

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    Hmm.

    If you are out of the country, does that mean you can travel back into the country at will?

    If he will be doing 100% of the work, have you seen his work habits? Have you talked to his former employers/business partners. Friends will always think they can leave work 2 hours early in a partnership but not so much if working for an employer. Few people are motivated to do what it takes to build a sussessful business in the US.

    Also, if you are both from another country and have lived here for less than 10 years--Although I understand the motivation to do so, running a business in the US is vastly different from running it elsewhere. The amount of paperwork you need to keep up with is why most Americans refuse to do it. I looked into the books of my African friend's restaurant and I nearly died. He overlooked a lot of things in sheer ignorance. Thank God the govt didn't go after him on it because he would have been toast.

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