Is 70/30 split with investor fair?

[jshbrgs07]

I am currently running a junkshop and it had been up and running for 5 years now. A friend of mine wants to invest and im thinking of a 70/30 profit split from his investment since i own the company, i do all the work and all he has to do is sit down and wait for his monthly share and my breakdown of reports.

Your thoughts will be greatly appreciated

TIA,
Jshbrgs07

[nealrm]

Based on the information provided it is not possible to state exactly. Is he investing $1 or $1,000,000; how much do you have invested??? In general the profits spile should match the investment split. If you invested 70% to his 30%, a 70/30 split would be OK. However, that is AFTER you are paid for your work. Profits = net income - expenses - salaries. Your work is part of the salaries portion.

[Sjfine]

Agree with Nealrm - more info is needed and you must keep your salary in the equation. Do the paperwork, don't rely upon a handshake. Discuss the downside and the potential for loss. Will you be creating a buyout plan to pay him back and gain back 100% ownership? Realize that what is at risk is your friendship. Unless all is discussed and clearly understood and agreed upon - misunderstanding can (and will) happen. What are his expectations on ROI and profits and the future?

[Harold Mansfield]

No one can say what is fair but the party's involved. Every situation is different.

[jshbrgs07]

Thank you for the prompt reply. the thing is she will be investing $10,000. The deal was she wanted me to roll her money for her rather than just leaving it with the bank.
I thought of 60/40 but then I am considering the sweat equity which is 10%. All she wanted is to receive something from me monthly and to show her the breakdown. I don't want to be unfair and appear greedy with the amount she receives and I don't want to go lower than what should be mine. however, based on what all of you told me the best option I have is to talk to her and come into terms that we both would agree upon and put everything into document to avoid unwanted issues.

[Business Attorney]

It's not very clear what you are proposing. At first I (and apparently nealrm, Sjfine and Harold Anderson) thought you were saying she was getting a piece of your business. Reading your reply, I think you are talking about investing her $10,000 buying inventory and splitting the profit from the sale of the inventory you buy with her money. Can you clarify that?

[LordVito9]

Why give her anything of your company? depending on the laws of your country,could she lend it and you pay her interest? its seems that your investor is simply seeking a way of growing her money and investing it.

Im a novice,so just spitballing

[Kyle Johnston]

Do you know what your business is worth? If so there is a simple answer. If she is investing $10,000 and your business is worth $100,000, then 10% equity is far. Just divide the amount your business is worth by her contribution. I hope this helps

[donald12]

I suggest that you do fair split ups. If that's the case which is 70/30, who owns 70? what about 30? If you own 30% of your share then you haven't had the authority to mumble, but if you own the 70 part, that's the time that you have surely be mumbling about.