Find us elsewhere
Join Now Member Login

Figuring out ownership % and partnership agreement

 
New Topic
Post Reply
Follow Topic
Page of 1
  • Author
  • Message
 
mrmistry

posts: 1

Feb 02, 2013 10:35 PM ET    Quote  Report Abuse
Points: 0   Vote
So I recently met a gentleman a few weeks back -- he was looking for a partner for a biz plan idea that he had.   So anyway, we have met and had a couple of initial discussions.   He's a high level guy who's had this idea and he's looking for someone to take the idea and run with it.  He'd play more of a consultant role - as he doesn't want to get tied up in day-to-day.  So that's where I come into play.  So over the last few weeks, I have created a basic business plan that outlines a very basic /barebones test to see if it could work.  Idea is to create proof of concept -- and see if we can get traction.  If it works, we continue - if not, we re-work the plan. 
 
   Anyway - my question is this -- before I get too far along with this, I wanted to created some structure to this partnership.  The idea I would like to see is if I can get him to provide the initial start-up capital ($5K).    Assume he provides start-up capital (and the initial idea), but I provide a significant amount of the work involved in taking the idea into a real business.  How would you set-up the equity side of the business?  Would it be fair for me to take a greater share (60/40, 70/30,80/20) since I'm providing the bulk of the initial work?   Would it be necessary to create a true corporate structure - partnership or is it still too early?   He keeps wanting to bring in other people -- but I feel it's unnecessary at this time. What would you include in a partnership agreement?  


-------------------------

Kudzai_D

posts: 6

Feb 03, 2013 4:15 AM ET    Quote  Report Abuse
Points: 0   Vote

It is advisable that you formalise you business relationship into an agreement, be it partnership agreement (if you have not incorporated a company yet) or shareholder agreement if you have a company incorporated.

The % of equity each partner is given should be commensurate with the capital put in, be it sweat capital or cash capital. You can agree on an equity shareholding proportion now and then because you are working on it on a day-to-day basis you agree on a salary compensation.

Tips for starting a successful small business



-------------------------

Kudzai D blogs at EntrepreneurCrunch on startups, small business and entrepreneurship.
robertj

posts: 1458

Feb 03, 2013 11:40 AM ET    Quote  Report Abuse
Points: 0   Vote

I advise my clients to break down the situation into 4 catagories:

1 Control - Who and how will decisions be made. Both the long term and daily operational ones

2. Compensation - Who does the work, what is the value of it and how will they be compensated

3. Distribution of results - how will the profits (and losses) be distributed.

4 Ownership - How will the equity be divided based upon the above. Will there be "earned" equity and how will that occur.

If you would like to discuss your situation, feel free to contact me privately.

 



-------------------------

Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com


Page of 1
Post Reply
 
.
Advertisement

Keep the Community Clean!

  • StartupNation forums should be used as a platform to learn, educate others, share stories, tips & tricks and to provide constructive feedback.
  • Please do not use the Forums for advertising & blatant self-promotion.
  • Please be respectful to other members and refrain from personal attacks and vulgar language.
  • StartupNation reserves the right to delete any message, reply, and/or member who violates our terms of use.
Read full terms of use
Advertisement
Advertisement
Advertisement
Advertisement