Forums: Discussions for entrepreneurs and small business.

I am trying to set up a business with this gentleman, he has access to the money - he`ll be getting a loan - and I have the time, and labor to run the business.  How do we set up the contract?  He will be on the loan, so I am assuming we will have to make a side contract.  This is a franchise and we are both agreed it`s pretty low risk, is there any standard on how to split the proceeds in this situation?  Kind of out of my element on this, any experience or even sound thought would be appreciated.  Thanks,

Doug

I don`t think that there is any standard, as it varies from business to business. It also depends on how labor intensive managing the business is going to be and possibly the skill you are bringing to the table.

If you are providing all of the labor, where the other potential owner is bringing none, and you will be providing a substantial amount of time (eg: not part time), 50% is probably reasonable for each of you.

But I have to ask, what prevents you from signing on the loan as well? Is the other owner paying off the debt himself/herself or is he/she just bringing their good "credit" to the table?

Maybe you should consider becoming a signer on the loan and paying some of the debt yourself in exchange for more % ownership. Just a thought.



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I have been in relationships where I had the money and the other guy did the work. and I know of a few others, all ended badly. the guy with the money is the guy, loan or not.
if you can`t get on the loan and business paperwork, you are basically a powerful employee, which can be let go at anytime.
I also know of a few where the "worker" was named as a "principle" in the business with a vested interest, with a legal and binding contract. even those arrangements ended poorly, 1 the business folded the "principle" got nothing for the effort (except life experience) plus had the stigma of a failed business. another was just fired by the board he got a big pile of cash but was left out in the cold, and the third also got some cash when the business was sold and the new owner didn`t want him.

another case where it might have worked out the principle got divorced and was asked to leave so not to get the business involved.

I am not saying it won`t work, I just don`t know of any personally.

Just a thought

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Dave Barnes
Spider Climbing, Inc.
(734) 994-0646
www.spiderclimbing.com

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