Hello All

Please, your opinion would be very welcome given this business scenario with regard to profit and/or Equity sharing between two business partners thus:

1. Partner one invested 85% of the monies needed by the business. He is a sleeping partner.

2. Partner two does ALL the job required by the business down to marketing at the very elemental level. He has the expertise and is an authority on the type of the business partner one invested in, in fact, it was the strength of his business plan that convinced partner one to invest in his business idea. He is the active partner and is investing all his time in driving the business to success.

To put it in perspective, it's a type of business that demands all of partner two's time involving much networking with people coupled with mental and physical work. For starters partner one has invested 2million (may be little by some people's standards but times are hard o!) with the possibility of injecting more fund into the business if performance within a set time frame meets with acceptable standards.

So there you have it. one man risking his money on the business idea of another without lifting a finger in terms of work save writing the cheque to fund the business. The other not bringing much (just 15%) in terms of fund to the table, all he does is put in all the work that generates the profit and drives the business.

how do you suggest they go about sharing the profits? please, business minded folks should chime in as I believe folks here may be engaged in this type of business arrangement already. thanks.

Seen, lalasticlala,I would very much appreciate it if this could make FP so more views and consequently comments could be generated. Regards.

Here to read comments from business scholars; I'm not a business man nor an entrepreneur ........ #ImAnEngineer

Profit should be shared based on agreed and documented profit sharing ratio.

And where there's no agreement profit should be shared equally according to Partnership Act 1890

85 and 15 + 100% time...
Remember time is money. They should sit and deliberate on the sharing formula but i suggest 50/50 cus d later got d idea and the time also,
REMEMBER IDEA IS VERY COSTLY COUPLED WITH TIME

There ought to have been a well documented and agreed sharing formula before the business is executed.

From your stories above, please don't try and be cunny here. The business financier should take 70% while you take 30%.

The business wouldn't have started with your strength, ideas and marketing skills. Money makes it possible. 2mill no be small cash.

50 - 50 is not bad.

Is partner one gay? He is your sleeping partner

99% & 1%

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Now this looks like a "Management" Assignment !!!
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Brb

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I was involved in such business model and it failed because we didn't sign an agreed sharing formula before i doled out the money. In my own, I brought 95%(including cash and machinery) required for the business.

At a time, my partner started feeling cheated, even though, we were sharing the initial profits 50-50, because I was still doing my 9-5 work and he was the one running around for the business. He said afterall he runs the day to day activity. He demanded for 60-40 in his favour and I rejected it. He started doing some jobs behind me for months, and taking the profits alone, and when I ask him, he will say, there's no business because things are hard. He did this for months before I found out. We had to call it a quit. I'm yet to recover my money.

My advice: document and sign every single detail or agreement about the business. When signing the 'agreement' just remember that "I shall" and "I will" have two different meanings. Involve a lawyer and get every damn thing signed. You can share for now 50-50 until the biz stands because remember he has the expertise required. Goodluck and God's grace.

I'll go back to the old saying of 'He who pays be piper calls the tune', even tho it is quite not related to this
Partner A who provided the capital should have major share, cos business plans don't make u rich. It's when people invest & then the business grows u can then make money from ur business idea cos it has bn turned into reality by another man's money.
My advice is be patient and earn as much as u can active Partner B, get a new business idea then invest in it. It's all yours then
P.s. The above advice is for the 'nice guys' but sometimes business needs the 'hard and smart' guys

For the hard and smart guys, use what u r earning from the business to start a rival business that will compete with the current one. You had the original idea, so u know the slight modifications to make to give ur new rival business an edge and make money from two sides.
Don't crucify me, It's just my thought process at work

Hmmm.

For a startup company, whoever provides the largest share of the funding required, should own the larger percentage of shares in the company and should also be entitled to the largest share of the company's profits.

However, in such scenario, the partner that's actively involved in the day to day management of the business could include a "shares buy back" clause in the agreement so that in a case where the business begins to trade profitably, he can either buy out his partner entirely or buy out a portion of his shares.

Financier (this is d person who makes d business) - 60-70%
Person with d business idea - 30-40%


Hope i helped?

Donate the money

60/40 or better still 50/50 to encourage the man on the field.. apart putting your fund ..what the other needed etiquette..in which he second man had done .. because he is the main fund protector..

If you want to share the profit fairly then pay partner one his capital and pay partner two commission. After this, share the profit equally.

sponsor my startup

65 - 35

Why wasn't there a well documented revenue sharing agreement prior to take off? I find that incredibly naive.

That being said, there are a lot of factors that should be the basis upon which you make your decisions. I would ask myself if I were you:

1) Has the venture come to an end
2) Is generated revenue going to be reinvested
3) Were there any informal revenue sharing agreement at the onset
4) Do I need to treat my partner exceptionally well in this venture because he may come in to finance other ventures
5) Whatever percentage that I wish to use, is it fair for both me and my partner

I believe if you truthfully answer these questions within yourself, you would find an answer.

Both of them are integral parts of the business and in a time like this when a lot of businesses are packing up, keeping a business afloat is a great feat, money is as important as well but brains aint common, if you look at it one does all the work while the other sleeps and let his money work, the one who work can decide to mismanage or steal and lie but he didn't so they both deserve equal share, one for investing and the other for managing the investment, doing all the work and making sure it yields profit, i stand to be corrected though.

If you want to share the profit fairly then pay partner one his capital and pay partner two commission. After this, share the profit equally.

Profits are shared according to the equity owned by each partner. That has to be agreed even before they begin their business dealings.

Yinkatolu:
Profit should be shared based on agreed and documented profit sharing ratio.

The sleeping partner should get 60% while the active one should get 40%
Without capital there is no business

Should share equally, one gave 85% of capital is as good as the capital, the other did all the work= equal efforts. without his partners capital there will be no work to do




caveat, Quote me not

partner one would want more than partner b, and if partner b refuses, there is a chance of partner one pulling out. so my advice is 55-45, that way partner knew doesn't feel cheated and you also don't feel too used. for those little saying partner one should earn more. also remember that if 2million is sitting in the bank for even 2years, it won't generate up to 200thousand. also partner b should remember that he also put in some money no matter how small, it is also his idea, and he is the executioner also. so to me 55-45 is the appropriate sharing ratio.