DONT FORGET TO DOCUMENT!!!! AGREEMENT AND ALL

As for me, being an entrepreneur myself, I would suggest that the financial partner gets back his investment over an agreeable period, of course this depends on inflows and profitability, and 35% stake through out the life of the business, while the inventor maintains a controlling 65%, as one who birthed the idea.

Some persons may want to ask, why get back his investment without interest on it? It is simple. That's the sacrifice he's required to make as a passive partner, bearing in mind that he has all the time in the world to participate in other economic activities, unlike the inventor.

As have been submitted by some other contributors and importantly too, all agreements must be properly documented under strict legal guidance.

That's my little contribution and I hope it serves you.

4C2215131:
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.

I can tell with confidence that the poster is the active partner,hey let me tell u in clear terms,there are people with ideas better than urs who are still smelling up and down because there's no money to back their so-called ideas,secondly the sleeping partner did not make that CAPITAL while sleeping,u can't tell if he got it from the lion's mouth.

So better don't play any funny games here because if u betray someone,then someone will also betray you.

CONCLUSION: share the money according to your agreement,in the absence of which the money should be shared 50/50,peace.

I have been looking for this type of post since God knows when on nairaland.

Partner A should think of the return he would make if he invested his capital into another business. if I were partner A I will demand for 70% of the retained earnings or profit..partner B- 20%

The one doing the running should be pay a salary agreed upon, then share profit according to share holding.

Keneking:
Is partner one gay? He is your sleeping partner

Depends on there "Contract"...Because according to Business Law 'All agreement is not a contract'.....
If there is know written contract btw them...They have to share the profit equally(According to partnership Act 1960)

The active partner should be placed on salary commensurate with his/her efforts. Profit is then shared according to earlier agreed ratio. If the experience and knowledge of the active partner is monetised, what is the value? Depending of the value of this knowledge, it could account for extra 35% capital contribution or even just 10%

Don't forget something guys.. It's he who funds a business that owns the business.. One who runs the business can always be replaced.. But one who injects funds in the business still pulls the strings. Most big businesses have major shareholders that don't contribute in d business except put in funds.. Yet.. All major decisions go through them.... Talking from experience.. Thou.... Synergy between both parties is always the best.. They should both agree on their profit sharing ratio... Enuf said..

HarkymTheOracle:

Bill Gates dad was never a woodcutter.

Capital contribution should be given interest on the capital provided.
The active partner should collect commensurate salary for his effort.
The balance of profit should then be shared equally.

masterblogger:
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.

You said my mind!

This reminds of how Mack zurkerberg started Facebook, a lot of people may not know but there were two guys who made the first investment,but along the line Mack decided to forget the guys and the saving grace for Mack then was that he didn't sign any official agreement, nobody knows how a business can grow to be so always put things in writing

hmm. im guessing youre the guy with the brains about the buisness. anyway from my little understanding this could play in different ways . my opinion is as follows.

1. Is the company registered as both of you being directors?
2. how did you share the company?

If the company is shared equally between you guys you can decide on a certain amount you want to put aside for the company because your capital has to keep growing. say 25percent and you convert the remaining to 100percent to be shared equally.
or you split profits 3 ways into 33.3 percent and keep one for the company and each for you guys.

there are still so many factors to consider but this is it being simply explained.

This reminds me of every episode of Dragos Den #junkie
Bottom line: there's no standard formula. The tougher negotiator of the two parties, wins. Simple as that...or both parties walk away!(inventors are usually desperate for investors tho)

Profit should be shared based on number of shares holding in the business, this is why it is important to register a business and set the profit sharing document in place. Anyways one good way to determine this is using www.slicingpie.com it has good resource to help start up business decide om equity and shareholding.

Cheers

It should be shared according to the time and the money each contributed

The funds should account for 70% of the equity while 30% for the business plan. Since he provided 85% of the funds he will have 85% of 70% about 59.5% and he who brought the idea will take 10.5% for his 15% plus 30% for his idea totaling 40.5%.
In addition who ever is runing the business should be put on a salary for his role in managing the business as this is an additional task.

Whaoo...sometimes, I just love to read through threads on nairaland without making comment...their are ingenious guys in this country....my candid take....every contributions is a product of individuals experience and mindset. As an entrepreneur who equally engages in investment business arrangement...I've realised that the major factors in any investment partnership are, TRUST, TRANSPARENCY, ACCOUNTABILITY. These are rare factors to come by in partnership.
My submission in line with many other views....partners must understand models that best works for them....Nigeria market is unstable market because of the dollar index which determines the prices of goods per time....
We must understand that, the one with the idea is bringing in two assets either classified as tangible or intangible.... One "idea", two "labour"...these must be factored into the cost....the one with the idea must understand its financials well ahead....a realistic net income must be proposed.....there after...he can now offer either of these two models to his/her prospective investors
1. Return On Investment based on net profit realise or
2. Interest based on capital invested for a period of time.
For the Investor, his/her only asset is money.....so, such as to examine so many investment options that can bring returns in either short, mid or long term...taking into consideration risks or no risks...
....Hope to continue next time....nice thread anyway....love to chat me up for how my model works.....my whatsapp is 08077523538

70-30 till Mr 85% recovered his fund. And the 40% to Mr 85% subsequently. The business wouldn't have seen the day light without Mr 85%.

OK, The value of partner Bs hardwork, skill, sweat should be determined. An easy way to do this could be checking how much it costs to hire someone with similar expertise to do the work partner B is doing {the totals for 6 months should be sufficient). There you go, your equity proportions

[quote author=veekid post=49637369]Here to read comments from business scholars; I'm not a business man nor an entrepreneur ........ #ImAnEngineer[/quote
Have you not heard of the statement that after the hard hat comes the bowlers hat.Engineers are managers/entrepreneurs too.
We should not shy away from business.]

What I will suggest is that a form of remuneration be agreed to be paid partner 2 for his work(estimated at the cost of hiring a skilled person for the same job). Then the profits should be shared equally, at an agreed ratio, or in the ratio of capital contributed.

54-46.... The funder gets d bulk share while mrB stays ok . in d absence of greed, this wud b gud for everybody.. But u know human beings...

masterblogger:
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.

I just fell in love with you for this.
You said exactly what's on my mind
Now the business is yielding profit and having a future he then remembers his input and tried to be cunny. When he was sure of his ideas why didn't he get a loan instead. Exactly as u said. There should be a form of agreement between the two of them earlier on so he should revisit that

50/50

My suggestion is for d primary investor to make sure DAT d person managing d business is a sincere somebody to avoid regretting investing his money.Am into such business and d best way to share profit is to divide d profit into three, one for d investor,one for d manager and d remaining one is for d business which still belong to d investor incase of adding anytin to d business.all dis will b done after expenses. tnx.

60% to #2M investor, 40% for the idea owner.

Lobatan

HarkymTheOracle:

Bill gates never made that statement; his father was a lawyer and not a woodcutter.

SirAweezy:
70-30 till Mr 85% recovered his fund. And the 40% to Mr 85% subsequently. The business wouldn't have seen the day light without Mr 85%.

Neither will the business have seen the light of day without the 85% and besides if the business had failed mr. 85% would have lost 2million naira and what will mr. Experience lose? His experience? Lol 70% to 30% in favour of mr. 85% or gerrarahia men!