nero50:
The proper/honest thing to do here is to share d profits 50/50...i knw hw u feel,coz i did exact same tin to my partner dat was aggrieved/feeling cheated dat he does all d works in d buisness. Jus like u stated times are hard to invest in sometin u dont knw for sure it wud succeed.

Good luck.

Thanks bro!

sweetilicious:
Exactly there should be an agreement between the two partners on profit sharing ratio. Op, the sharing ratio should be shared Fairly if not equally.If the sleeping partner wants 90% to himself as the highest contributor, he should be active as well. Its more like he lent money to the active partner. Just like interest is given to every fixed deposit by banks, even though the depositors money might yield more money, banks will still give you 5% for every 100k deposited at the stipulated time depending. I think the profit should be shared for clearity as follows :Divide it into 4 parts, two parts goes to the sleeping partner as the main contributor, one part should go to the active partner for his own contribution, the remaining part should go to the active partner for the running of the business and compensation for his hardwork in putting the business in progress. If the sleeping partner wants to partake in this, he has to get active as soon as possible. This is my own advice to you Op.

Thanks a lot Sir for this novel thought to the issue at hand.

kaboninc:


Partner two needs to find a way to at least get a commensurable benefits for all his efforts. Let me ask again, what is the ownership structure of the firm as set out in the CAC Forms? From there we can say that share of profit should be according to each one's holding. Partner 2 can also draw up an agreement entitling him to a certain percentage of profits or bonus.

Every machinery bought should be in the company's name and owned by the company. It should not be in the name of anyone not even a staff or shareholder. When the partners wants to part ways then the asset can be valuated and based on mutual agreement then the sharing can be done.

Please never purchase company's assets in the name of any other entity except the company no matter what unless it's a lease arrangement or something similar.

The ownership issue is to be a joint affair between both partners. The profit/equity sharing ratio is what is being considered.
Thanks for chiming in on who owns the equipment stuff as partner two feels that should partner one want to be the owner of the equipment, then he should be more considerate in the sharing formula as the nature of the machinery is such that it's resale value is quite high so in the event of a fold up, partner one can sell off the machinery in a bid to recoup his loss.

What do you think Sir?

phyllosilicate:


I'm sorry I can't answer the question as I am not a financial expert. I only shared the article.

Thanks anyways for sharing!

oluwagream:
Simple. The net profit should be shared 85:15, but the active partner should be paid for the work he puts into the job (just like an employee). So both partners have to sit down and agree on the wage rate for the tasks to be carried out by the active partner; and such wage or salary will be charged in the expenditure account. This is very important, because when the business eventually booms, the active partner will most likely step down from day-to-day activities and employ helping hands. This, to me, is the most realistic profit sharing plan

Thanks for your input Sir!

kaboninc:


Well I do not know your investment appetite but am sure that in addition to the profit you'd want a situation whereby your money would be readily available anytime you need it

True, long term deposits, treasury bills or those callup deposits too arent exactly readily available for liquidations without fulfilling some conditions. So which ever way, he still has a good deal here provided risk is to the barest minimal.

Melonny:
Business entity concept- the business should be separate from the owners.. if I get your question right, it should be invoiced in the company or business name.. And all receipt should be credited in business account like the debt should be paid from business account..
All asset are sold at the realisable value..In a case the business ceases, the assets are sold and all liabilities are paid off then the partners share the remaining.

Thanks a lot Sir for your time and contribution to this topic. I truly appreciate the gesture!

sisisioge:


True, [b]long term deposits, treasury bills or those callup deposits [/b]too arent exactly readily available for liquidations without fulfilling some conditions. So which ever way, he still has a good deal here provided risk is to the barest minimal.

Don't you think too that the reward for investing in these instruments I highlighted above could be factored into the operating expenses of the business? For example the business pays partner 1 an interest for his investment then at the end of a period the business liquidates his 'investment' in full?

Rather that 'claiming' a share of the profit.

4C2215131:


The ownership issue is to be a joint affair between both partners. The profit/equity sharing ratio is what is being considered.
Thanks for chiming in on who owns the equipment stuff as partner two feels that should partner one want to be the owner of the equipment, then he should be more considerate in the sharing formula as the nature of the machinery is such that it's resale value is quite high so in the event of a fold up, partner one can sell off the machinery in a bid to recoup his loss.

What do you think Sir?

Assets which are to be used for running the business should be bought in the company's name. Even if Partner 1 wants to buy it and use it as part of his financial contribution, it should still bear the company's name while the ownership structure is altered to reflect his investment in the business.

Should the business fold up, the net realisable value after settlement of necessary liabilities could be shared according to equity contribution.

Why not give Partner 1 an interest and a small percentage share of the profit - only profit declared for sharing? Or no share of the profit until after say 3 years while he enjoys interests payments spread across the three years? Partner 2 enjoys some form of allowance until after the 3 years with option to purchase shares yet not subscribed for

kaboninc:


Don't you think too that the reward for investing in these instruments I highlighted above could be factored into the operating expenses of the business? For example the business pays partner 1 an interest for his investment then at the end of a period the business liquidates his 'investment' in full?

Rather that 'claiming' a share of the profit.

Well then, they would have to draw up an agreement where equity holders get profit according to ratio of investment. Which means they would both be rewarded according to their share, which means partner B could "claim" reward for service rendered too. After all, the business couldn't have ran itself.


Note, partner B's intellectual property may fetch more value in monetary terms than A's capital investment in the labour market.

By the way, I'm a girl who loves to talk non serious issues. Biko, stop quoting me...I don't talk business on Sunday. Remember what the bible says about the sabbath?

4C2215131:


Thanks Sir very much for your input.

Going forward, whose name should machinery bought for the business be under. considering the fact that if the business goes south, partner two can claim that since the machinery needed for the business is still functional, partner one has lost just little as he can sell off the asset (seeing it is invoiced in his name and not the firm) though at a loss to recoup his fund while partner two is left with nothing.
In fact this brings another issue to you fore; who owns the asset of the business, under whose name should equipment bought be invoiced-partner one, two or the firm. Your wise comment is needed. Thanks.

/
It is a business. Every equipment should be under the business name. Unless you intend to lease the equipment from a third party.

If the business fails, the equipment goes into recovery process. Eg. If this is a transport business. X buys a car for the business for N2m. If after two year the business fails, do you think he can ever get N2m back considering the depreciation rate of the car? No. If he liquidates and get N500k from it. He balances his account and eats the loss/profit as the case may be.

Focus on the 60/40 for now and work diligently to grow the business. If the business grows well, you may open subsidiaries that when put together may surpass the 60% he is getting. At this point, focusing on the money shouldn't be your main focus. You are the face of the company. The good thing is that if you do well, loyal and satisfied customers will follow you everywhere you go. That alone is worth more.
/

sisisioge:


Well then, they would have to draw up an agreement where equity holders get profit according to ratio of investment. Which means they would both be rewarded according to their share, which means partner B could "claim" reward for service rendered too. After all, the business couldn't have ran itself.

That's if they would agree to this model. I would rather take the capital as 'debt' than concede almost 85% in equity of my busines .

Note, partner B's intellectual property may fetch more value in monetary terms than A's capital investment in the labour market.

Hmmmmm

By the way, I'm a girl who loves to talk non serious issues. Biko, stop quoting me...I don't talk business on Sunday. Remember what the bible says about the sabbath?

I had to quote you because am a guy who also loves to talk about non serious issues. I guess we can now start talking about non serious and non business issues. And ejoor let's leave Sabbath for sabbatarians

kaboninc:


That's if they would agree to this model. I would rather take the capital as 'debt' than concede almost 85% in equity of my busines .



Hmmmmm






I had to quote you because am a guy who also loves to talk about non serious issues. I guess we can now start talking about non serious and non business issues. And ejoor let's leave Sabbath for sabbatarians

Let's just hope these two would come to equity with open hands. No need to be greedy lest someone decides to put a bullet to the other's head in the near future...

Whatever their agreement, let it be documented and transparent. Or, partner A should forget the business and join the MMM wagon...there he could sleep all he wants and still makes money with 130% risk and 30% profit! Can life be any better?

op, it would be nice if there is a partner c . the partner c should be a nominal partner( limited).

sisisioge:




Let's just hope these two would come to equity with open hands. No need to be greedy lest someone decides to put a bullet to the other's head in the near future...

Lol. It depends on what open hands could mean

Whatever their agreement, let it be documented and transparent. Or, partner A should forget the business and join the MMM wagon...there he could sleep all he wants and still makes money with 130% risk and 30% profit! Can life be any better?

Hahahahahahaha...

I think this is just the best idea soooo far. Lool. 30% interest per month! Damn girl! Ayam beginning to see why you don't talk business on Sundays!!

sisisioge:




Let's just hope these two would come to equity with open hands. No need to be greedy lest someone decides to put a bullet to the other's head in the near future...

Whatever their agreement, let it be documented and transparent. Or, partner A should forget the business and join the MMM wagon...there he could sleep all he wants and still makes money with 130% risk and 30% profit! Can life be any better?

lol...that can't happen. I guess partner A is risk averse. he's buying the business assets in his name..

Melonny:
lol...that can't happen. I guess partner A is risk averse. he's buying the business assets in his name..

Well...all will be well.

kaboninc:


Lol. It depends on what open hands could mean




Hahahahahahaha...

I think this is just the best idea soooo far. Lool. 30% interest per month! Damn girl! Ayam beginning to see why you don't talk business on Sundays!!

If there is no agreed profit sharing formula/ratio, profit will be shared equally I.e 50/50

kaboninc:


Assets which are to be used for running the business should be bought in the company's name. Even if Partner 1 wants to buy it and use it as part of his financial contribution, it should still bear the company's name while the ownership structure is altered to reflect his investment in the business.

Should the business fold up, the net realisable value after settlement of necessary liabilities could be shared according to equity contribution.

Why not give Partner 1 an interest and a small percentage share of the profit - only profit declared for sharing? Or no share of the profit until after say 3 years while he enjoys interests payments spread across the three years? Partner 2 enjoys some form of allowance until after the 3 years with option to purchase shares yet not subscribed for

Thanks Sir, for your response. it is truly appreciated.

InvertedHammer:

/
It is a business. Every equipment should be under the business name. Unless you intend to lease the equipment from a third party.

If the business fails, the equipment goes into recovery process. Eg. If this is a transport business. X buys a car for the business for N2m. If after two year the business fails, do you think he can ever get N2m back considering the depreciation rate of the car? No. If he liquidates and get N500k from it. He balances his account and eats the loss/profit as the case may be.

Focus on the 60/40 for now and work diligently to grow the business. If the business grows well, you may open subsidiaries that when put together may surpass the 60% he is getting. At this point, focusing on the money shouldn't be your main focus. You are the face of the company. The good thing is that if you do well, loyal and satisfied customers will follow you everywhere you go. That alone is worth more.
/

Again, many thanks for your input.

sisisioge:


Well...all will be well.

Well said as the parties involved are individuals of high integrity (never minding money issues).

Both espouse life philosophies that negate any potential do or die business scenarios.

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