51% 49% Partnership

[1Katrina]

I'm developing a Partnership where I'm 51% owner, because I'm a women and would like to take advantage of any opportunities for women owned business. My Partner is putting up the money and I'm doing all the sales, he doesn't know the industry. His accountant suggested that I pay him back 100% of the amount that is being paid for my salary. Shouldn't I at least back pay 51% if anything or should it be structured that what ever money he put up is his 49% investment. We will of course consult an attroney to help with the operating documents of our L.L.C. Any suggestions?

[clientmax]

you know I really don't think you should have to pay back your salary. I would however pay back any money that he invested into the actual business startup. Your putting in your time and hes putting in his money which kind of washes each others hands. thats just my opinion but to secure the startup capital then you got to do what you got to do.

[1Katrina]

Thanks, I think he is considering my salary as part of the start up capital. I really don't have a problem with paying back at least 51% after I really thought about it a felt like 100% was not fair.

[clientmax]

I think 51% is reasonable did you mention that to him?

[akula]

I'm developing a Partnership where I'm 51% owner, because I'm a women and would like to take advantage of any opportunities for women owned business. My Partner is putting up the money and I'm doing all the sales, he doesn't know the industry. His accountant suggested that I pay him back 100% of the amount that is being paid for my salary. Shouldn't I at least back pay 51% if anything or should it be structured that what ever money he put up is his 49% investment. We will of course consult an attroney to help with the operating documents of our L.L.C. Any suggestions?

hi and welcome..well..your situation is getting out of hand so let me break it down for you:

1) the overall problem that you and your partner are dealing with is termed "how do we split up the value pie?"...i.e. you're doing a venture together, you're both contributing resources, and you want to share in the profits in a way that's fair and accountable.

2) you're not the first one to experience this problem. in venture capital, this issue is resolved every day when entrepreneurs take on investors, and then haggle over how much equity everyone gets, and what the terms are..like liquidity preferences etc..

3) to resolve this problem, professionals use established, universal concepts and procedures to make sure that value is shared in a way that's accountable and fair..which is very important because it safeguards both parties from getting into serious conflicts down the line (such as disagreements about follow-on rounds and liquidity events)

4) these concepts (such as premoney valuation) and procedures (such as term sheets) have absolutely nothing to do with amateur, dangerous, unaccountable, retarded nonsense like "hey, let's split the company 51/49!"

5) what this means is that both you and your partner are currently making serious mistakes because you have no idea what you're doing (because you might be doing this for the first time). this is bad because it's highly likely that your value pie is not getting split either fairly, or in a way that's accountable

6) my advise for you is to step back, scrap what you're doing, get curious and start asking questions about how to properly solve your problem. this requires that you let go of your current preconceptions. the net result of you adopting this advice, is that you're going to avoid experiencing a whole list of serious problems which happen to people who enter into the kinds of badly executed, ill planned legal structures, such as the one you're entering into now.

Good luck!

[akula]

I think 51% is reasonable did you mention that to him?

this founder is selling 49% of her company
she hasn't disclosed the price of the sale, so we can't tell whether she is getting ripped off or not
so how can you possibly say "I think 51% is reasonable"?
it's the same as if some one said "hey, I just sold a car" and then you say "I think it was a reasonable sale" irrespective of knowing what the seller actually got for the vehicle (which could have been a total rip off).
what is wrong with you?

[Encrypted]

What does being a woman have anything to do with your percent share in a business?

[clientmax]

The found isnt selling her company, the investor with the cash wants 100% of the salary back when the profits come pouring in. I was stating that if the only for her to get the capital to even get the business going 49% pay back of her salary might be fair. it might also be the only option

[BusinessAdviser]

The found isnt selling her company, the investor with the cash wants 100% of the salary back when the profits come pouring in. I was stating that if the only for her to get the capital to even get the business going 49% pay back of her salary might be fair. it might also be the only option

Well, if the founder came up with the idea and went to the guy with to get the funding to make it happen, she actually IS selling her company, or at least part of it. And how did you determine that paying back salary was "fair?"