Profit Sharing Disagreement

[Anju]

I'm in the intial stage of starting a business that is priced at $300k and requires 50k down and rest to be financed. I have three partners including myself. One of the partner has no financial contribution into the business and also does not even qualify for 10k of loan due to his credit history. That leaves me and another partner to pitch in the 50k down, take 250k liability and personal gurantee on a lease with 8,000 rent. and additional 25k for chash flow.

I have told my third partner that I cannot include him in the purchase/sale agreement of the business.
I also told him that since he does not have any capital investment in the business that we cannot share the profit equally but willing to give him bonus for his marketing and catering work + 3.5k in salary.

He is was offended with my suggestion.

I also told him that he can take first six months to invest a small amount at least from his salary to get in the partnership but he does not agree with my offer. Another suggestion was that he turns over his van to the business and we can consider the fair market value of the car as his investment but he says its unfair that it would be worth less than what he paid.

What solution can I offer him? Or is there a solution to this at all.

All three will be taking equal salary, but sharing profit according to the investment.

Please help.

Anju

[KyleXY]

He's being unreasonable. Clearly he has to give somewhere given the circumstances. If everyone is putting in equal work and taking equal salary yet only two are contributing and taking the risk, why should be have the glory... The risk alone is already a huge problem regardless of equal amounts of contribution which he already lacks. If he finds it unreasonable, I'm sorry to say but it's better to let him go now because if he's already unreasonable to work with this early, it'll only get messier later on.

[conor_mcg]

Sounds like he is looking for a free ride! I'd ditch...always hard if its your mate but I wouldn't call someone a mate if they were basically ripping me of.

[Marco Santori]

I agree with KyleXY. In my experience, I've found that profit sharing is a privilege for those partners who bear risk. Others draw a salary. That's the trade-off. Regular salary in exchange for no risk and no chance of high gains over and above the salary vs profit sharing in exchange for the potential to go over above salary and risk of losing it all.

How will you structure your partnership?

[akula]

i agree with KyleXY