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Partnership - Working vs Non-working partner- Strategy?

theredfishermantheredfisherman subscriber Posts: 1
edited March 2009 in Business Planning
       I have a current retail startup idea that i am working on. I have a partnership situation that i would like some advice on. This is my first startup engagement, so please bear with me.
My partner and I would like to be equal investors( 50% each). But, i will be solely responsible for all the work. My partner would be a silent partner who still shares in the profits and losses of the business, involved in decision making and strategy planing but uninvolved in management, startup tasks and day to day management.
We are trying to figure out a compensation for my work. Since we are equally funding this project, we are unclear on this. For now, the couple of strategies that have been thought of are:

40%-60% profit split: This has not been agreed upon, but still in discussion. My partner fees 20% is a heavy compensation.

Monthly Management salary: I will be paid a monthly salary compensation for my work, regardless of profit or loss. This will be in addition to my original 50% profit split. One problem i perceive with this is that i am not going to be compensated for my work prior to the opening of this project.

Please provide any advice, ideas and comments. Thanks.


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    MattTurpinMattTurpin subscriber Posts: 22
    I`d say, take a salary for your work, and split the profit 50/50. This way you each get an equal share of the company profits, whilst you get your due for your time worked as an employee. As for your time worked before opening the project, a one time bonus seems fair.
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    robertjrobertj subscriber Posts: 0 Member
    There are three segments to your relationship -
    1    Ownership (equity)
    2.   Control 
    3.  Sharing of the results  (profit/loss)
    I suggest considering each separately because they don`t have to be the same.  By that I mean that it is possible to construct a relationship where (for example) on each party has a 50% ownership , but one receives 60% of the profit (typically there is a time or dollar limitation this)
    All of the above should be separate from the compensation you receive for working in the the business.
    Finally, you should have a formal agreement on all this which includes a  buy/sell agreement.
    If you want to delve into the specifics of your situation - shoot me a pm or email at robert@bizgrowthmasters.com
    robertj3/17/2009 11:12 AM
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    theredfishermantheredfisherman subscriber Posts: 1
    Thanks a lot for all your comments. Please let me know if you have other ideas that could work as well. Thanks again!
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    infiniqueinfinique subscriber Posts: 0 Member
    Sleeping partner just doesn't make sense. It's one of the main reasons why partnerships go sour. It only works when the sleeping partner comes out with most of the investment in the start up process.
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