Re: Sticky Partnership Issue

Sandi, thank you for your response. Assuming I ignore the fact that I am contributing the money, do you think the profits should be split 50/50, with my sister and her husband being treated as one? As I mentioned, apart from that, each would also receive money earned while actually doing the work.

Gerard

> Hi, Gerard,

> Since you will be footing the financial start up costs, it would seem fair
> that you get a greater proportion of the profits as compensation. This,
> however, can lead to friction later, if not sooner, because then the
> question arises: how long should your extra compensation be continued?

> Another way to handle things might be for you to make a loan to the
> company with interest and a set payback arrangement (could be a percentage
> or a flat amount). This avoids the unequal feeling of the other
> arrangement.

> I'm not a lawyer and this is not legal advice, just a few tidbits I know
> from experience or reading. I'm not up on LLC regulations too much but
> I've heard it is one of the easiest and best ways to do things as well as
> saving on double taxation as in corporations.

> One thing I'd caution you on (voice of experience) is to having EVERYTHING
> and every likely situation and how it is to be handled, spelled out in
> advance and in writing, signed and agreed to by everyone involved.

> Here's a small example we had: The building the business was in was owned
> by one of the partners. He decided to expand his other business and needed
> the building. When the lease expired, we were faced with finding another
> location. Since we could not find a suitable one, with proper zoning, we
> were forced to close the business. Don't let that happen to you.

> It's not sufficient to say that 'all will help with...'. There needs to be
> some definite guidelines (which can be somewhat flexible, of course) of
> who does what and when otherwise one person is 'too swamped' to help for
> awhile or one person gets stuck doing all the messy jobs or all the
> bookkeeping. Discuss who's good at what and always have backup so things
> don't pile up in case of illness.

> Last but not least, have a written agreement about how to handle
> disagreements. You do understand that, them being a marital partnership
> first, the odds are you will be out-voted the majority of the time so they
> can 'keep the peace'. Some things should be subject to informal
> arbitration, if it's a critial move for the business, rather than simply
> voted upon in a situation such as yours.

> Hope I've been some help to you. Partnerships CAN work but sometimes it's
> not the easiest way to go. Communication and understanding are essential.

> Best of luck to you all.