Trying to workout a fair deal for sleeping partner

[masso]

Hi,

Me and a friend of mine are planning to start a very small business.
Initial investment is planned $10,000 (50% share, means $5,000 each).

The store we plan to start business in will be rented at $400/week.

At present we both are working as an employee at almost same salaries ($500/week) and we're thinking one partner should leave the job and handle business while other continues the job.
Let's assume the worse and business makes 0 profit. At the end of the week we have to pay the rent, utility bills etc. Let's just say rent is $400 and as 50% partner, each has to pay $200.
Now, since one partner is at job (paid), while other is handling the store (managing supplies and store), what sounds the fair deal in this case?

I personally think that the silent partner should pay the store rent. Other cost (bills etc) should be bared equally.

In case of any profit, silent partner should pay the store rent. Cost and profit should be shared equally.


What you say? or silent partner should pay something like 70-80% of store rent and working partner should share 20-30% of rent as well?


Thanks

[Harold Mansfield]

I think you mean silent partner.

[masso]

Yes, thanks.

[nealrm]

The one working the store should receive a salary that is paid prior to determine profit/loss. Then profit/loss should be shared equally.

[Krystsina]

So far it sounds to me quite unfair. I would definitely go for being a working partner, and no matter how I perform, a silent partner will pay the rent. Even if the work I do doesn't bring any profit to the business. Quite unfair I would say. I think that a working partner should get salary, so you both will be in a position to be able to pay. And then you should just share all the costs equally. It makes more sense to me.

[masso]

Yes, both of above suggestions are very fair.
Now, the salary needs to be decided.

Under the above circumstances (capital, rent and partners current salaries), what salary sounds fair for working partner?

[nealrm]

I would replace the current salaries with the market rate for similar employees doing similar work in your area. In the US, a clerk at a retail store is making around min wage. However, if the working partner is managing employees, you should use a higher salary. The same goes for the silent manager that is handling orders and inventory.

Both salaries should be taken out before you determine profits for the business. If anythings goes well, the profit sharing will be greater than your salary. At that point, you may decide to hire someone to replace you.

[masso]

Thank you very much.
I think now the situation started to make more sense, and once a fair salary (as per area market) has been decided, it would be fair to both partners.

On a side note: The working partner is going to manage everything. Starting the store, Orders, purchase, sale, inventory, managing employees (if any)... everything. Silent partner will have no responsibility.
Once the store starts doing good and after covering store expenses from within the store, and we are left with some profit (say, even $100), silent partner will leave the job and join in.