Any recommendation on splitting ownership and kind of Business to set up.

[powerbiz]

How do you split ownership if you are putting up a new business and there will be two partners/owners.

Type of Business: Fashion Accessories

Partner A: No Knowledge of the business but has the money.

Puts in all the money: rent, salary, additional inventory etc.
a.Helps in securing vendors from China and will travel as needed.
b.Helps overseeing the operation.

Partner B: Only an industrial partner. Has the full knowledge of the business, has a list of at least 500 buying customers and will set up the business but no monetary contribution except maybe
some inventory of the products (certain lines only)

a.General Manger overseeing all aspect of the business mainly on sales and marketing:
- Set up all about sales and marketing aspect
- set up the showroom
- set up logistics

b. Gold mine of 500 buying customers

c. Has the lease for a very strategic showroom- where all international buyers go to buy

d. Will handle trade shows and road shows


Initially Partner A offers Partner B 15% profit sharing on net income plus salary.
But partner A wants to register the business solely under his name.

Questions:

1.0 What should be the fair split for profit sharing and ownership of the business?
2.0 What should be the salary of Partner B say hourly, weekly or monthly?
3.0 How should partner B be protected that after the whole thing is set up and running that
he will still be part of the business.
4.0 Partner B wants to get an initial fee for the customers list and management fee for setting up the business from partner A.
Is this reasonable as way of compensating partner B for his initial start up effort ( will take a lot of time and effort).
If yes how much would that be? If not why you think?
5.0 How are both partners be protected?
6.0 Partner B believe to be a limited partner and must be part during incorporation or setting of partnership instead of just profit sharing.
7.0 Is 15% profit sharing good enough considering that its partner b who will really run the show and all the business know how will come from him?
8.0 What should be the ideal and fairest set up for both?

Your thoughts and input will be greatly appreciated.

[Freelancier]

If Partner B wants a salary during the start-up "we don't have any profits" phase, then Partner B gets a small cut of potential future profits, and 15% could be about right. If Partner B wants to take a bigger risk, then the portion of future profits should be larger.

You protect future profits by being a registered owner. Which means you create and register a business entity with the ownership portions spelled out.

Employment agreements don't survive a bankruptcy; ownership shares can give you a stake in a bankruptcy outcome, depending on where the money comes to get the company out of bankruptcy.

Really, you need to talk with an attorney to make sure you're protected in whatever agreements get created. The advice you get in free forums for generic question is worth exactly what you spent to get the advice.

[huggytree]

partner A is already trying to take advantage of the situation...he's very smart....he has nothing but $$

partner B has everything except $$

anyone see a happy ending in this situation?

there's no partnership to start with...its a rivalry........you each have 1/2 of the puzzle, but really partner B is the business while A is just an investor

skip the partnership.....find an investor and pay him his $$ back with a nice % return

if the business is registered in A's name then B is an idiot

[ozetel]

Well it is a difficult situation.

You need money to be able to achieve results, (in the beginning anyway). Unless there is some way to take a "patient" approach if Partner B has some money available.

But at first glance it does seem lop sided to me - 15% profit share when Partner B is pretty much doing all the work and bringing the business to life to speak, not really fair in my book. The issue, Partner B is reliant on the fact that the money is essential so I tend to agree with huggytree - find a way to not be dependant or this will come back to bite. (If you are Partner B asking the questions of course!) Which poses a query - with whom might we be talking to here?

It is hard in my view you balance the worth of a monetary investor V the worth of the one doing all the work and growing the business. That has to be figured absolutely.