how to fairly split the profit?

[julie]

I started a business with a partner. We are in our third year of business. We make clothing.
Since the beginning i have been investing more than 90%. We started with a small production, the first year i pay back my first investment and split the profit 50/50.
The second year i again came up with all the investment. At the end i pay back my investment and split the profit 50/50 in the idea that she would came back with half of the investment for the year to come.
But finally she made wrong choices and again had almost no money to invest, actually she invest about 10% that she have been paid back within 2 months.
Seven months after we started to invest for the new collection i didnt paid back my investment of this year. I surely will soon enough but i figure out that to split the profit 50/50 isn't fair for me and this year i want it to be fair.
Basically i take care of the selling over the net, the orders, the wholesale, the catalogs, the emails, the accounting, te money, the purchase of the
fabric, the designs, the marketing, i do all the business relations and i take all the risks,
She help me with the designs, she create some unique pieces that we can sell a bit more expensive, she's working many hours as much as I within the production period, but if she want she can leave go in holidays and me not really, if i do i could loose a lot...
She as been working for about 4 month this year and yet she didn't get salary or only a small.

So how would be the best way to divide the profit better?
I thought about to pay hey a lower market salary + a equity stake of the profit what could that be?
We live in India where life ain t really expensive. Maybe 1000$/month + 20%
If i do this i suppose i should pay my self a salary to? Same 1000$/month?

Thanks for your support

[Freelancier]

So she's the talent and you're the backoffice person. You don't have any business without her, she doesn't have any business without you. Seems like an equitable split that you get paid back first and then split the profits equally for your reward. Why are you looking to kill the golden goose? Could it be because you didn't make back your investment money this year?

[nealrm]

It appears that you don't have a partner, instead you have an employee that is receiving as much of the profits as you. There are several ways this could be done better. You could change this into a straight owner/employee relationship. She would receive a salary and maybe even profit sharing. A second way would be to keep the partnership but split the profits according to how much each contributed. However, for either to work you must change what you are calling profits and how you are dispersing money.

At the end of the year, take the total collected, pay each of you the amount you put in PLUS interest. Also remove a base salary for each of you. Out of what is left, remove an amount to be used to buy next years supplies. Put that into a bank account for next year. What is left are the true profits. Split that between the two of you based on investment.

[julie]

I believe you must have misinterpreted what i wrote, she does some of the creations but that reflect only about 20% of the profit, the other part come from my creation or ours. And for the futur this 20% can only come smaller as we will expand the handmade stuff will represente only a small amount of the production. And the office work will become much more!

[julie]

Thanks for your answer Nealrm. When you say Split the true profit based on your investment if she do not invest money and we invest same amount of time what would be most fair?

[nealrm]

Above I stated to remove a base salary. That is the portion that compensates for the amount of time you each put in. If you work equal amounts, then the two amounts should be equal. If one of you works more hours, then that person would get more. Base the hourly rate on comparable wages in your area.

BY removing the salaries before splitting the profits, you are assuring that each of you receive an equal amount for the work you do. What is left is return on investment. That is the portion that needs to be split according to the amount invested.

You deserve to compensated for the risk you are taking with your money. Given that you both work equal amounts, you should receive a larger portion of the profits as compensation for that additional risk.

[Freelancier]

I wondering if the wrong questions are even being asked. It sounds like the OP already has an idea what is to be done, but hasn't figured out how to sell it to her partner.