Welcome, and good luck
Anybody investing 200K start up should have both an accountant and a lawyer on their side.
Talk to the professionals. It will help NOW and save a lot of trouble LATER
I agree completely and do have appointments set up but I'm looking to try and gather some opinions here as well. Anything would help the structure.
There are three of us opening a business and are having difficulty negotiating the shares. Total Start up = $200k
Partner 1: Is the inventor/manufacture of this product and will be going in as a silent partner. His contribution: if 50 units are ordered, 100 will arrive. So whatever is ordered, he will double. Partner 1 is providing financial support to Partner 3 for initial buy in of $16K.
Partner 2: Will be financing the business. Has 800+ credit and 6 figure income. His contribution: will finance $115K and bring $20K cash to start the business. Will not be leaving his job but will be responsible for all accounting, payroll, vendor, sales of contracts. He is remaining at his job to cover financial needs for the new company if they arise.
Partner 3: Has bad credit (or else would be on the note with partner 2) but does have the correct expertise in this field. His contribution: Sweat equity. He will be the store front and be in charge of seeing day to day activities, basic management of employees, sales of contracts, employee training. Partner 3 claims that his connection to partner 1 is what makes this possible, (does this have value)?
Here are the questions that are coming up in discussion.
- it the companies responsibility to repay partner 2’s loan?
- sweat equity in this situation and how it should be applied.
- does partner 3 officially hold shares of the company? All sweat equity discussions are to be focused for 1 year time period only.
- has been proposed a couple of different ways thus far, 45/45/10 with partner 1 being 10%. Partner 2’s concern with this is that Partner 1 and 3 are friends and will be majority owners over partner 2, who “is bringing the money”. Partner 2 originally offered 60/30/10. His statement was that Partner 3 would not have earned enough shares over her salary until year end to be considered an owner through the whole year, hence the company was still majority his and could pay for the overhead loan.
Thanks for all the help!