the startups.com platform about startups.comCheck out the new Startups.com - A Comprehensive Startup University
Education
Planning
Mentors
Funding
Customers
Assistants
Clarity
Categories
Business
Sales & Marketing
Funding
Product & Design
Technology
Skills & Management
Industries
Other
Business
Career Advice
Branding
Financial Consulting
Customer Engagement
Strategy
Sectors
Getting Started
Human Resources
Business Development
Legal
Other
Sales & Marketing
Social Media Marketing
Search Engine Optimization
Public Relations
Branding
Publishing
Inbound Marketing
Email Marketing
Copywriting
Growth Strategy
Search Engine Marketing
Sales & Lead Generation
Advertising
Other
Funding
Crowdfunding
Kickstarter
Venture Capital
Finance
Bootstrapping
Nonprofit
Other
Product & Design
Identity
User Experience
Lean Startup
Product Management
Metrics & Analytics
Other
Technology
WordPress
Software Development
Mobile
Ruby
CRM
Innovation
Cloud
Other
Skills & Management
Productivity
Entrepreneurship
Public Speaking
Leadership
Coaching
Other
Industries
SaaS
E-commerce
Education
Real Estate
Restaurant & Retail
Marketplaces
Nonprofit
Other
Dashboard
Browse Search
Answers
Calls
Inbox
Sign Up Log In

Loading...

Share Answer

Menu
Sponsorship: What are best practices in splitting up the business profits between to partners?
DC
DC
David C Barnett, I help you buy, sell, plan, value a business answered:

Hi there. I help people buy and sell businesses and also do a lot of consulting for people with partnership issues.

Your question seems to ask what percentage of ownership should go to each initial shareholder when setting up a company. You can choose to do this in a number of ways.

Some people keep it simple, they go with 'percentages' of ownership. This can make it difficult when the idea of new partners or investors comes up.

A second, more sophisticated, approach would be to look at the value of what each is bringing as an 'investment.' For example, if each is investing a year of labour, what is that worth? A nominal share value can be used and shares issued based on this investment.

This helps to distinguish between what is invested and what is earned in the form of wages or salary. For example, if one partner contributes $50,000 in cash and does $20,000 worth of labour for which he draws a wage and the second partner simply donates $50,000 worth of labour, then both have equally contributed to the equity of the company even though only one has given cash.

Business owners need to distinguish between what their 'job' is in the business and their role as owners. Think of what if would be like to work in a large corporation while also owning some shares. Your day-to-day would be all about your job and the wages you earn. Your activities as a shareholder would be about setting strategic direction.

When I help partners get going we always have to put an organizational chart and job descriptions in place to keep people on track with what they do every day vs. what they do as owners. This helps to determine the value of the invested equity as well.

Watch this video to get a further idea of how shares work in a business: https://youtu.be/1EjKjSAd1F8

Please arrange a call if you'd like to discuss your specific situation.

David Barnett

Talk to David Upvote • Share
•••
Share Report

Answer URL

Share Question

  • Share on Twitter
  • Share on LinkedIn
  • Share on Facebook
  • Share on Google+
  • Share by email
About
  • How it Works
  • Success Stories
Experts
  • Become an Expert
  • Find an Expert
Answers
  • Ask a Question
  • Recent Answers
Support
  • Help
  • Terms of Service
Follow

the startups.com platform

Startups Education
Startup Planning
Access Mentors
Secure Funding
Reach Customers
Virtual Assistants

Copyright © 2025 Startups.com. All rights reserved.