How do you structure a small business with one partner as investor and another in charge of operations?

It is noticeably clear from your question that you are hinting towards a broad business model because it is taking external forces like investment are taken into consideration. Major pitfalls in this model are not sufficiently focusing on the core value creating processes and it includes factors not completely controlled by the company.
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath

First things first, you should do your assessment, due diligence of the person offering you this opportunity and the assessment of the offer and underlying business model.

Do you know this person, do you have an established trusting relationship?
Does this person have successful and verifiable business traction in the same field?
Are there any references you can check?

Also, assess what you could do alternatively with the capital that you would invest here? A comparison of the opportunities' type, risk profile, ROI etc will make it easier to decide if this is even a relevant opportunity for you or not.

Hi there.

My initial thoughts here is that the risk/reward payoff of between 2 and 4% seems low. In essence, this deal feels more akin to a venture capital proposition (seed capital), if the business proposer takes onboard all operational activities and doesn't invest anything. More information here would be helpful regarding this point, but under this form of deal, I'd be seeking a much higher return on my investment.

Secondly, and to the point of others on this thread, what percentage of the business does your $250k buy into? Has the proposer invested anything or provided anything of tangible value to the business (product, invention, patent, active customers, confirmed orders, etc.)? It's important here to understand what exactly your $250k (per transaction) is buying into.

Another question I'd be asking, is what will the funds be used for and what level of comfort do you have that it will be well managed and equate to growth/value.

Also, how many others (if any) will potentially also be investing (both now and into the future). The more invested, the further your return is diluted.

Knowing these aspects, one potential structure here is that you could be an equity parter with x% ownership (based on the above factors) of the business. I would however caveat this by urging caution and making sure I did a thorough assessment of all the angles presented here before progressing. There is some good general advice here so far from a few of the members and I hope these give you some good ideas on how to proceed. Feel free to reach out or to ask more questions here.

When the one partner provides the financing, the other the expertise, the best practice (depending on how the investor knows his partner) is for the investor to provide a small share (10% or even less) of the ownership to his partner and the rest of the reward for the managing partner to be performance-based. Usually both partners agree on few preset (long-term) goals, the achievement of which will trigger increase in the share of the managing partner. By the definition of the goals and of the share increase the investor should make sure that he would get the expected return on his investments and a fair share of the value increase based on the agreed parameters. Effective interim control of the operations and of the financials of the business (and of the fulfillment of the goals and managing partner commitments) by the investor is of prime importance. The funds are provided in installments based on up-to-date performance in the form of a capital increase or loans.
On the contrary, in case of underperformance and unless the investor does not decide to quit, any additional financing should be made either as equity financing or as convertible debt in order to dilute the share of the managing partner.
A partnership agreement can make or break potentially a very sound business.
Otherwise I agree, 2% - 4% ROI does not make any sense.

Below steps should give you clarity:

1. Conduct due diligence - only after having this report, you know what to plan next.

2. If the business is genuine, then develop strategies to:
a) secure your investment by implementing an Internal Control system, legal document, and business structure.
b) cash flows strategies to set payment in a secure manner.
c) implement a risk management system and contingency plans.
d) an exit strategy

Good luck