Hey Everybody, I have a question about a situation. Which does everybody think is fair? --- Partner A has skills and knowledge in an area of business. He also has been working in that area and has $4,000 of assets in that business. Partner A creates a partnership with Partner B. The agreement is that Partner B has to buy into his fair share of the Partnership though purchasing of assets and business expenses until he is at $4,000. The agreement is that “expenses are paid first”. Partner A is to receive 70% of the profits, whereas Partner B is to receive 30%. This discrepancy is due to the skill, knowledge, and know-how that partner A is bringing to the operation. Under this type of partnership: A) Should the first $8,000 in revenue go back to reimbursing the original $4,000 in investment from the two parties OR B) Should the first $8,000 in revenue be split 70% and 30%, with both parties being co-owners in the Partnership.
Are we talking about an existing partnership or one that is being considered? The crux of the question to me is whether "expenses" includes startup costs. If partner B is paying into the partnership through the spending of $4000, it doesn't make sense to me to reimburse those as expenses.
A new partnership/business is being formed where Partner A is bringing in $4,000 of existing assetts / equipment, and Partner B is buying in $4,000 of assetts.
Just tell his partner about $4000 of total assets is not enough. I think Partner A also must be open about all of expenses or current debts. Don't forget to prepare a legal agreement to protect you if something happened in the future. For legal document needs you can check at http://LawDepot.org. Hope it's okay to post link