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Is it far to enter a business partnership where each person has equal share but one partner does not work the business?

Asked over 2 years ago - Columbus, OH

The start up costs are 200k. Partner A will invest 70k and will be responsible for the day to day operations and will work 60+ hour work weeks. Partner B will invest 130k but will not be responsible for any of the day to day operations and will not even work the business at all. What is a far way to enter into a partnership?

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Attorney answers (2)

Ronald Anthony Sarno

Reputation Level 20

Answered over 2 years ago. Litigation Lawyer in New York, NY.

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The best way to go is to hire a lawyer to draw up a partnership agreement. If A works daily, he should be permitted to take a salary. One suggestion is A gets 35% of the profits and pays 35% of the liabilties while
B gets 65% based on their capital ratios. I always recommend that both partners sign major checks so there is no mystery as to what expenses costs.

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LEGAL DISCLAIMER
Mr. Sarno is licensed to practice law in NJ and NY. His response here is not legal advice and does not create an attorney/ client relationship. The response is in the form of legal education and is intended to provide general information about the matter in question. Many times the questioner may leave out details which would make the reply unsuitable. Mr. Sarno strongly advises the questioner to confer with an attorney in their own state to acquire more information about this issue.

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Bradley William Miller

Reputation Level 10

Answered over 2 years ago. Business Attorney in Dublin, OH.

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It sounds like you are envisioning a limited partnership. In a limited partnership, there are two classes of partners - general partners who operate the business, and limited partners who provide funding but don't have a right to operate the business. To enter into such a partnership, you need to have a partnership agreement that sets out exactly how the partnership will be run. You will also need to file papers with the Secretary of State's office.

Depending on your intended business and your plans for it, it might make sense for you to form the business as something other than a limited partnership, such as a limited liability company (LLC) or a corporation. The only way to determine which entity is best is to consult an attorney. Not only can he or she help you decide whether to be a limited partnership or other entity, he or she can also create any partnership or operating agreements for you and submit the necessary paperwork to the Secretary of State to ensure that your business is legal.

If you have other questions or are interested in sitting down and discussing your situation in more detail, feel free to contact me.

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