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what is a fair % allocation of this type of business
Austin, TX
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Posted about 1 month ago in Partnership
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My brother started a business about a year ago. he invested small capitol, equipment, and sweat equity. Everything has paid itself off. Six months into the formation of the LLC, I moved to his location to become a "partner". He needs my skills. I have contributed phone consultation, equipment, sweat equity, and experience. I realize that he has made more investment and pulls more weight in the selling "bigger" clients, but he still needs my skills to carryout the jobs. What are some fair examples of ways to divide up the % of the business and the salaries/bonus of each. I live a much more frugal lifestyle than him, and he also is also comming from a previous job that was much more lucrative than my previous job. But, at the end of the day, we are both giving 100% of our time/effort.
Answers (1)
Michael Stephen Byrd
This attorney is licensed in Texas.
Posted about 1 month ago.
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I suggest you look at the actual monetary value contributed to determine ownership percentage. The tricky part is assigning monetary value to the sweat equity. I suggest you objectively look at the "market" for the types of service each of your are providing. This will also help you set salary. Once you have assigned a monetary value to everything each of you brings to the table, it is easy to determine the appropriate percentage. Do not get hung up on the fact that both of you are giving 100% of your time/effort, as that is only one factor in determining the value of the services being provided.
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