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Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 10354
Experience:  30 years of corporate, litigation and international law
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Two people founded a small business and agreed to be 50/50.

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Two people founded a small business and agreed to be 50/50. They didn't have a partnership agreement.

A few months pass and the company gross profits are about $1500.

One partner is doing 90% of the work. The other provided most of the initial startup cost which was $450.00 The company makes all of their money from their website.

The partner who made the initial capital investment is going to leave the company. What would be a fair amount to pay out? There are no tangible assets besides a $100 printer.

bizlaw :

The leaving partner invested $425 and the working partner contributed a like amount in labor. So that represents $850. What you have in the bank in excess of $850 would be split 50/50 and the leaving partner would get his $425 back. You have too little of a track record to consider future earnings since the amount you have generated is minor.




This communication is not intended as legal advice. A local attorney should always be consulted for legal advice. No client/attorney relationship is intended or created by this communication.


Richard - Bizlaw and other Business Law Specialists are ready to help you
Customer: replied 5 years ago.
I will hit accept for each reply once we are done...

(The above answer plus paying off his legitimate business expenses which he has receipts for totaling around $500. right?)

I offered him $1000 total which would pay off his business expenses and nearly all of his capital investment.

This is what he emailed asking for (please note he is counting his initial capital investment as an expense):


"You know know and I know companies sell for 3 to 5 times their net value. In the last two months, we have sold close to $1000 each month. This is a great company in which both parties have built. You offered me $1000 for everything. Are you trying to cheat me? I know you better than that and that is not a fair offer. You told me you would be fair and $1000 does not even cover my expenses. Here is what I am thinking:

1) The total expenses equal $1,187.18, in which, I have all the necessary receipts to prove legally.
2) I am not trying to gouge anyone's eyes and ask for 3-5K, but I have come up with a number of $1,187.18 + $1,500 for a grand total of $2,687.18 to sell out my share of the company."

You have gross revenues of $1,000 per month. That does not take into account the value of your services working for the company. If you paid a normal salary of some type using minimum wage you probably are generating barely enough to pay salary. That is what you have to consider. You friend is acting like nobody has to work for the company to generate the revenues. Put a salary on your time, deduct that from the gross revenue, then deduct something for website maintenance will you need to plan for. What is left is your profit if any. That is why I said what I did.

 

For example if you put in 20 hours a week or about 85 hours a month at $10 an hour the salary would be $850. Add 15% for the company share of social security, etc. ($127.50) and your profit is about $22.5 per month. There is no profit to multiply. Give him the $1,187.18 he has in the business. Beyond that this business is marginal with no real history of success worth talking about. It is all futures and hope. It has no current value.

 

This communication is not intended as legal advice. A local attorney should always be consulted for legal advice. No client/attorney relationship is intended or created by this communication.

Richard - Bizlaw and other Business Law Specialists are ready to help you
Customer: replied 5 years ago.
Great thanks... We are friends and I want to do this so it is fair without one party feeling cheated.
You are welcome and thank you for accepting the answer.
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