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Richard, Attorney
Category: Business Law
Satisfied Customers: 54839
Experience:  32 years of experience practicing law and a businessman.
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I own a 50% share of a LLC in Brooklyn, NY. The remaining 50%

Customer Question

I own a 50% share of a LLC in Brooklyn, NY. The remaining 50% share of the business is owned by my business partner. The business provides graphic design services. The company has been in operation since 3/2009. The company is profitable as of 12/31/2012. That's the easy part. A third person ("Hans") plays an ongoing contractor role for our company. He is married to my partner. Hans provides new business, strategic, and design services. He typically spends between 10 to 15 hours per month on activities related to my company. In addition to this work, Hans also has a permanent, full-time job with another employer. When my company formed in 2009, Hans was supposed to join us but he backed out as he and his wife were uncomfortable with the idea of "going out on their own" and the potential financial risk a new company might pose for their family. As the company continues to grow, Hans has now asked for a share (20%) of the company as well as a monthly stipend ($1,000). I'm uncomfortable with granting his request for a 20% stake in the company as that would mean he and his wife then own 60% to my 40%. Is there such a thing as an agreement where Hans receives a share of the profits (more like 10-15%) but I retain my 50% of voting rights?
Submitted: 4 years ago.
Category: Business Law
Expert:  Richard replied 4 years ago.
Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good afternoon. I totally agree with your concerns and this is often addressed via a Net Profits Agreement which would give him the right to his profit percentage, but would give him no direct ownership interest in the business. This gives him what he wants and it maintains the 50/50 balance you have in place with your partner. I would be happy to provide you a template for such a Net Profits Agreement if that would be helpful. Let me know and I'll be happy to provide it to you.

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