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I have a partnership with a business partner. We sell goods…

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Hello. I have a partnership...
Hello. I have a partnership with a business partner. We sell goods online and formed an S corp. We both have put equal amounts of investment and we have spent somewhat close to the same amount of time working on the business (I've spent a bit more, but not much). Now I've quit my full time job and will be spending probably 70 hours a week working on the business (my partner probably spends 35-40). How do we handle this? My thoughts are below. 1) We change equity structure, but I have no idea how to do that and that's not a very flexible solution 2) I get paid by the business--paid out in the future--for my hours at market rate. The problem is that if we liquidate the business and there is no profit, then my partner is essentially paying me out of his pocket. But it is a flexible solution 3) I could use the extra hours to star another business, but this has it's problems/issues as well. How is this typically handled?
Submitted: 10 months ago.Category: Business Law
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Answered in 2 minutes by:
9/24/2017
Business Lawyer: RayAnswers, Attorney replied 10 months ago
RayAnswers
RayAnswers, Attorney
Category: Business Law
Satisfied Customers: 48,845
Experience: I have 30 years as a business lawyer in Texas
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Hi and welcome to JA. Ray here to help you today.Please bear with me a few moments while I review your question and respond.

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Business Lawyer: RayAnswers, Attorney replied 10 months ago

You need a A corporation operating agreement here setting out what you have agreed to as far as payment, equity, etc.

Reference

http://smallbusiness.chron.com/write-s-corp-operating-agreement-66089.html

Legal zoom has self help and forms for this

http://info.legalzoom.com/write-s-corp-operating-agreement-20990.html

I appreciate the chance to help you tonight and good luck.

If you can positive rate 5 stars it is much appreciated.

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Business Lawyer: RayAnswers, Attorney replied 10 months ago

Another free operating agreement you can draft from

Operating Agreement - Tools for Business Success

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Customer reply replied 10 months ago
Thanks for the response. I guess my question relates more to a recommended way as to how to handle changing hours working for/on the business. I'm not sure the best way to proceed. It's not so much about what we agree to but rather what the best way to accommodate changing hours when it comes to business equity or creating the hours as an expense.
Business Lawyer: RayAnswers, Attorney replied 10 months ago

I think you deserve more equity here since you are working for free full time.Maybe 5-10% more.

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Customer reply replied 10 months ago
Well we've been in business for a year and we've both worked approximately equal amounts. Let's say this situation lasts for four-five months and then we are at a point where he feels comfortable leaving his job as well, does that still merit a 5-10% increase in equity?Also, in terms of equity, does that mean I would get 5% more of profits? Would I need to invest 5% more as well. For example, let's say we both invest $50 dollars ($100 value). And then the company sells for $200. Would I then get 55% of that sale, even with a 50% investment portion?Wouldn't a payment for hours be a more flexible solution? So if we sell, the business would owe me for additional hours worked? The only issue that I could see with this is that if we don't make any profit, then my partner would basically be paying me out of his original investment.
Business Lawyer: RayAnswers, Attorney replied 10 months ago

You could do a payment for hours here ,thats another option, and have it paid back to you if the business takes off, the risk is whether it does but this is doable.Add up hours and what amount per hour and could be payable once profits reach $$$.Something like that..

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