Business Law

My sister and I are starting a business. Actually, it is…

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My sister and I are...
My sister and I are starting a business. Actually, it is about the business mentioned in the other conversation. I had already incurred the costs of the LLC formation and it the business is under my name. But since I thought her business idea would be profitable much faster than mine, I... Read full answer
My sister and I are starting a business. Actually, it is about the business mentioned in the other conversation. I had already incurred the costs of the LLC formation and it the business is under my name. But since I thought her business idea would be profitable much faster than mine, I decided to take on her offer to partner with her.I wanted an equitable way for profits to be divided from the getgo so that when we become profitable it is not an issue.
I incurred the cost of business formation, business license and fliers. And I provide advice when needed on whatever subject needed, and come up and fix advertising catchphrases.I also have started what I told her would be a regular investment every 2 weeks within my means.
She is the more active partner. She posts on social media and actively looks for physical clients, possible affiliates The profits from those she will get to keep for herself.
She does not have a lot of cash on hand to invest at this time. I told her since she needs the money, she can get the profits first. Then at some point down the line, we can get our cut. And when that does happen, then I will get reimbursed for the money originally invested.Two weeks ago, I proposed that she gets 60% and I get 40%. And if I cannot contribute in any way advice or monetarily my ownership will drop to 15%. reimbursed
We plan on adding our older sister into the mix. If she becomes an owner, I will drop to 25% and my older sister will get 25% leaving my younger sister with 50%.
However, she just told me that she doesn't think her 60% is enough since she will be doing most of the work. But I also think that since I incurred the LLC formation costs along with regular investments, I should be penalized for not being as active as she is since I do also provide advice. And I also think that less than 40% may not be worth it for me to invest as well.Please let me know if the 60%40% is a fair, and equitable division. I thought it was but since my younger sister mentioned that she was dissatisfied with getting just 60%, I think I may be too bias to know what's fair at this point.
I want to avoid potential fights/unnecessary friction for the future. (this is for an online startup)Kindly let me know.
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Answered in 1 hour by:
11/9/2018
Maverick
Maverick, Attorney
Category: Business Law
Satisfied Customers: 7,595
Experience: 20 years of professional experience
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This something that the tow of you need to work out in a logical fashion. It is not something that I can determine for you; but I can provide you with some guidance on how to go about arriving at a fair percentage:

1. You need to add up your estimated time invested in hours and multiply that by a reasonable market hourly rate; then add to the the money invested to date. This will be your capital contribution to the LLC.

2. She need to do the same.; this will her capital contribution to date to the LLC.

3. Divide #1 by the sum of 1+2 and that is your % share.

4. Divide #2 by the sum of 1 +2 and that is her % share.

5. Fix quarterly dates when these % shares are adjusted based additional invested time and money.

6. Document everything and use an operating agreement that spells this out. It will have to be customized. CLICK HERE for a sample form to use as a go-by.

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Maverick
Maverick, Attorney
Category: Business Law
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Experience: 20 years of professional experience
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