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Tax.appeal.168
Tax.appeal.168, Tax Accountant
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I bought a coffee shop grand daughter. She was under

Customer Question

I bought a coffee shop for my grand daughter. She was under the impression that she would just pay me back from the profit. I had it where we would be partners and split the profit and the company would pay me back my investment. Normally if someone loans money for a business do they receive the investment back and still be a partner.
tom
Submitted: 2 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 2 years ago.
Welcome. Thank you for choosing us to assist you. My name is ***** ***** my goal is to help make your life, a little... less taxing.
Q: I had it where we would be partners and split the profit and the company would pay me back my investment. Normally if someone loans money for a business do they receive the investment back and still be a partner.
A: Was there a written agreement? If so, how was that agreement structured? Was it stated in the agreement, how, and when you would receive your investment back and split profits or losses? As far as if it is normal whether a person receives their investment back and still serves as being a partner depends on what is written in the agreement and what type of partner that person is. It is not automatic that investments are repaid or how and when investments are repaid.
At the following link, you will find a sample of a basic partnership agreement.
http://www.smallbusinessnotes.com/managing-your-business/sample-partnership-agreement.html
Let me know if I can be of further assistance to you regarding this matter.
Customer: replied 2 years ago.
There was no written agreement. I just own the coffee shop now. It is normal to get you investment back and to become a partner?
Expert:  Tax.appeal.168 replied 2 years ago.
Hello again,
Usually when there is no written, things can become sticky.
It is normal to get you investment back and to become a partner?
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I'm not sure if you're telling me that it is normal to get your investment back and become a partner above, or if you meant to ask is it normal?
As for whether is is normal, see below:
Relationship of Partners to Each Other
Each partner has a right to share in the profits of the partnership. Unless the partnership agreement states otherwise, partners share profits equally. Moreover, partners must contribute equally to partnership losses unless a partnership agreement provides for another arrangement. In some jurisdictions a partner is entitled to the return of her or his capital contributions. In jurisdictions that have adopted the RUPA, however, the partner is not entitled to such a return.
Capital contribution - your investment. Notice that it states that in "some" jurisdictions, not all.
RUPA stands for Revised Uniform Partnership Act.
REFERENCE SOURCE:
http://legal-dictionary.thefreedictionary.com/Investment+partnership
Other information that might be beneficial to you:
A partnership agreement is not a mandatory legal requirement for establishing a partnership. However, it is a very important step to ensure there are no misunderstandings between you and your partners. A well-drafted partnership agreement will help you decide in advance how to handle certain situations.
Here’s a list of some of the items that should be covered in your partnership agreement:
each partner’s contribution to the partnership
the allocation of profits, losses, and draws
the partners’ authority and management duties
voting rules for decision-making
how to admit new partners
what happens upon the bankruptcy, withdrawal, or death of a partner, and
how to resolve disputes.
REFERENCE SOURCE:
http://www.nolo.com/legal-encyclopedia/how-form-partnership-south-dakota.html