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How does a partnership work...HELP

rozanz
05-07-2006, 08:23 AM
Hi I'm finally going after my dream of opening a upscale gift shoppe. Here is my problem. My brothers want a part of it and I too would like them to be, but I am the one with all the knowledge and customers. If hypotheticaly it is going to cost 200K for start up how do I get them to be a part of it without having control of it? If they put in some money how much should it be? Is there a book or a link that will explain IN DETAIL the different types of partners? I'd be willing to give them each a certain percentage but not 50%. PLEASE HELP. Thank you
Rosie

mike
05-07-2006, 11:02 AM
You could sell them 20% voting share each at $40K (or 20% of the total investment). That will also give you a 60% gearing, which is pretty good leverage level for a retail outlet and allow you to approach debt financiers with cash in hand.

My question is- WHY do you want them to be part of it? Is it because they're your brothers or because you think they can bring something valuable to the company? If it's the former- reconsider! Making a decision to create a key stakeholder should make business sense, not emotional or familial sense. If you want their cash; be up front, tell them you want them to put in the money, but let you manage them company, and they can enjoy regular dividends (provided the Earnings are substantial enough).

Icemastr
05-07-2006, 05:02 PM
Partnerships can work in a variety of ways but really we need information on your reasons why to have a partnership. Most of the partnerships I see are because someone with knowledge and ability don't have the money to start up a business so they pair up with someone else, or someone who does have money and ability wants to expand their business with someone else who is also talented. If you have enough money to start up the business you would be better off not involving someone else for many reasons, especially people that are family members. You can setup the partnership anyway you want however you should understand if someone is investing a substantial amount into a company and its not a loan they have some control. If you have quite a bit to invest don't forget there are lots of options for SBA loans that can be lower interest than the returns you would pay out to a partner.


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