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Thread: A percentage split of company between two people

  1. #21
    Join Date
    Jun 2004
    Location
    Cherry Valley NY, Seattle, WA
    Posts
    3,317
    A few thoughts:

    1. There isnt really such a thing as "fair". Its whatever you both agree on. If you agree you agree, if not you walk away. I Admit I have and still do frequently search for what is "fair" vs what I can get. There is little in the world that is fair.

    2. Remember profit is often kinda a useless vague term for or one or two guy business. I say that because you have to consider what you pay yourself also. Guy A says, "I had a great year I had 100k in profits." and he paid himself $10 per hour. Guy B says, "I had a horrible year, I made no profits." but he paid himself $120 per hour.

    3. The percentage ownership may not mean anything depending on what type of entity it is. With an LLC for example, salary/draws, dividends, ownership, and decision making percentages can all be different. They are very flexible that way. With an S-corp, the percentage ownership is the same as profit/dividend distribution (something like that, I may not be using the exact right terms).
    Ethan Brush - East West Electric. NY, WA. MA

    "You can't generalize"

  2. #22
    Join Date
    Apr 2016
    Location
    Tampa, Fl
    Posts
    141
    Quote Originally Posted by JohnDS View Post
    OK, let me be totally clear now that I am not typing on my phone. In this scenario, Party B) will always own 100% of company and assume liability.

    Party A) wants to go into a particular field of business he used to be involved in, but can't show his name on books because of divorce issues. Has all tools and is going to do the hands on work. (Party A) is a very trustworthy individual so no worries here). Willing to accept 70%.

    Party B) already has a company set up with bank account, business credit card account, insurance, blah blah blah. Does all billing to whomever. Assumes all responsibility and liability. Company currently makes no money so we are starting from a clean slate with no money invested. Willing to accept 30%.

    Material and company expenses:
    - Party A) will receive a company card from Party B) to make material bills easier at end of month to share as a percentage but that's what we are trying to figure out.

    Payments from customers:
    Checks come in and need to get cashed against Party B's) business bank account.

    Party A) and Party B) would like to do a 70%/30% split, party A)/party B).
    Party A) cannot be shown on paper so party B) in all reality couldn't send a 1099 to use party A's) income as a right off and would have to show that as their own income, I get that. That's why 25% of party A's) 70% payment will be withheld for income tax. Let's not get caught up on the percentage being withheld, I know brackets are a factor as well. I am hypothetically using the 25% withheld as an example.

    Ok so this is basically how the company will run. So far the agreement would be a 70%/30% split, Party A)/Party B).

    The profit is easy: Party A) 70% - approx. 25%(income tax)/Party B) 30%

    The business expenses and material is another story. I don't know what would be the way to handle this. 50/50 or 70/30?

    In my mind, Party B) is already taking a 20% cut so why would they have to come up with 50% of material bill still?
    To Begin: Are you a C-Corp, S-Corp, LLC, Partnership or Sole Proprietor?

    T

  3. #23
    Join Date
    Apr 2007
    Location
    Huntington Beach, CA (19 Hrs. 22 Min. from Winged Horses)
    Posts
    6,204
    Quote Originally Posted by Unbridled View Post
    To Begin: Are you a C-Corp, S-Corp, LLC, Partnership or Sole Proprietor?

    T
    well, when you are running money thru someone else's name,
    not showing any of it going to you, isn't that a subchapter L?
    (laundromat, or money laundering)
    ~New signature under construction.~
    ~~~~Please excuse the mess.~~~~

  4. #24
    Join Date
    Sep 2017
    Location
    Napa, CA, US
    Posts
    58
    Quote Originally Posted by Fulthrotl View Post
    well, when you are running money thru someone else's name,
    not showing any of it going to you, isn't that a subchapter L?
    (laundromat, or money laundering)

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