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Partnership/splitting the profits, help/clarification needed.

(5 Posts)
Trippler Fri 23-Sep-11 15:39:12

Starting a partnership with a person in the same field.
I bring 50% of the start-up costs. He brings 50% but it is a loan which is deferred for three years.
The question is, how do we split the profits?
Obviously I will have three years' benefit of a sum of money without which I would not be able to start up alone.
However I am investing my money and expect a higher return than I would if I had taken out a loan, so I'm reluctant to accept 50% of profits less repayments.

I'm sure there is a clear way of thinking about this: what are your thoughts?

TalkinPeace2 Fri 23-Sep-11 17:57:00

you can split the profits in whatever proportion you like
speak to your accountant and get it written into the partnership agreement
you can change the percentage whenever you ike - to adapt to changing circumstances

Laugs Fri 23-Sep-11 18:07:38

I don't understand why you would get more than 50% if he is solely responsible for paying back the loan. (Maybe I am being stupid though?)

You will still be in a better position than he is because your interest on your savings would have been minimal, whereas his interest on his loan will be much higher.

Trippler Fri 23-Sep-11 18:13:35

Sorry, to clarify: the loan is to the business, not to him as an individual, but it comes via him, not through a bank. The business will repay the loan in instalments, interest free, after 3 years.

I know we can get the accountant to advise us, and of course it's all going in the agreement, I just wanted some thoughts on what others would do. There are several ways I can see to organise things.

TalkinPeace2 Fri 23-Sep-11 18:25:02

The "loan" is capital introduced
and has no impact on the profit shares
it only impacts on how he manages his tax affairs on the personal return
for extracting money back out of the business

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