In a crisis with my business partner - business about to collapse

The risk may have been small but it is still something that founders consider.

The time that he put into it, before it made any money, was worth something. If he had a job, then his time was worth somewhere around what he was getting paid at his job. If he could have programmed other things, his time was worth the opportunities that he gave up to work on this. Only he can really say what his time was worth but it did have value. So, he took a risk when he gave that value to this business without any guarantee of getting paid back.

That he is now getting paid more than the work he put in is the reward half of the risk/reward equation. He risked his time and knowledge, now he gets rewarded.

You risked early on also, if you invested time before there was profit. And so you get half the reward.

Where you are fucking up at the moment is that you are splitting everything 50/50. You have ongoing work but he doesn't and yet you are just splitting the net down the middle? That's dumb. You have a job right now, he doesn't. You should get a salary for your job, that is a business expense, and you guys split the net after your salary is covered. When he works, he gets paid for that also and then you guys split what is left.

So, come up with a reasonable number for your time. As an owner it is part of your responsibility to be fair to the business. He has to come up with a reasonable number for his time too. When you guys work, you get your hourly pay. You pay income taxes on it. You contribute to FICA and Social Security and all that. Be a proper damn business. At the end of each month or at the end of each quarter you can look at what is left and pay out dividends based on your shares in the company.

With that arrangement you will net a little bit more than he does if the division of labor stays the way it is. Alternatively, if he has a higher rate and decides to go back to work then he might net a bit more than you do. But that'd be fair if he's doing more work.

Ultimately though, you guys need to stop half-assing it and get some proper financial and accounting advice. You are making real money now and you need to take it seriously. Pay the right taxes, get your books in order and be a proper damn company.

/r/smallbusiness Thread Parent