small business partnership agreement

Lionheart99

Hi all,


Ive researched as much as i can on this board and others with only a little sucess.


My question, a colleague and I are embarking on a new venture based on interactive learning. We wish to split the profits 50/50, from what Ive learned so far, if we set up a ltd co hiow do we make that an enforceable agreement? for example 50% of profits each, how would we procede?


The second option (if im right) we simply operate as sole traders and note any income on our resprective tax returns, if thats right is there any way to ensure we stick to 50% each ??


BTW the level of trust between us id very high.


Any thoughts ???

Aquamania

Lionheart99 wrote: »

Hi all,


Ive researched as much as i can on this board and others with only a little sucess.


My question, a colleague and I are embarking on a new venture based on interactive learning. We wish to split the profits 50/50, from what Ive learned so far, if we set up a ltd co hiow do we make that an enforceable agreement? for example 50% of profits each, how would we procede?


The second option (if im right) we simply operate as sole traders and note any income on our resprective tax returns, if thats right is there any way to ensure we stick to 50% each ??


BTW the level of trust between us id very high.


Any thoughts ???

The level of trust between you may be very high at present, but that can quickly disappear - which is presumably why you are asking the question so as to be sure in the future.

If you set up a limited company, and each own 50% of the shares (of the same category e.g. ordinary) then you will both be entitled to 50% of the profits distributed.
The difficulty with such an arrangement is that if you fail to agree on something (such as how much profits to distribute), stalemate can occur.

If you don't want to set up a limited company, consider setting up a partnership agreement.

Pennywise

I'd suggest you make provision for situations when profits of 50:50 aren't appropriate, i.e. for any periods when one of you isn't working due to sabbatical, holidays, other work etc., or for future projects where one of you works on but the other doesn't. A simple 50:50 profit split is a very blunt instrument that may well not be appropriate, so I suggest you make provision for alternative profit shares according to various scenarios.

You may have a high level of trust and co-operation now, but speaking of someone with over 36 years of dealing with small businesses, partnerships, etc., they very rarely end well, often due to perceived unfairness surrounding level of input and level of profits.

Lionheart99

My sincere thanks, its greatly apperciated

Lionheart99

Im in your debt, thanks for excellent advice...

Lionheart99

Yes thanks,



your clearly well versed in these situations and your way ahead of me, basicaally its his idea and all (80%) of the work will fall upon me as my partner has none of the requisite skills to pull it off. If explained this he may go for a partnership, of course what is to stop me just doing this my self as its just an idea, and you cannot patent an idea ?