Jsbalzer | Answers

The sweat equity vs capital contributed split is the 2nd or 3rd most common post formation problem. Since Peter already answered the question of what to do after the horses are already out of the barn if you left the barn door open I will try to cover some practical advice on how to setup your partnership in the first place to avoid this problem.

1. Do not just download and sign a form operating agreement! Downloaded forms are like tools. Just because you can buy a welder doesnt mean you know how to use it.

2. Discuss and agree on hours contributed or tasks completed in exchange for Equity or compensation.

3. Consider having different shares of profit splitting versus voting shares many people don’t realize you can do this but often this solves the problem of people who contribute more work deserving more profit but the person who contributed a lot of capital and does no work may want the majority of the voting shares

The sweat equity vs capital contributed split is the 2nd or 3rd most common post formation problem. Since Peter already answered the question of what to do after the horses are already out of the barn if you left the barn door open I will try to cover some practical advice on how to setup your partnership in the first place to avoid this problem.

1. Do not just download and sign a form operating agreement! Downloaded forms are like tools. Just because you can buy a welder doesnt mean you know how to use it.

2. Discuss and agree on hours contributed or tasks completed in exchange for Equity or compensation.

3. Consider having different shares of profit splitting versus voting shares many people don’t realize you can do this but often this solves the problem of people who contribute more work deserving more profit but the person who contributed a lot of capital and does no work may want the majority of the voting shares