Me and my boy thinking bout going into biz together. Total startup costs are $100,000 sposed to be Me: $30,000 Him: $70,000
let's say I put up cash but he falls on hard times and needs to get a bank loan to get his $70,000 but the bank needs to use the ENTIRE BIZ as collateral in order for him to get his $70,000
now, my question is, would I be wrong to ask for say a 50% share of profits even though I only put up 30% of startup capital? Even if without my $30k he wouldn't be doing SHIT because the bank wouldn't touch him?
if he was just some bum off the street i'd be like HELLZ YEAH i want my 50% profit share for 30% of biz interest (BUUUT 100% startup capital) but dude is like my brother so i be tryna be more even-steven with him
also, we've done the same amount of legwork on researching this so "sweat equity" is 50/50.
so, in essence, my boy is taking my $30,000 to take to the bank to front and in turn they'll issue him $70,000
just focus on percentages not interest rates or anything else all technical
2. "If y'all end up getting sued, you taking 50% of the loss or just 30%?" In response to Reply # 0
This is one of those things that there really isn't a right answer for. You could agree on sweat equity, you could agree on some sort of competitive scheme (whoever brings in the most business)...but if you're really trying to get rich, you need to own as much of the asset as possible.
The other problem with 50/50 is that nobody can force a major decision on where the business is gonna go.
If anything, y'all should scale the business down to 60K, so you're both coming at it on the same level, and ol boy can give the business a 40K secured loan, and the business pays him back his 40K + interest back first, before either of y'all take profit on the 29k/31k or 30/30 that you got invested in the business.
See, I didn't wanna get into all the LLC/LLP Stuff becuz it conflates the situation My boy don't even relaise I have this issue yet My issue is that If we go belly up I'm losing $30,000 of my hard earned cash He's only losing his "name" at the bank My $30k cash can buy a lotta bottles of ciroq and H+B His "signature" don't work that well in Follies or King of Diamonds
Also, the backside profit was to be split by how much equity you put in on the outset. 30/70 as you see the figures above.
The biz idea I've really been holding onto for a few years but decided to "make it live" and my boy had some cash to throw around so I ran it by him and he was game. Something came up so his cash was wiped out but he still can get the loan from his bank but I'm kinda not liking someone coming with "paper money" to my physical geld.
And yes, we're both "lawyered up" so our interests are protected.
Ehhh, I guess I need to retool and rethink. But that was a good idea to go 30/30/40 with the biz payin my mans back 40k problem is, he don't have the 30k CASH right now and we'll need to move forward on this pretty soon.
And no, this is not my "$30 vending machine potna" hahahahhahah That dude got his own set of issues but I'll invest a few hunnit in my boys ideas if I see him out there tryna make smthg happen and not just rob+steel.
5. "sounds like a lot is going on here" In response to Reply # 4
>Ehhh, I guess I need to retool and rethink. >But that was a good idea to go 30/30/40 with the biz payin my >mans back 40k >problem is, he don't have the 30k CASH right now and we'll >need to move forward on this pretty soon.
Honestly, anytime I was gonna spend 30 large on something, I'd want to test it out.
Can you do a micro test on it? Can you do a mini-business?
If you're trying to flip a house, prolly not. but a lot of businesses don't require that kinda capital upfront.
7. "yes. it's only me and him at the moment so profits=ownership" In response to Reply # 6
honestly it's more of a "feeling" thing for me now i'm like damn dude, you dont have the cash no more and you coming at me with pokeman cards to my greenbacks even though they equivalent my cash go harder