How do you determine a silent partner's salary if he begins working for the company?
If someone was a silent partner for about three years and owns 1/3 of the business with two partners and everyone agrees he can now start working with the business for a salary, how would you determine his starting salary? Is it much lower than the two partners who have been working for three years? Thanks.
All salaries whether for partners or hired employees should be based on the fair market value for a particular function within the company. The first thing you need to do is to develop a job description, preferably with a measurement of performance and attach an appropriated functional job title to it, like sales and marketing manager or operations manager. You can then obtain a value for that function from the state or federal department of labor websites that provide this information to the general public - www.payscale.com.
Another way of evaluating the appropriate pay scale is to break down and individually rate the job in terms of its key elements, such as knowledge, skills, education, experience, independence, level of supervision, intelligence and other pertinent statistics. You can find how to do this by going to https://gsmbizsystem.com/paid-fair-salary-wage. This is a job factoring model that may work well in your particular case with three partners involved in the business.
It depends on a lot of different factors. Here are few:
Expertise: What is his area of expertise? How does it contribute to the business?
Market Worth: What is the market worth of the position he is serving?
Investment: How much did he contribute in terms of investment? What was his share? Did his share grow in the 3-year period?
Partners: Who are the other two partners? What is their role in the business? How will his role be superior or inferior to their role? What do other partners think?
Value Addition: How will the partner's contribution add value to the business? Sometimes, it is not the work that counts, sometimes goodwill and reputation have a role to play too.
Salary Structure: What is the current salary structure of the organization? How does this new role fit in?
Ask these questions and see where it goes.