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Dec 16, 2013
It seems you are saying you bootsrapped the start, but now many folks are moving on right after the launch. If so how much they keep should be very small because most of the risk, and the hardest work is still there. I don't know how far you are or how profitable you think you might be, but consider a system where their share is proportional to the effort they made, in the total effort in the next year. After that, it should bottom out a few percent max. Silent partners a huge burden and they shouldn't expect to keep much if they can't stay and do the work.
Dec 12, 2013
I think Neil is spot on. How much are they investing and how much risk are they taking? You have to decide if that investment is worth giving up a percentage of your business ownership. Shark Tank is a good show to watch.
Dec 11, 2013
If they are true silent partners, there total percentage should be less than 40%. That way the people doing the day to day work keep control.
Dec 7, 2013
Usually silent partners share on the profits of the business in direct proportion to their investment. Let's say if a silent partner contributes 10%, then he/she will receive 10% of the after tax profits of the company. On the other hand, active partners pay themselves a salary and share the profits according to the partnership agreement.
Dec 6, 2013
In principle, "fair" should take into consideration the level of risk they've taken on by investing in your company. The higher the risk of losing, the higher should be the reward. investing in the company. The other consideration is how much is the investment as a % of the value of the company. You should have at least an idea, even if it is biased as to how much your company is worth. If you watch SharkTank, you've seen the panel members will do a fast calculation of $Investment / %offered = $Total Value of Company.
Dec 6, 2013
To give you an idea of the situation, Our initial production has been equally invested. However we will be doing separate projects after the launch. They will stay on as silent partners with no further investment on their part
Dec 6, 2013
The initial partnership was equal. How ever it now will be restructured to be silent partners.
Dec 6, 2013
Neil had some pretty good advice. Valuation of the company versus what the other partners have risked is a first step. Obviously, the working members (which may just be you at this point) are going to want their "sweat equity" as well. The problem is quantifying that number.
For example, I worked with a company similar to yours. 4 members, 2 in for just capital investment, 2 that were both investors and the main mechanism of the business. When they sat down to figure numbers, the two working partners negotiated their actual work in the business into an equity position.
Regardless of what is considered capital (money versus sweat), it is still a function of figuring out what the business is worth and how much each partner is truly contributing with their "capital." I don't think their is a hard and fast number you can set without knowing the other factors.
Dec 6, 2013
The initial partnership was equal. How ever it now will be restructured to be silent partners.
Thank you