Snafu with New Business - npc, your Thoughts & Opinions PLEASE Options

[Scott Carlberg]

I'd really like to get your opinion on the situation I'm currently going thru.
Here are the details:


Matt & Scott were going to start a new business out at the local mall.

Matt has some experience with this type/location of business.

This new business is/was Matt's idea, although it was Scotts persistence & encourgement that almost got it going.

Matt & Scott were going to split the costs 50-50 to get the business started.

Currently, Matt has a full-time job, 8-5 Mon-Fri, at which he will become 1/2 owner of in Jan '05, having agreed & signed the paperwork with the one partner of the two current owners who is retiring.

Currently, Scott is not working and lives just 5 miles away from where the business would be.

Although Matt works just 5 miles away from where the business would be, he lives,
with his fiance, about 45 miles away from the business location.

Matt has now stated a couple of times that because of his job and where he lives, he does not see himself spending much time out at the mall with the business.
Maybe one-3hr closing shift a week, if that.

The mall is open 72hrs a week, or 288hrs for a 4-week time period.

Figuring a PT person works 25/week, 100 hrs in the month, Scott would then
work the remaining hours, 160-188hrs/month.


Matt wants to distribute the money in the following way:
- 1/3rd to pay the bills;
- 1/3rd to Matt &
- 1/3rd to Scott


However, after putting some numbers down on paper, Scott does NOT think that's a fair deal for him.

For example, IF the gross was $10,000 for the month:
$3300 - bills (33%)

$3350 would go to Matt -
for being 1/2 owner AND having worked 3-12hrs for the month;

$3350 would also go to Scott -
for being 1/2 owner AND having worked 160-180hrs for the month.


Scott has suggested a lower Base Pay, and then an agreed upon Hourly amount paid per the number of hours worked.



My question, simply is: WHAT DO YOU THINK?


Is one scenario more fair than the other?
Why, or why not?


>>> IF you've gotten this far down on this thread, THANK YOU,
your thoughts & opinion are very mich appreciated, as I realize this situation REAlly only matters to one person on this bbb! (IMG:style_emoticons/default/wavey.gif)

[ChrisFoley]

Consider a limited partnership instead of a general partnership.
Scott would be the general partner, with the day to day responsibility of operating the business. Matt would be the limited partner, with no responsibility regarding operating the business - and no say in decisions made. He also would not work at the business - not even part time.
Pay arrangements could be based purely on profit, with Scott taking no salary. Of course the profit would have to be skewed in favor of Scott, since he is taking the biggest risk - staking his income on the success of the business.
At the other end of the compensation spectrum - Scott would draw a reasonable salary for his efforts and any money left would be distributed as profit to both partners.
I went into business 16 years ago by forming a limited partnership. I did not have any money so I solicited friends with money to invest in me. Since I had no experience in business I was generous with distributing profits to the limited partners in order to attract them to the investment. I even guaranteed a minimum profit. At that time interest rates were high so I guaranteed 12% annual return on their investment. The only downside to the partners was the chance of losing the original investment. As general partner I took no salary, but received 65% of the net proceeds from operating the business. The partnership document gave me the power to buy out each limited partner after the first three years. The cost of the buyout was the amount of their original investment. Based on format of the partnership agreement it was in my best interest to make the business profitable and to buy out the others as fast as possible.
It was successful in the long run. I own 100% of the business today and I am still friends with my former partners. This is mainly because the agreement was carefully written to accomodate the needs/desires of all involved.