Business Advice, Split Of The Money/profit?
I have been working on a business venture for the last 4 months, the initial agreement was that my business partner would put in the money and I would put in the time. We are not starting to make money and they think that their money should be paid back before I see any profit? Should all of the investment be paid back first (effectively leaving the investor with ‘nothing in’ and seeing 50% of profit), or should it be a strait 50:50 split from day one (meaning my time is paid back from my 50% and their investment is paid back from their 50%)?
This could potentially mean up to 10months before I see any profit (meaning 14months) before being ‘paid’.
Does anyone know both the ‘ethical’ answer and the ‘standard business’ answer?
Thanks 
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From a business point of view, if the agreement was that as you stated, then the profits should be split 50:50. However it is usual for profits to be reinvested in order to increase future turnover.
Ethically it would be the same answer.
If they want to repay their investment before sharing the profits, that seems fair… but only if they agree to pay you a standard wage for the work that you have put in, which depending on the work and time you’ve worked, might be more than 50% of the profits. Put this to them and see what they say.
Ethically and Business Wise, it would be most logical to create a ‘pot’.
X = Pot
Y = Money Made
Z = Investment Costs
After selling a certain amount and generating Y, plug in your values to: X = Y – Z
And later split X 50:50.
Y > Z to begin profit.
You absolutely need to go to a solicitor and get a written partnership agreement drawn up ASAP, otherwise you might end up with even bigger arguments in the future.
Unless there is an agreement the Partnership Act provides a set of default rules. In general this means that all money and assets put into the partnership becomes the property of the partnership. And any proceeds are split 50:50. This includes the day to day profit, but also the proceeds from selling capital items. The Act also states that partners are not entitled to be paid (eg they can only take a share of the profits).
In your case, half of all the profit made is yours. I would suggest that this is also the “ethical” way to do it, as you are putting in time which is just as important as the cash investment.