How is the most better way for the owner to get paid

Discussion in 'Growing and Managing a Business' started by MasterM, Jan 21, 2012.

  1. MasterM

    MasterM
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    Hi everyone,
    I have a question that has been bogling my mind...offcourse the owner needs to get the most money out of the company but i dont know how it goes so i presented 2 scenarios and i would like for you guys to tell me how you would split the money and why.

    Scenario #1 :
    The company had a project that generated 40.000$, there is 3 members? and there is a pot. Most of the work have been done by the owner but the members needs to get paid of the project and money also has to be stored in the pot and offcourse you have to get your cut.How would you split the money.

    How i would do it :
    I would get give each member 10%(a total of 30%) and i would put another 30% in the pot and i would give the owner 40%.


    Scenario #2 :
    The company generates 5.000$ from a monthly project, in this case everyone puts in equal work. just like the previous time the members needs to get paid, money needs to go in the pot and offcourse the owner needs to get more money then everyone because...well...hes the owner.

    How i would do it : I would give every member 10%(30% as whole) and i would give the owner(25%) and the rest is for the pot.



    How would you split the money and if possible why split it in the way you described?
    Thanks in advanced.
     
  2. MasterM

    MasterM
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    Anyone?
     
  3. StarBC

    StarBC
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    It depends on your company type. If you live in the USA & there are several owners you should have an agreement about profit shares according to your biz entity. Can you provide more details about your company structure, please. Are those members owners or just employees?
     
  4. ArcSine

    ArcSine
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    The amount that remains invested in the company (the "pot", I assume) should be determined by the company's growth forecasts and future financing plans, not by an arbitrary percentage. Since growth is frequently the catalyst behind the lion's share of the owner's personal net worth, it's in his best interest to make sure that growth is properly forecast, and then the optimal profit-retention rate is determined therefrom. The owners and members should agree to allocate among themselves any profit amount over and above the retention amount.

    As to exactly how the individuals allocate the 'overage' among themselves, that depends on specifics and details not mentioned in your post. Relative contributions of labor and of know-how / expertise (and the value of such expertise); relative contributions of capital (and the extent to which such capital is responsible for generating the company's earnings), etc.

    The most equitable percentage split of the profits can only be determined after taking into account those specifics. In the end, assuming each party has a pretty good idea of the value of what he or she is bringing to the table, it'll be determined by negotiation among the parties.
     
  5. Krisz Rokk

    Krisz Rokk
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    I agree with ArcSine. I suppose the company has a good business and financial plan. We are talking about the 'money principles' which should be specifically described in the financial plan. The business format of the company is important, the number of employees etc.
    An arbitrary percentage will not solve the issue.
    Check the business plan and check the goals of the company: is growth of importance? where is the market going? are you investing in new technology, new products etc?
    These questions are highly relevant for the money to have to put in the 'pot'. Many business people forget to reinvest into the company and wonder why they fail.
     
  6. Missnancyalex

    Missnancyalex
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    If you did not sign an agreement then I think you or may be your partners are in big problem now because this entire thing should be discussed before starting a business. Share and work load should be divided in start of a business if you want to continue your business.
    I can’t help you in this manner until you specify some contract/agreement detail.
     
  7. Bliss Elliosn

    Bliss Elliosn
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    I would agree. Such serious situations must be addressed before taking up a project that which member will consume how much share. Otherwise it can create serious problems for the whole team and you end up with nothing.

    Be careful for the next time.
     
  8. MasterM

    MasterM
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    Just employees.


    The situation is a little complicated because i have hired about 4 employees but since the business isn't stable yet they have agree'd to work for free needles to say they don't work full time. Some of them still go to school and some work so i am the only one(owner) that works full time in the company.
    I have 1 marketing employee which helps to make and advice's on the business plan and strategies,etc and the rest are normal employees

    But i have never let them sign any contract's and even that i will make a contract now i don't know how to split the money when it comes in because this is not a stable business yet that has an income every month so if i put price tags there may be some months that they wont get paid and its bad for business.
    So what do you guys suggest in a complicated situation as this?
     

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