LLC partnership?

Discussion in 'Starting a Business' started by fitguyjax, Oct 5, 2010.

  1. fitguyjax

    fitguyjax
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    Hi,
    thanks for your professional advice in advance!
    I am currently in the process of opening a Personal Training studio. My partner is putting up the money( around 200k). I am just putting up my time to organize everything, create floor plans that will suit our need, locate equipment that will be conducive, and my knowledge of the business as a service. My Partner already obtained the llc in his name only as a member. At first, before he realized how much was being invested, it was going to be split 51/49 split. Before I could get anything in writing, it has changed to 70/30 split (which I'm ok with)?. And, I have to wait 2 years to be "vested" in order to "own" the share. In that two years, there are goal stipulations(400k 1st year and 500k 2nd). Otherwise, I will get 30% profit at the end of each year as a "bonus." At the end of the two years, providing goals were met, I will "own" the share.
    I am pushing for an Operational Agreement now. My fear is: what stops one from saying at the end of 2 successful years, "um, I think we need a change?" then, I am out of my whole business plan and marketing ideas. Is there something I can put in the Operational Agreement to state all these stipulations and they be legit?
    What should I realistically expect out of this? I am the BEST in this area and my partner knows it. He has full confidence in me.
     
  2. Fergal

    Fergal
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    Welcome to our business forum fitguyjax and thanks for posting your business questions.

    You are right to push for a written partnership agreement, that will cover all areas of the partnership arrangement such as;
    • Who is responsible for what duties and tasks in the business
    • How accounts and figures, such as sales and profits are to be recorded and reported
    • Meetings between the partners
    • Percentage ownership of the business - sounds like you have agreed this already
    • Wages and salaries
    • Proportioning profits
    • Dealing with loses (hopefully you won't have any, but you should be ready to deal with them)
    • Dealing with a situation where one partner wants to leave the business
    • Selling the business.

    Once you and the other party have agreed on all these points you should have the agreement written up by a legal professional. Putting a partnership agreement in place now, could save you a lot of trouble, stress and surprises later on.

    You say that it is a personal training business, will you be dealing with clients one on one? Will there be other personal trainers employed by the business? Your ownership of a share in the business is dependent upon the business reaching specified sales targets. Have you got plans in place that outline how the business will reach those targets?

    Will you be writing a business plan for the business? There are some great business plan templates linked to from the Business Plan Templates section of our Useful Business Resources / Links thread.

    Good luck with it and please do post back with your thoughts and any further questions you might have.
     
  3. fitguyjax

    fitguyjax
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    okay, all duties including, but not limited to...everything! lol
    I am entitled to 30% of the profit from day one, but do NOT "own" the share! After 2 years and meeting projected goals, I will then have ownership of the 30%. Does this sound like a common practice? does it sound fair? it does to me, as I am putting up nothing, nor do I have any obligations for Loss, except at the end of two years I will not own the share.
     
  4. Fergal

    Fergal
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    fitguyjax will you be getting a wage / salary for the hours you work in the business?
     
  5. fitguyjax

    fitguyjax
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    No, I will NOT be getting a salary. I will get 30 % profit at the end of the year.
     
  6. Fergal

    Fergal
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    fitguyjax it's difficult to advise you without knowing the exact circumstances. However it does sound like you should be very careful. You would need to include something in the partnership agreement to ensure that you get some return from the business. You don't want to be in a position where you have put a lot into the business but get nothing in return and you should try to have some terms included in the agreement to avoid that.
     
  7. jumeira123

    jumeira123
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    business consultants

    You can seek the advice of business consultants.they will be able to help you in defining a contract and business plans.
     

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