Q: We are planning on starting a business with a partner 50/50 but only we will be working there. What extra paybacks do we receive for doing all the graft - late nights, weekend and stress? Has anyone any ideas?
Dec 13 2005
Answered by: Clive Lewis Ask a question
You need to consider what format you adopt for the business. You could form a partnership and share the profits and/ or losses equally or in any proportion you agree between the partners. In this case you need to draw up a partnership agreement to record the share of profits. The main alternative is to form a limited company where the shares would be held equally. The shareholders could then agree that those working in the business are paid a salary which could be on hours worked basis or as a straight salary. This arrangement should be reviewed periodically (say annually) or when the circumstances change to check that it is still appropriate. The salary costs would be a charge against the profits of the limited company and would reduce the profits applicable to the shareholders. The shareholders decide how much of the profits should be paid to them as a dividend which as the shares are held 50/50 would be equally to both parties.
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