Hi Everyone,

I have a new business with 2 other partners. One of them and I are unemployed so we will run it full time but the third is employed by a firm in our industry. How should we set up the company considering the following points:

1. 3rd partner who is employed contributed to securing our first client because of his relationship with them
2. But as he is still working, he cannot officially be in our company and pitch to future clients due to strict disclosure requirements in his company and conflict of interest (since my business is in the same field as his employer)
3. We want to reflect that his contribution level falls off drastically after this first client.
4. My other partner and I want to draw a salary
5. The later the 3rd partner quits his firm and joins us full time, the more costly it will be for him as our company would have grown in value.
6. Lastly is it fair that 2nd partner and I ask that we draw a salary equivalent to our market value?

Many thanks
J

Does sound like a situation more suited to an LLC. Im not a lawyer, im a business development consultant that works with a firm that sets up LLC's and corporations for us, and my only question would be the equity offering for the 3rd non-working partner. If he closed the first client, and you teo are drawing a salary, unless im missing the part about seed capital that everyone contributed, his client basically funded the start up (im just assuming) so you are right that you two working partners should draw a salary but I dont think (and this is just karmiclly speaking - nothing to do with legal advice) that you shouldnt make it more costly for him to join your firm later on (if my assumption about him securing the first client is what got the company off the ground).

Just my humble opinion based on observations and assumptions.

Anthony Jones - Business Development Consultant
www.buildabusinessworkshop.com
877-849-1412 ph/fax


>Hi Everyone,
>
>I have a new business with 2 other partners. One of them and I
>are unemployed so we will run it full time but the third is
>employed by a firm in our industry. How should we set up the
>company considering the following points:
>
>1. 3rd partner who is employed contributed to securing our
>first client because of his relationship with them
>2. But as he is still working, he cannot officially be in our
>company and pitch to future clients due to strict disclosure
>requirements in his company and conflict of interest (since my
>business is in the same field as his employer)
>3. We want to reflect that his contribution level falls off
>drastically after this first client.
>4. My other partner and I want to draw a salary
>5. The later the 3rd partner quits his firm and joins us full
>time, the more costly it will be for him as our company would
>have grown in value.
>6. Lastly is it fair that 2nd partner and I ask that we draw a
>salary equivalent to our market value?
>
>Many thanks
>J

Hello J,

I think that the majority of your concerns revolves around your 3rd partner not doing the same amount of work to grow the business but reaping all the benefits.

You will need to structure the relationship so that each role is defined clearly, including responsibilities,compensation and percentage of ownership.

If your third partner is not "working" but contributing capital to grow the business (marketing, start-up expenses, etc.) this is just as important as running things. You should have this also defined clearly as well as what happens if they quit their day job and join the team.

You should have everything done with a lawyer for sure.

Salary should relate to profits, you can't bleed the company dry of capital, and be realistic about salary and accept that you may not always get paid in a start-up.

I wish you luck in your new venture!

Thanks,
Dan La Bate
COO & Director of Marketing- Engines of Creation.com
http://enginesofcreation.com
Phone: 518.842.3242
Fax: 866.643.4125
dan@enginesofcreation.com