5% ownership in partnership...question on salary
My friend has started a new business. He offered me a consultant job or 2% ownership for my services through May 07. He also has ooffered me a BUY IN of an additional 3% that I am most likely going to do. So I will own 5%.
My partner will be running the business full time and will draw a 60K salary. Then either quarterly or annually we will split Net Income 95% - 5%.
My question is how do we handle the owners draw for a salary in the future??? What if he decides that since he is president he should be receiving a 250K draw? This has a HUGE impact on my 5%....
If company has a 300K Net Profit before salaries and then he receives 250K, leaving 50K of a NET INCOME....My 5% is worth $2500. BUT, if he keeps 60K as his annual salary, then my 5% is worth $9500. So you can see a huge difference per year.
What type of agreements can we come up with that are fair to both parties?
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