
Partnership agreement template for an LLC? - rms

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rms
So I've managed to get myself an LLC. I have a friend that is giving me
$10,000 dollars. I'm giving him 2.5% of the company for an investment of
$10,000. That's a valuation of $400,000, right?

We expect to be generating revenue pretty quickly. Does his 2.5% entitle him
to 2.5% of the profits, after my partner and I draw salaries? Or does he get a
a dividend that is 2.5% of the salaries we are drawing? We'd also like a
clause for us to buy out his shares. What's a good price for that?

Googling for "partnership agreement" gives me a lot of results. Are any of
these more suited to our situation? Thanks, I really appreciate the help.

I'll let you guys know as soon as we launch. In the meanwhile, I'm not
comfortable sharing the idea because with a basic background in the
medical/laboratory sciences anyone could duplicate what we're doing.

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jey
While you might get some good overall guidance here, I would recommend getting
a consultation with a lawyer before acting on it.

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Wintermute
Couple of points.

1\. Your valuation is correct and considering you only have an idea, its
pretty darn good.

2\. The 2.5% of profits would come after the salaries. Salaries aren't
profits. That said, you can't just pay all your profits out to you in salary.
You will need to set that up ahead of time with his / her input.

3\. Lastly, just from an outsider perspective, your buyback clause comment
makes it sound like you are being a bit greedy. You have an individual who you
call your friend and who is giving you a good valuation and you are a)
concerned about 2.5% share of the profits s/he will get (relative to your
collective 97.5%) b) Trying to pull the shares out from under him whenever you
like.

An investment is a partnership and it is, to say the least, bad karma to screw
over a partner. He is risking his money for the upside. An upside comes at an
acquisition or an IPO not a buyback from the founders.

If you don't want to give up equity, don't take money. If you need money,
equity is what you trade. This will likely not be the last time you make this
trade, so start getting comfortable with it. Still, it sounds like maybe you
will be happier with all 100%.

All that said, get a lawyer.

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waleedka
Quote: "Does his 2.5% entitle him to 2.5% of the profits, after my partner and
I draw salaries?"

Sounds about right. However, with an LLC you can divide the profits anyway you
like regardless of the ownership. For example, you can agree to have your
investor get no profits at all for the first 2 years and then after that get,
say, 10% of the profits (basically any percentage you agree on). Or, you can
even be more creative such as having your investor get all the losses for the
first two years (to offset his income from other sources and reduce his tax
burden) and then get him to receive 2.5% of the profits after two years. You
have full flexibility with an LLC, but consult a good attorney or accountant
to make the best of it.

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RyanGWU82
Your friend is not automatically entitled to any cash just for being an
investor. If he owns 2.5% of the company, it just means is that 2.5% of the
business assets belong to him. If you operate the business for 50 years, he's
won't _automatically_ get anything back, unless you structure the agreement
that way. If you sell the business or close up shop, he is entitled to 2.5% of
the (remaining) assets and cash.

Nolo Press has a bunch of great books to help you set up your organizational
structure, and they include templates for your operating agreement. I was just
browsing them in Borders last weekend. They are _awesome_. And they're like 20
or 30 bucks. :)

