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Dividing Profits Among Partners
Once your business has taken off, it will take a while for things to fall in place. You will find that you might have initial hiccups, but if you play your cards wisely, you will notice that in a shirt while, your hard work will start to pay off. Soon, you will have profits being generated.
Once your company starts to show profits, you will get into discussions about how this is to be distributed. You should not wait until you reach such a stage to talk about these issues, since it will only lead to disagreements and tension. It is better to plan and discuss these issues even before you have begun. When drawing up partnership deeds, you should make a mention of profits and how they should be distributed so that your business works easily and you have a larger chance at making your business a success.
You must remember that a part of the profits will have to be kept in the business. This is to make sure that the company has enough money to run and take care of all expenses, and even unforeseen expenses. You should also make provisions for contingency funds. It is important for money to be set aside for business development. This could mean advertising, marketing, and even expansion and growth in the future. A fixed portion of twenty of forty percent could be dedicated to this after mutual consent.
The rest of the money can be shared by the partners. You can decide to share the profits equally. This will mean that all the money remaining after meeting expenses and setting aside for growth must be given equally to all the partners. There is no one who benefits more in this deal. This is also regardless of the function than anyone is responsible for, or the amount of hard work put in by any one person.
Another way of dividing profits is to divide them in proportion to the amount of capital invested by each of the partners. This would mean that the partner who has invested the largest amount will have the highest percentage of return, and other partners will receive their returns accordingly.
The third kind of distribution is to divide profits in accordance with the kind of business that has been generated. The profits have been generated by sale. The volume of the sale would determine the share in profit. The partner who has made the most sale and money for the company would receive the highest proportion of the profit.