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Sharing profits among partners

| Mar 24, 2021 | Business & Commercial Law

When partners go into business with each other, they often bring complementary skills to the table. Sometimes, they bring unequal amounts of money into the picture. In some sectors, it’s common for one partner to fund the project and one to provide the sweat equity. Entrepreneurs in Brooklyn should know that it’s important to decide how to divide profits before it becomes an issue.

Allocating profits

If partners don’t come to an agreement about the division of profits, they will likely all receive the same share. This can come across as unfair to some people. For example, say one person contributed $100,000 and the other contributed only $50,000. It would be difficult for the larger investor to believe that their partner deserved the same profit share as they did.

Consider the structure of limited liability partnerships as a contrast point. In such a business. arrangement, the amount the limited partners can be held liable for is equal only to their contribution. Many investors would like to see profit-sharing arrangements follow this same kind of guideline.

However, the parties involved decide to split profits, they should make a record of it. A partnership agreement can protect everyone involved in launching a new business. Putting things in writing is a key when it comes to business law. It ensures that everyone knows what their rights and responsibilities are. It can protect everyone involved in a new venture.

If you and a business partner are having a dispute about profit-sharing, it’s a good idea to contact a lawyer. An experienced attorney may be able to help unravel the details of any existing partnership agreements.