So my buddy and I are finally doing the thing. LLC paperwork is ready. But he's putting in like 80% of the startup cash and I'm putting in 20% plus doing most of the daily operations. How do people usually structure this without it turning into a weird power dynamic? Neither of us wants to be the "boss" but someone has to make calls eventually.
business partners
We are starting a business together but one person is investing more
You need an operating agreement that spells out decision-making, not just profit split. Otherwise the money guy wins every argument by default.
80/20 split but you're doing the work? Sounds like you you're about to be an unpaid employee with extra steps.
Honestly the split doesn't matter as much as what happens when one of you wants out. Buy-sell clause. Look it up before yu sign anything.
Yeah the operating agreement is the piece we're stuck on. We both agree on 80/20 profit but he thinks capital should equal control. I think sweat should count fot something.
It should. But it usually doesn't in practice. Trust me I've ben the sweat guy.
Put a vesting schedule on your sweat equity. That way if you bail after 3 months you don't walk with a chunk of his 80%.
yep, vesting + clear roles. also who is on the bank account? both signers or just him?
"we don't want to be the boss" is the most dangerous sentence in a new partnership.
Oof. Fair. We talked last night and agreed on: he handles capital and financial decisions above a threshold, I handle day-to-day ops and hiring. Neither of us can spend over $1k without the other. Is that dumb?
That's actually more structure than most people have. But $1k is tiny if you're buying equipment. You'll be asking permission for a laptop.
The threshold should be a % of monthly revenue, not a fixed number. Or at least review it every quarter.
also put a deadlock breaker in there. if you can't agree, mediator or a tiebreak process. otherwise you just built a stalemate machine.
the number of people in this thread who clearly learned this from one bad experience is hilarious. and accurate.
Deadlock breaker is smart. He's actually the one who brought up vesting first so maybe we're less doomed than this thread thinks.
Still get a lawyer to look at the agreement. Not your cousin's friend who "knows contracts."
Honestly if you both agreed on vesting without being told to, you're probably fine. The 80/20 will be the least of your problem once you're arguing over the color of the logo.