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Software business




Two partners have started up a software business, Partner A and Partner B. The business is yet to pull in any revenue because there have been substantial problems with the product. The business is at a point now where in 6 months? time the product should be ready to pull in revenue.;Partner A has been out of work for the full 2 years forgoing any wages he would usually receive. His usual income would probably be at about 150k a year. Partner A has contributed 15k to the overall project in the meantime in actual funds.;Partner B runs his own business and has been funding the business venture and has put in close to 110k so far over the 2 year period. Partner B also puts in time here and there however not compared to the effort that Partner A has put in and not of the value that Partner A has put in.;Partner B believes he should be paid his money back because that was actual funds that were put into the business. Partner A believes he has put sufficient sweat equity into the business and is only asking for a 50/50 split as the company makes money.;At the moment, there are no forgone wages on the books for any of the time that both Partners have spent on the business. Partner A will be seeking employment elsewhere also to generate an income in the meantime before product launch.;Once the business starts to make money, how should the split between partners work?;Should Partner A push to have the paper loss put on the books for his upcoming employment? If so, how can that benefit him? How will this affect the valuation of the business?;How should the sweat equity of Partner A be calculated?;Should it be based on forgone wages? Should it be higher/lower?;What are any issues that may arise from such an agreement and how should such a dispute be handled legally?;The preference here is of course to preserve the working relationship but to also be fair in the outcome.


Paper#74351 | Written in 18-Jul-2015

Price : $22