Am considering starting a business with a partner and was wondering how to divide the partnership.?

I will be providing the credit to get a $500,000 loan to purchase a property. Profits will be used to pay for my loan. I also have the credentials and knowledge to run the business. I will be working part-time. The other partner will be providing cash capital ($200,000) for startup costs. That partner will be working full-time. What would be a fair means of dividing ownership? Salaries? Any suggestions are appreciated.

I would strongly recommend that you talk to a business counselor before you do anything especially spend money. I'd call the local office of SCORE (go to http://www.score.org and input your zip code to find the chapter nearest you), the advice is FREE.

The counselor at SCORE will most likely advise you to write a business plan which is very good advice because it will force you to dig out all of the start up details and the costs of starting a business with a partner. You'll have to decide not only on the percentage ownership but also on how the responsibilities will be divided and how you will divide the company should one of you want to get out of the partnership.

You also have to decide on the legal structure of the partnership (LLC., Partnership, S Corp,) and force yourself to also understand all of the aspects of this business including the customers you'll concentrate on (your market ) and how you'll go after them.

Try this link :
http://www.ychange.com/small-business-co...
and read some of the articles especially the ones about a business plan and starting a business.

Good Luck

I'm going to be very honest with you on this. The average life expectancy for partners is 5 years and even worse for brothers which is 2 years.(Cain slew Able..lol..but I'm serious) Don't do this. I've been there, done that with both and sure enough the above happened. Either go it alone which it doesn't look like you can or incorporate with a group. Save yourself a big headache in the years to come. What's fair now will never be fair later.

After all bills/payments are paid at the end of every month, a 60/40 split and either pay him by the hour or pay his health insurance every month.

You are prudent to be asking the questions now, rather than down the road. And, I am presuming, intending to create a written partnership agreement addressing them.

The first, and serious, answer to your questions is: any way that the two of you want to and believe is "fair."

One approach you may want to consider on salaries is to agree what the market rate for the part time "expert" service you will be providing is and what the market rate for the full time service your partner will be providing. If you can establish these amounts as salaries off the bat, that might be a fair way to go - treating any surplus as accretions to partnership interest.

One way to allocate the value of partnership interests is in proportion to the capital contributions of the partners, which begs the question of how to value the actual cash contribution versus the contribution of credit sufficient to support your loan. That's something the two of you will need to agree on. An additional item to consider is whether, over time, your partner's full-time service should result in a relative increase in the proportional share of your partner.

I hope these ideas may prove helpful as you flesh out your agreement.