Question

I would like to invest in a small internet business which sells face masks and share in the profits it will make. My two friends and I think a business selling face masks right now might make a lot of money, but I just bought a new car and I don't want to risk lossing my car if something goes wrong with the business. Neither of my friends has any assets they are worried about losing if something goes wrong with the business. My friends don't want to deal with setting up things like shares or by-laws. What kind of business model should we set up? Answer:

Answer 1

The three friends must enter into a partnership agreement with each other and decide on different profit sharing ratios based on the investment made in business, risk taking ability of each individual, work allocation during business setup etc. A person who has assumed all the risks associated with the business and is the one who will compensate for business loss will take more profit share than other partners. Moreover a person who has more responsibility to handle in the business and invests more money than the other partners will take more share of profits. In this manner, profit sharing ratios must be calculated and a partnership agreement must be signed among the three friends to set up the business.