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by bdfh42 5275 days ago
OK - you recognise that it was an error not to change the equity split at the point when your level of commitment to the project abruptly changed and exceeded your partners.

In your current situation I assume you are now drawing a salary as a full time employee of the business. Any income split between you and your partner would be on the profits - so you should get your salary plus 50% of any profit after expenses (including your salary). Provided your salary remains at a commensurate level then your respective incomes should reflect the realities of your current situation. No harm in your partner receiving a small salary for his administrative tasks - just make sure it reflects the level of work and (perhaps) industry norms.
1 comments
throwfrustrated 5275 days ago
Well that "equity split" was when I decided to go part time, at that point, we effectively had done the same work (almost nothing).

And no, I don't get any salary as a full time employee, all profits are divided, so we effectively get the same amount of money every month.

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gyardley 5275 days ago
Your business is doing well enough that it should be set up properly - proper legal structure, proper accounting, etc.

When you do this, your accountant (at least in America) will happily tell you that to be 100% kosher, full-time employees should get paid full-time salaries at market rates, whether they're owners of the company or not. Both the IRS and individual states take a dim view of small-business owners dodging 15% or so in payroll taxes by paying themselves solely via corporate distributions.

You can and should also pay yourself out of corporate distributions, of course, but to be legal your salary should come off the top first, and only then should you be splitting profits 50-50 with your cofounder. If your cofounder also wants a market salary, well, he'll just have to come work on your business full-time with you.

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throwfrustrated 5275 days ago
As far as I (and our accountant) understand, the structure we have is not a problem at all from a legal point of view (We're not from the U.S.), so no worries there.
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bdfh42 5275 days ago
Amen, In the UK the "Revenue" take a pretty dim view of those who only pay themselves dividends.

Take a proper salary and see how that changes things.

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