Two of my friends and I are thinking on starting a small business, which would be just a mechanic garage. I am the one who is going to put all the money for the investment as I am the only one that has the money. In their cases, they would be the mechanics and would be have to work in the garage every day. So in my case I would just put the money and nothing else. Anyone is bringing a customer base or anything else so we are in the same position there.

There are two ways of thinking my position:

"I am doing nothing else but putting money" "I am putting all my money and that's a lot for the business"

So do you think that a share of 33% for everyone is fair in this case?

  • 3
    I think you need to devise a plan of capital return to yourself, which will be a different discussion than ownership proportions. Additionally, if I were in your shoes, I would not let myself be the single source of funding for the business, especially if neither of the other partners have a client book to bring to the table. And at a minimum you need to be the last line of defense regarding any spending.
    – quid
    Mar 22 '16 at 22:11
  • One thing to think about: if you're not going to be involved in the business, you're basically giving the other guys a free option. If the business works they win, if it doesn't work you loose. You are running the risk so you'd better be involved. Are they going to pay themselves out of your investment money? If they're not taking salary then getting equity as compensation is fair enough. How much would you have to pay them for the same amount of work? That's how much equity they should get (+ a bit more for the risk). Also, can they leave or do they have to work for certain amount of time?
    – SMeznaric
    Mar 24 '16 at 15:46

There is no universal answer here; it depends on how much risk each person is taking, how you want to define the value of the business now and in the future, how much each person's contribution is essential to creating and sustaining the business, how hard it would be to get those resources elsewhere and what they would cost...

What is fair is whatever you folks agree is fair. Just make sure to get it nailed down in writing and signed by all the parties, so you don't risk someone changing their minds later.


Question (which you need to ask yourself): How well are your friends paid for their work? What would happen if you just took your money and bought a garage, and hired two car mechanics? How would that be different from what you are doing?

The money that you put into the company, is that paid in capital, or is it a loan to the company that will be repaid?

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