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My (female) partner owns 51% of business and I own 49%. We maintain this because we want to continue to be woman owned. We are taking on a 5% investor, Does his share have to come from my % so that we can maintain the 51% for my partner to maintain woman owned status? Is there another way to structure this so my partner gives up something to investor but maintains 51%

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    Why to you want to qualify as a woman-owned business? Is it for tax reasons? So that you can pursue certain government contracts? Also, could you specify your country? – Nosrac Jan 27 '17 at 17:11
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    I don't see how this question is in line with "personal finance" – maplemale Jan 27 '17 at 19:18
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    @CQM: If the relative shares of the two existing owners remain the same, the business may not be majority owned by a woman after dilution. If the majority owner has only a 51% stake, reducing her stake proportionally to give the new person 5% may leave the original woman owner with less than 50%. She would still be the largest shareholder, but not necessarily own a majority of the company. – BrenBarn Jan 27 '17 at 19:35
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    @maplemale there is some gray area in business questions, but if [the company you own shares in] will lose its subsidy as a woman owned business because you sell shares to a third party, that will have a negative impact on the value of your shares as a stock holder. I like to see very specific questions like this one that have a tangible impact on the financial outlook for a shareholder. – Nathan L Jan 27 '17 at 19:47
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    Please edit this to add the appropriate country specific tags if your country has some kind of laws where the gender of business owners is relevant. – curiousdannii Jan 28 '17 at 8:55
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To qualify as a woman owned business, a woman or group of women must own shares worth 51% of the business.

If your investor was a woman, the entire 5% could come from her share of the company without affecting the 51% ownership requirement. Could you find a woman to add as an investor?

If you each had your shares diluted 5%, She would be down to 48.45% ownership, and you would be down to 46.55% ownership. The only way for you to get back to a 51% female ownership situation would be to give a 2.55% ownership stake (from your share) to a wife, sister, mom, girlfriend, or any other woman who you think should benefit from this arrangement. This would still put you down at 44% (effectively taking the whole 5% from you) but by giving some of your share to someone else, it does require your partner to make some of the sacrifice, while still benefiting someone you care about (if you have someone you would like to give that benefit to).

In summary, this is what it would look like:

                Her share Your share Investor Other Female    
                --------- ---------- -------- ------------
Before                51%        49%
To Investor        -2.55%     -2.45%      +5%             
To other Female               -2.55%                +2.55%
Final Outcome      48.45%        44%       5%        2.55%
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In addition to finding another woman investor, you have an equitable option that is not unreasonable: ask your partner to buy out 3% worth of shares from you (which then gives her 54%, allowing you to then sell 5% to an investor and have it not dilute her below 51%: .54 * .95 = .513).

That keeps you whole but also keeps your woman-owned-business status.

  • @jpmc26 The OP mentioned that in the question. I have to assume that OP would prefer to find another solution, or he wouldn't have asked. Taking 5% of the business from him is unfair in a sense - he's giving up 10% of his investment in exchange for nothing. – Joe Jan 30 '17 at 15:06
  • He's not rejecting it, but the explicit question-part of the question is: Does his share have to come from my % . Hence, the answers are about how it could be done to have it not. – Joe Jan 30 '17 at 16:24

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