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%
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%
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.