This maybe a stupid question but I can't seem to get my mind around it. I have a partnership and we've both spent some money on start-up expenses for which we'd like to be reimbursed now that the business is up and running and making money. My question is, if I spent say, $500 of my own money on the business, and later I want to get reimbursed out of the business income, then how does that not hit me twice? In other words, in the same scenario, if the business makes $2500 I would normally get $1250 as my half (assuming we're leaving nothing in the business for the sake of the example). If I were to get reimbursed, then I'd get $500 off the top, which leaves $2000 total after that expense, and then I get my half which would be $1000. So I've essentially paid the $500, but then $250 of the reimbursement is technically my money, as it's hitting my half of the earnings. The same would obviously go for any of my partners reimbursements. What's the formula to work out those reimbursements equally?
1 Answer
Working with the scenario you presented, did you get any additional equity for your loan? If you loaned the business $500 and your partner did not, do you still both own the same amount of the company? (Which here I am assuming from your example is a 50/50 split)
Does your business have a plan to service it's debt? Or is it just one big slush pool of funds?
Working with your example and keeping it simple, if your company has $2500 in revenue and $500 in debt (and assuming no other debt or expenses, with a 50/50 partner split) then the company had a net of $2000. You two split that @ $1000 each.
If the company had 0 debt and $2500 in revenue and sticking with the same example, you both get $1250.
If you loaned or risked your $500 and your partner risked nothing ($ or additional time spent on the business) and you did not get increased equity from your risk, that may have not been a very favorable deal for you.
