Problems in partnership

[crazlunatic]

My friend and I created a site 2 years ago and at that time we had informally agreed that we would do 50/50 and share 50/50
however thats not the case anymore, and it is more like 93/7 and even 100/0 at times.

The thing is when we split money now, I give him a small percentage such as 10%. The problem I have is that it is clear that the majority of the money we make is mostly off my hard work, and that he is only able to enjoy a share of it because of my hard work not his.

I want to settle on some terms that we can agree on, since I have stopped working on the site, so he doesn't start working on it now and tell me hes done 100% in September so he deserves 100% of the earnings, since the earnings wouldn't be there in the first place had I not written 108 articles out of the 109 published! Another minor problem is one of his articles produces 20-30% of the traffic that I do credit him for, but part of that percentage comes from the marketing I personally made to increase the article's potential.

Please give me suggestions on this. I know it is my mistake for not settling on definite terms earlier.

[Brian Turner]

Definitely a mistake, but I'd keep by your agreement. By the sounds of it, it is your insistence to break that agreement in the first place that is causing the problems.

It doesn't matter whether you put in most of the work - if you decided on a 50/50 split at the beginning, that's what you should keep to.

Have you considered having the site valued, and then offer 50% of this price for full ownership of the site?

[crazlunatic]

Originally Posted by Brian Turner

Definitely a mistake, but I'd keep by your agreement. By the sounds of it, it is your insistence to break that agreement in the first place that is causing the problems.

It doesn't matter whether you put in most of the work - if you decided on a 50/50 split at the beginning, that's what you should keep to.

Have you considered having the site valued, and then offer 50% of this price for full ownership of the site?

Well the agreement was kind of like an in the air thing (another mistake). 50/50 salary would only be shared if the work was 50/50 or somewhat near that. However, it is extremely clear that by now, the work division is close to 95/5 and we have mutually agreed that 50/50 is not the option to go for salary split

[DavidToohey]

If you are looking to change the agreement, or make a financial adjustment to it as you say the agreement has already changed due to workload... just two aspects worth looking at at the share in the business, and the share in the workload.

Keeping both of these separate might help you reach a new agreement.

The share in the business could remain to 50/50 as each of you have contributed in different ways to date... however, it seems an adjustment may simply sort out the difference in workload.

So long as you can agree a fair rate on actual work done (for the future I would think), this can then applied prior to the 50/50 split of profit.

If you're both doing an equal amount of work then this will come out equally prior to any profit being split, if profit does not cover this for the period/month this just needs to be recorded in the accounts for the future periods.

Providing the rate is something that doesn't create any further disputes you should be ok. It may help to put in place per article, per task rates so that disputes can't arise from claiming hours (unless there is trust, timesheets done etc).

Hope you get it sorted... and let us all know how you get on.

Cheers

[crazlunatic]

Originally Posted by DavidToohey

If you are looking to change the agreement, or make a financial adjustment to it as you say the agreement has already changed due to workload... just two aspects worth looking at at the share in the business, and the share in the workload.

Keeping both of these separate might help you reach a new agreement.

The share in the business could remain to 50/50 as each of you have contributed in different ways to date... however, it seems an adjustment may simply sort out the difference in workload.

So long as you can agree a fair rate on actual work done (for the future I would think), this can then applied prior to the 50/50 split of profit.

If you're both doing an equal amount of work then this will come out equally prior to any profit being split, if profit does not cover this for the period/month this just needs to be recorded in the accounts for the future periods.

Providing the rate is something that doesn't create any further disputes you should be ok. It may help to put in place per article, per task rates so that disputes can't arise from claiming hours (unless there is trust, timesheets done etc).

Hope you get it sorted... and let us all know how you get on.

Cheers

Thanks. I understand what you are saying however I don't think it is fair that he is coming back now and that I give him 50/50 if he decides to contribute a lot now.

In a business, the hardest times are at the start of it and he backed out then. At that time we did not know if we were going to make a large sum of money. Now that we are earning thousands, he comes back? There is not much to do on the site (basically it is a cash cow.) We had this debate before. If he was to do even one small fix on the site, then he would sometimes account for 100% of the work done that month.

Even if we were to split 50/50 now, the money that he receives is mainly due to my hard work and not his.

I do not feel the need to keep this 50/50 promise (nor does he) because he had broken the terms.

After a few days of thinking about it, this site is pretty much mine. He never comes to offer for help, only asks me how much I've made, and only contributes when I ask him to, which also seems like I am hiring him instead of us two working together.

I'm thinking of just giving him a 3-5% share in the salary regardless of work done for the rest of the site's life.

What do you guys think?

[monaghan]

I'd suggest seeking professional contractual advise and buy him out if you can run the site without him.

[DavidToohey]

You have a few problems to consider.

The only agreement has been 50/50 so you have little choice but to accept it.

He probably feels otherwise and you have to do your best to look at this from other angles.

You are probably not in a position of deciding to "give him a 3-5% share" as he already has 50%.

If he contributes a lot more now, then it simply may be a part of meeting his initial obligation of 50%. Bear in mind, the definition of 50% may differ and might not simply be as you are defining it. He may consider his input does equate to 50%, or that there was no agreement as to when 50% would be contributed and he is now making up his 50% work (ie equal 50% each day, week, month, year?).

As the others suggested - offering to buy him out is certainly an option that may be worth considering... just bear in mind it's 50% you would be buying out, not a % you decide (of course an offer to be made, discussed, negotiated etc).

You may also be able to work out a fair rate, and even use it to value the work done from the commencement of the business so that you can both feel there is some recognition of work done. It doesn't have to be at full commercial/market rates - just something to help provide some financial balance.

Unfortunately most things will have to be discussed and negotiated and may only change if you are both prepared to consider each others position. Another reason a lot of this should be 'nutted out' at the beginning.

Another option also - is you offer to sell your share (to him or a 3rd party).

[crazlunatic]

Originally Posted by DavidToohey

You have a few problems to consider.

The only agreement has been 50/50 so you have little choice but to accept it.

He probably feels otherwise and you have to do your best to look at this from other angles.

You are probably not in a position of deciding to "give him a 3-5% share" as he already has 50%.

If he contributes a lot more now, then it simply may be a part of meeting his initial obligation of 50%. Bear in mind, the definition of 50% may differ and might not simply be as you are defining it. He may consider his input does equate to 50%, or that there was no agreement as to when 50% would be contributed and he is now making up his 50% work (ie equal 50% each day, week, month, year?).

As the others suggested - offering to buy him out is certainly an option that may be worth considering... just bear in mind it's 50% you would be buying out, not a % you decide (of course an offer to be made, discussed, negotiated etc).

You may also be able to work out a fair rate, and even use it to value the work done from the commencement of the business so that you can both feel there is some recognition of work done. It doesn't have to be at full commercial/market rates - just something to help provide some financial balance.

Unfortunately most things will have to be discussed and negotiated and may only change if you are both prepared to consider each others position. Another reason a lot of this should be 'nutted out' at the beginning.

Another option also - is you offer to sell your share (to him or a 3rd party).

Perhaps I should have explained a bit more clearly. At the beginning, we agreed on 50/50 work and 50/50 split. One has to be met for the other to take place. So if 50/50 work did not occur, then there will be no 50/50 split. However, I'm starting to understand you guys and please forgive me for my amateurness, but I think the point you guys are trying to get across is that even though the split may not be 50/50, the share in the company is still 50/50, so if I ever sell the site, or any major decision is made, it will have to be based on the fact that we decided on 50/50 in the beginning, right?

For the majority of the lifetime of the site, he disappeared, and only came back when he needed money, or when he simply felt like he needed to come back to reassure his position with the site. Can I hold this against him?

[DavidToohey]

Without professional contractual advice as recommended by Alex, it is likely it would be seen as a 50/50 split unless you can reach a new agreement. With advice, it might be a small legal battle, renegotiation and so on.

I understand what you are saying, though 50/50 work would be arguable, amd 50/50 ownership not so arguable. Did you agree on minimum, maximum commitments?

He might argue that you worked more than was agreed to place yourself in such a position of claiming a greater ownership.

Was the work equally valued? Was it 50/50 on time, or measured by another means? Was there a requirement for this 50/50 to have already been met or is he still able to meet his obligation of 50% of the workload? If not, why not?

There are just a few too many factors... I would think the single best and easiest thing may be to sit down and simply discuss it. State your side, the issues you have and consider the options and solutions to resolve it so you don't feel he is taking advantage and receiving his fair share.

Keep it calm, objective and give each other time to talk and use it as something to move forward from.

Just another option but something you could also consider.

Wondering - is the business a partnership structure, that has been formally registered with HMRC and so on?

[crazlunatic]

Originally Posted by DavidToohey

Without professional contractual advice as recommended by Alex, it is likely it would be seen as a 50/50 split unless you can reach a new agreement. With advice, it might be a small legal battle, renegotiation and so on.

I understand what you are saying, though 50/50 work would be arguable, amd 50/50 ownership not so arguable. Did you agree on minimum, maximum commitments?

He might argue that you worked more than was agreed to place yourself in such a position of claiming a greater ownership.

Was the work equally valued? Was it 50/50 on time, or measured by another means? Was there a requirement for this 50/50 to have already been met or is he still able to meet his obligation of 50% of the workload? If not, why not?

There are just a few too many factors... I would think the single best and easiest thing may be to sit down and simply discuss it. State your side, the issues you have and consider the options and solutions to resolve it so you don't feel he is taking advantage and receiving his fair share.

Keep it calm, objective and give each other time to talk and use it as something to move forward from.

Just another option but something you could also consider.

Wondering - is the business a partnership structure, that has been formally registered with HMRC and so on?

Sorry I think I wasn't detailed enough before. This is not a legal partnership so maybe I used the wrong term. We are both 17, and in Canada, cannot legally sign a contract. Would we still have to settle this case legally? I would like to try to avoid legal involvement but if I might then that will be the case.