Division of Profits

My husband and I are starting a food truck chain and asked my parents to go in business with us. We would come up with capital and all preparation and they would come up with operations and management of the truck after the business was licensed and truck was operational.

We've invested several thousand dollars and have been working on building the truck for several months now. My parents have offered to share the costs, which I have turned down because I thought that it was our share of the partnership. They have moved from Texas to Hawaii to work on the truck and they've been waiting idle for 3 months for my husband and I to finish building the truck so they can start working on the day-to-day operations.

My husband we're talking about profits we've come to an impasse about how to share it. What would be a good split between the 2 couples in your opinion? We need some outside perspective.

This is always a complicated question, and there is no specific numerical answer, but there is a rough methodology that underlies the division of equity and the distribution of profits. To come up with a fair division, you can create a simple four-column table that attempts to define and quantify your respective contributions:

CONTRIBUTION | WEIGHT OF CONTRIBUTION | PARENTS | HUSBAND & I In the CONTRIBUTION column, you could put:

• Idea
• Investment (Direct & Indirect)
• Risks


• Roles

In the WEIGHT OF CONTRIBUTION column, you would think about how much (by percentage) you weigh or value each contribution (relative to the others) to the long-term success of the business. So, for example, Idea could be 10%, Money 20%, Risks 20% and Roles 50% for a total of 100%. Obviously, the business can't succeed without every contribution, so you'll want to avoid the temptation of saying "well, there would be no business if we hadn't X..." You just want to try to reasonably weigh the various contributions over time.

In the PARENTS and HUSBAND & I columns, you would think about what percentage of each of these factors each of you is putting in. So, for example, if you put in 80% of the idea, then that is what you would put in that column. If you weigh the IDEA contribution at 10%, then you'll weigh that particular contribution as worth 8% of the overall profit share.

As far as the specific contributions:

• IDEA -- The idea has a certain value, but unless it is a novel idea (which usually applies in technology companies), it is usually modest.
• INVESTMENT -- Money is obviously easy to quantify, and you could consider the value of the time and money that you've invested, as well as your parents' relocation costs and the value of their time in Hawaii.
• RISKS -- Risks are more difficult, and you'll just have to think about the risk that you and your husband are taking by investing money in this business, as well as the risk that your parents are taking by moving their lives to Hawaii.
• ROLES -- This is extremely important, particularly in this case. To define and attach value to the roles, you can think about what job titles or job descriptions would most accurately reflect the contributions that each of (a) you/your husband on the one hand and (b) your parents on the other have made. Then you could do an internet search for the compensation for those roles or jobs in the area in which the work will be done (Hawaii) (if there is no data for Hawaii, look at other comparable regions). On the set up side, what would one pay a consultant to set up a food truck? On the operations side, what would one pay someone to manage a food truck? These aren't going to be exact numbers, but they'll help give you a basis for coming up with percentages. The other thing that you'll want to factor is time. If your parents are going to put in years of work, then they should be compensated for that work. That can come in the form of an ongoing salary or increasing equity (share in the profits) that vests with time. You'll want a vesting schedule regardless, so that your parents share of the profit increases as and when they put more time into the business.

Finally, all of this said, more important than all of these numbers is to make sure that you all feel happy and at peace with the division of profits because this is a family enterprise, and the value of a good relationship between you, your husband and your parents can't be quantified; it can only be described as "priceless".

Best of luck!

It depends on how you see the partnership exactly but due to the fact you wanted to keep all the costs to yourself you don't see this as an 50/50 partnership or don't want them to take the risk you are taking?

You describe to do the preparations and injecting the capital to this project but what will be your work when you have completed the preparations? Starting on expanding the business? Marketing and Public Relations? Or do you intent to help with the operations in the days your parents can't ? To get an better view of your situation and give a proper advice we'll need to have a little bit more insight in what will be the time spent of both parties in this partnership. At least that's a point I always weigh into my considerations about setting a %/Share of the income besides a couple of other things.