How are partner contributions calculated?


2

I am just curious on this one. I understand that partners usually have to contribute capital. What is the very general calculation used to work out how much would be required to contribute for x share in profits?

Partnerships

asked Aug 28 '13 at 23:00
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Joel Cahill
11 points

2 Answers


0

Assuming your ownership structure is straightforward--each owner's % ownership correlates directly to their share of profits--the general formula is (Individual Contribution) = (Total Partner Funds) * (% Ownership in company). Here's a basic example, you can plug in your own numbers:

Company XYZ

Owners:

  • Fred 30%
  • Jane 30%
  • Angel 40%

Total Capital Contribution Required Currently: $50,000

  • Fred == $50,000 * 30% == $15,000
  • Jane == $50,000 * 30% == $15,000
  • Angel == $50,000 * 40% == $20,000

Total contributed == 15,000 + 15,000 + 20,000 = $50,000.

There is plenty of room to complicate this simple breakdown, but that's the general one that I would start from.

answered Aug 28 '13 at 23:35
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Theao
255 points
  • Ok thanks. I understand that. What about for an established firm. lets say there are 4 partners and they contributed $25,000 each and now some years later they want to take on a 5th partner. – Joel Cahill 6 years ago

0

Here are some calculators for Funding And Equity on startups :


The interactive infographic helps you understand
how different funding events will affect you and your investors over
time, and at exit.

answered Aug 29 '13 at 12:40
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John 4d5
181 points

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Partnerships