How Do You Split Ownership of a Business: A Comprehensive Guide

When starting a business with partners, one of the most important decisions you will make is how to split ownership. This decision can have a significant impact on the success of your business, as well as your personal relationships with your partners. In this article, we will explore the various factors to consider when splitting ownership of a business.

1. Define the Roles and Responsibilities of Each Partner

Before discussing ownership split, it is important to define the roles and responsibilities of each partner. This will help ensure that each partner is contributing equally to the success of the business. It will also help prevent conflicts down the road.

2. Consider the Initial Investment

One way to split ownership is based on the initial investment made by each partner. This method is straightforward and easy to calculate. However, it may not accurately reflect the ongoing contributions of each partner to the business.

3. Evaluate the Skills and Experience of Each Partner

Another way to split ownership is based on the skills and experience of each partner. This method takes into account the ongoing contributions of each partner to the business. For example, if one partner has extensive experience in marketing, they may be given a larger ownership stake in the business.

4. Determine the Future Contributions of Each Partner

It is important to consider the future contributions of each partner when splitting ownership. This includes not only their ongoing contributions to the business but also their long-term goals and plans for the business.

5. Consider the Risks and Rewards

When splitting ownership, it is important to consider the risks and rewards of each partner. For example, if one partner is taking on more risk than the others, they may be given a larger ownership stake in the business.

6. Consult with a Lawyer

Splitting ownership can be a complex process, and it is important to consult with a lawyer to ensure that everything is done legally and ethically. A lawyer can also help draft a partnership agreement that outlines the ownership split and other important details.

In conclusion, splitting ownership of a business is a crucial decision that requires careful consideration. By taking into account the factors outlined in this article, you can ensure that the ownership split is fair and equitable for all partners.