If you have a partnership situation and you currently want to revisit the percent of ownership that each of the partners has in the business, then you need to figure out exactly how you're going to go about this. Let's say for instance that you are at a place where you want to take on more of a full-time role in the company. Things seem to be taking off; you can thus quit your day job per se and man the helm at the new business. This is fantastic! However, what if you and your two partners all have equal shares, and yet they are not ready to move toward a full-time role? Situations such as this definitely call for a reevaluation of ownership.
With many smaller businesses, such changes in ownership often get put on hold in favor of focusing on more "practical" things like operations, marketing, and customer service. The thing is, ownership percentage is important; in fact, it could be critical down the road when for instance a restructuring is in order.
Understanding How to Shift Ownership Percentages
One of the things you can do is to come to an agreement based upon the amount of work all parties are investing in the firm. So if you are willing to be there on a full-time basis, then the company could allocate more ownership percentage to you. Sit down with your partners, lay out your plan and explain to them that an investment of time and work is very much equivalent to monetary investment. Therefore, you would be allotted a greater ownership percentage and theirs would subsequently decrease.
You could also buy more owner shares as well. Figure out the value and then have a repurchase agreement drawn up that shows how the owner shares have come to be reallocated.
At First Union, we've worked with numerous small businesses as they experienced ownership changes, organizational restructuring, as well as just common growing pains. Growth is a good thing—you just want to make sure you're prepared and the company transitions smoothly. With our flexible financing programs, we can certainly help you make your expansion and/or change more meaningful and productive. Call today to find out how we can help you!