AboutRonald J. Cappuccio, J.D., LL.M.(Tax) Expertise I have extensive experience in negotiating emerging business contracts and agreements, joint ventures, limited laibility company buy-sell agreements and buying and selling businesses. My approach is from a legal, tax and business prospective gearing my negotiations to practical solutions rather than merely drafting impractical documents
Experience I have have been an attorney since 1976 emphasizing business and tax law issues. I am an adjunct law professor in negotiation and alternative dispute resolution.
Organizations American Bar Associtiation
New Jersey State Bar Association
Camden County Bar Association
Question I am interested in starting a business with a partner. We will try to get an sba
loan. I have sufficient collateral but need equity(cash). The total loan needed
is $1,000,000. The problem is that I need $200,000.00 cash for equity from
a partner. They will not have much to do with running the business. I have
the relationships to guarantee the business. What is fair in terms of ROI to
partner and possible ownership in the business. They will be silent partner in
a business that will net $1,000,000. yearly. Can you help provide insight or
guidelines to move forward. thanks, Tory
Answer Tory:
This is the traditional problem in a new business "what is the return to a capital investment vs. the operating people." Frankly, in my experience, there is a high likelihood that both sides will ultimately feel cheated. The investor will say "I took all of the risk, why shouldn't I get the reward." The operating person says " I did all the work, why shouldn't I get all the reward."
There are several possible creative solutions. One is to simply borrow the money from the investor. This will provide a fixed (and probably high) rate of return without having to deal with the equity issues.
Another was is to provide a higher rate of return to the investor until the investment is paid back, then the rate of return is reduced.
You need a good tax and business attorney to help find a solution.
