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re: Business investment question
Posted on 10/6/14 at 6:17 pm to JW
Posted on 10/6/14 at 6:17 pm to JW
quote:
If someone buys a 10% stake in a small business, does that automatically mean that they are inheriting 10% of the monthly profits .... and on the flip-side are they responsible for 10% of the business's losses? any basic info is appreciated.
Adding on the answers above, no, profits are not automatically distributed based on ownership %.
And no, you are not responsible for any losses greater than your initial investment. That's basically the reason corporate entities exist.
quote:
gotcha ... thanks. But what if the business is operating at a loss and that 10% partner is covering the majority owner's 90% responsibility. Would you consider that an extension of the investment into the business or at least a loan to the majority partner?
If you bought 10% of the business for $XX, and then put more $ into the business, you should either receive an additional % of the business or treat it as a loan to the business to be repaid in a way not tied into your 10% ownership stake.
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