business-registrationI am starting a new business with a partner.
We are in the middle of forming an LLC, and need to decide on % distribution of the company. Our lawyer stated that equity ownership does not matter in terms of decision making.
I assumed that owning 51% of the company would give me the right to make decisions. Is this not the case? If not, what does, legally?
My current plan was to do the following:
15% each for going in together.
10% to me for going full time.
then split the remaining 60% based on capital invested per partner based on first 3 months estimated startup costs (lease/materials/tech/etc).
Thanks
Within the classic C corporation they can have voting and non-voting shares. You can establish something similar in the by-laws of your LLC.
For example: You could declare the 10% and 15% as the voting share and the remainder as non-voting equity. As additional investments are made by new or existing partners your share of the non-voting equity will become diluted, but the share of the vote would remain the same, until you decide to sell some of your voting equity.
This does not happen automatically, though. You will need to spell all that out in your by-laws, and for that you will need a lawyer. You also need to specify how to handle additional investments as a percentage of owner’s equity at the time.
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