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I'm opening a gym with a friend, but I'm putting up all the funds. We've agreed to be "partners," but I don't know how to structure the ownership plan.

I've considered offering him a low initial ownership percentage (5-10) to show my faith in his potential to develop and operate the company. Then, structure a share increase based on the gym's success; possibly correlated to membership numbers or profitability.

I have also been told that I should consider giving him 40-50% initially and specify that my initial startup capital would be repaid first. I'm not sold on this option.

Does anyone have experience dealing with a partner who can not provide startup capital? I'm open to all suggestions about how to structure a share plan.

Thanks!

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1 Answer

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1). Can you open the gym without your friend? If yes, what is the value your friend is providing? If no, can you put a dollar amount to that value?

2). Can you hire someone other than your friend to do what your friend is providing? What would that cost over some period of time?

3). What is this person's role in the business? Do they have the talent and you have the money?

These are the kinds of questions that need to be answered to determine what his equity position should be.

The last time I was co-founder of a C Corp, my partner had market-specific knowledge and funding, while I had the technical skills. Neither of us could have launched the company separately and our initial equity split was close to 50/50.

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