In this video, we dive into one of the most common legally technical concerns of all multi-founder organizations - who gets the majority stake of equity?
In the last video we talked, we dove right into structuring partnerships from a high-level – structuring the equity distribution, who owns what? And, we talked about 50/50 partnerships, which a lot of lawyers don’t like. They don’t like them because there’s a risk that the parties will get sideways and there’ll be a stalemate, they won’t be able to make decisions. Now, we talked about ways to mitigate that and we also talked about the risk of other types of partnerships. Nothing is without risk. These things each carry pros and cons, but Brett is a firm believer that the 50/50 partnership works great for some partnerships.
Today, we’re going to dive into its corollary, 51/49, another common business type of partnership. So, to reiterate we’re talking about equity distribution and equity matters for two broad reasons. One is economics. How much money do you make? The other is control. We’re not talking here about the economics. Now, if I own 51% of a partnership and you own 49% – corporation LLC, whatever, we’re at a business – I make 2% more, or actually, if you work the math it’s something like 4% more, right, but the point is, I make more money than you do (assuming we don’t do something different with bonuses and salaries.
And, while you may hear many business attorneys advise you to take the majority of equity in your partnership, controlling ownership of the business is no small thing in a relationship where the other party expects to be an equal decision-maker.
This is the third video in Brett's Business Partnership Mastery Series, where he will be diving into both the philosophy and legal nuts and bolts of mastering business partnerships. If you are a current or future business owner, you will definitely want to stay tuned for videos in this upcoming series, so make sure to subscribe!
Inspired by the content in his book, Partner-Proofing Your Partnership, Brett will touch and expand on the primary concepts he fleshed out in that short read which you can find here:
https://www.businessattorneyinaustin.com/brett-cenkus-partner-proofing-your-partnership-ebook
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Have questions? Book a call, and talk to Brett today:
https://clarity.fm/brettcenkus
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You can reach Brett through:
https://clarity.fm/brettcenkus
https://www.linkedin.com/in/brettcenkus
https://twitter.com/BCenkus
https://www.cenkuslaw.com
https://braatenwoods.com
https://merger-resources.com
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Brett A. Cenkus has 20+ years of experience in business law, finance, and entrepreneurship. Through Cenkus Law, PC, he provides advice and services for mergers & acquisitions (M&A), securities offerings, founders’ agreements, and other general business law issues.
Through Braaten Woods, LLC, Brett helps business owners in the lower middle market ($2MM - $25MM) position themselves for sale, find buyers, negotiate, and close M&A deals.
Brett also maintains merger-resources.com, a site packed with free articles, videos, checklists, deal diagrams, template contracts, and other tools to help pass M&A knowledge to others.
Brett regularly consults with entrepreneurs and invests his own capital as an angel investor.
From 2010-2013, Brett served as Chief Legal Counsel of a publicly-traded international oilfield services company. From 2001 to 2006, he and a partner founded and built Paragon Residential Mortgage. Bridge Investments acquired Paragon in 2006.
Brett holds a Juris Doctorate from Harvard Law School and a Bachelor of Arts degree in Economics from Messiah College in Grantham, Pennsylvania.
Brett lives in Austin with his wife, Cathryn, and two children. He enjoys reading, squash, classic movies, great food and wine, and the New England Patriots.
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