50/50 or 51/49 Partnership Agreement

**bad-gs400** · #1 (**permalink**) 05-08-2007, 12:07 AM

Our company is in negotiations with a much larger company to create a partnership. Its coming down to the ownership of the company and percentages. We want to be fair but feel uncomfortable with giving up majority ownership to them, which they have originally requested. Now, they have revised the contract to be 50/50 ownership with a "tiebreaker". One stipulation set forth is that for a major financial decision regarding the final sale of the company will go to us. All other financial decisions will have the tiebreaker going to them. Their major concern is that they want to avoid a 51/49 deal since then we will have final say on all decisions and we could hypothetically pressure them into investing a large amount of money into the company.

Anyone have any thoughts on what we should do? I have always heard to never give majority ownership away, so I'm very concerned about future control of the company if we sign with the 50/50 tiebreaker contract.

Thanks!

**ankur** · #2 (**permalink**) 05-08-2007, 01:19 AM

you must keep 51% , dont give away major stake of your company to outside holders.

**paras** · #3 (**permalink**) 05-08-2007, 05:56 AM

i dont think you want anyone to dominate over you, keep the maximum share so it would be easy to make decisions from your side,, is this company started by you ?

**finestinfo** · #4 (**permalink**) 05-08-2007, 09:50 AM

The others are correct and I agree with them.

Whoever owns the most shares in a business owns most of the company. If this is your company giving away or selling most of the shares is something you'd only do if you want to give away most of the ownership and responsiblity.

You will only be able to get the shares back if they give or sell them back to you.

**bad-gs400** · #5 (**permalink**) 05-08-2007, 10:23 AM

Thanks for all your input. This is my company and the possible partnership is with a very large company in our industry. I would really like the deal to go through but I do not want to give up control of something I built from scratch. I'm thinking about responding to them with a 51/49 layout with majority going to me and let them have stipulations within the contract outlining specific things they are concerned with. Items such as having the final decision on products and also having specific details on maximum investment amounts required by them to be invested. I would much rather have control of the majority share and have them state a few of their stipulations, then the other way around. That way, I will have final decision on all the other multitude of issues which could arise throughout our partnership. What do you guys think?

Thanks!

**cowboy** · #6 (**permalink**) 05-24-2007, 03:52 AM

you should always have major stake in the company

**Hamish Jones** · #7 (**permalink**) 05-25-2007, 06:16 AM

If you start a company with partner's it can be 50/50. If you are looking for an investment partner down the track, 51/49 is definitely the way I would go.

However, every situation is different and you MUST get legal advice.

**bad-gs400** · #8 (**permalink**) 06-03-2007, 10:53 PM

Hey Guys,

Thanks for all your feedback. We are almost finished with the contract with the new company and they have agreed to the 49/51% ownership in our favor. Now the big issue is the buy-in details. They want to be able to buy-in without a current valuation of the company and want to base the buy-in off the last year's gross revenue. We want the buy-in to be 49% of a current valuation of the company which will be valuated by an independent third party.

We believe our company is currently worth a substantial amount and would like to be compensated for this if they choose to buy-in. If we went with the last years gross, then technically they could exercise their buy-in the day after they signed the contract and buy-in at 49% of what we generated last year. This is what we want to avoid and dont think its unreasonable to have the current valuation clause in the contact. What do you all think?

Thanks!

**Joetrevison** · #9 (**permalink**) 07-26-2007, 10:04 AM

You must keep 51% to have control, there is no other way. And have some kind of escape clause. I had two parternships in my life and they did not work. One man in my first partnership was dishonest. The other wanted to make love with the secretary more than he wanted to make money. These things happen. I heard one case of a partnership were the brother killed the other crake head brother. Even with relations it goes sour.

**Hobbit** · #10 (**permalink**) 07-27-2007, 11:53 AM

Don't proceed without the current valuation clause. I believe the other company is trying to take advantage of you. Be sure to include the clause or it will come back to bite you in the a** later.