Q: There are four person going to start a business. Two are investors two are handlers.

A: Determining the profit division in a new business with multiple stakeholders requires careful consideration of each person's role, contributions, and the agreements among all parties involved. Here’s a general approach to structuring the profit division for your business involving two investors and two handlers:

Equity Distribution:

Investors: Typically, investors receive a share of profits proportional to their financial investment. The exact percentage should reflect the amount of risk they are taking by funding the business.

Handlers (Including the Idea Originator): Handlers, particularly the one who developed the idea and secured the investors, should receive equity that reflects their contribution, effort, and ongoing role in the business.

Consideration for Key Roles:

Idea Originator/Manager: Since this handler not only developed the idea but also brought together the team and will manage operations, they should receive a larger share of the profits compared to the other handler.

Example Profit Division Structure:

Investors: 40-50% of the profits, divided according to their investment amounts.

Idea Originator/Manager: 25-35% of the profits, considering their key role and contributions.

Other Handler: 15-25% of the profits, depending on their role and contributions.

Formal Agreement:

It’s essential to formalize the profit division in a legal agreement, such as a partnership agreement or operating agreement (for an LLC). This document should detail each person’s share, responsibilities, and any conditions or contingencies. To ensure a fair and legally sound division of profits, we recommend scheduling a consultation to discuss your specific circumstances and draft the necessary agreements.