When two business partners start a company, it’s important for them to draft a partnership agreement. One area that this can address is the ownership percentages that they both hold. These could be based on how the business was founded, how much money they invested and a variety of other factors.
These percentages are very important, so partners need to know exactly how much of the company they own. They should not assume that they own 50% just because there are two business partners. If one person owns 51% or more, it can make a drastic difference in how that business operates.
Decisions that require a vote
When one partner owns 51% or more, they are known as a majority owner. Anyone who owns 49% or less is a minority owner.
On a day-to-day basis, this may not make much difference. Both people own the business and benefit from the revenue that it generates. The partnership agreement should specify how they split up earnings and get paid.
However, if something happens that requires a vote, the person who owns more than half of the company may have the ability to outvote any other business owner(s). This means that they control the major decisions – like what direction to take the business, whether or not to open another location and if they should bring on more business partners or investors.
Conversely, if ownership is split evenly, then the partners may need to seek alternative methods to resolve an issue if they can’t agree. They can’t put it to a vote if there are just two owners who control the same percentage of the company. This can lead to legal disputes and the court may need to step in. Getting legal guidance is important.