You Decide - Dividing Remaining Funds

Published: 2021-06-29 06:59:51
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Category: Business

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How will we split the $15,000 left in the investment?
It is unfortunate that we did not make a formal agreement that outlines an exit strategy. There is always risk in business and the best way to handle the unexpected is to plan for it ahead of time. If we think about the capital distribution at the beginning of the partnership, we put $25000 and the chefs put $10,000 plus $10,000 adding up to $45,000 for 100% of the shares. Each share is worth $450 , therefore we own 55.5% of the company while chefs own $45.5%.
Now we have $15,000 left to be split. If we split this capital according to the ownership percentage, we should receive $8,325 and the chefs should receive $6,675. But we do not think the chefs deserve this as they caused the business to fail. Also we will need capital for our new venture, therefore we should only give them $3,000 and keep the $12,000. In order to get them agree on this distribution, we should use the kitchen equipment as a negotiation factor. We can not utilize the kitchen equipment in our flower shop, but it is essential for the chefs.
How to handle the lease on the kitchen space, which has 18 months more to run?
We will need to rent space for our flower shop, and the store front of the catering shop may work for our business. But there is a kitchen attached to the shop that we will not be able to utilize. That kitchen is essential for the chefs' business. Also there is an established business and custmers know where the location is which is a huge advantage for the chefs. They would want to keep the space. Therefore we should offer them to amend the lease in their name only and they should pay the $500 cost for this amendment. This woud be the best solution as we can not trust the chefs to pay their share of the lease if we keep the lease and let them operate in the kitchen. Their business is failing already and we should not take another risk here.

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