The junior partner must always be paid

If you took a junior partner into an existing business (those people who have a business share of less than 50%), then you will have to pay dividends to him and therefore pay dividends to yourself.

There is a big difference if you set up a business with a junior partner or you brought in a partner after the business was already established. If you created a business together, then your partner has the property of a real businessman and understands how money is made in business. With such a person, you can simply discuss the goals of the business and agree on how you both will receive your money.

If you attracted someone as a junior partner after the creation of the business, then this is either a valuable specialist, or a manager, or your relative.

The thinking of such a person is different from the thinking of a businessman. These people work for someone and think the category of a simple employee. I did the job, I have to pay a salary and that’s it. Everything related to business, problems, possible losses, the need to tighten the belt for a while – all this is not interesting to them. It is important for them that their mortgage is always paid off, the bill for the child’s circle is paid, and that the salary arrives in the account on time. This is their mindset and cannot be changed.

If such a person also has a share in the company, then he considers the income that he can receive from the share as an addition to his salary, and not as the main income like businessmen.

This is a very common position and so many business owners that I advise do not understand this point. They think that owning a share of a business already motivates an employee to perform well.

This is not the case, and the main problem is that the founder of the company treats the company as his child and for the most part satisfies his needs at the expense of the company. The owner of the company knows that he has a branded car, the company compensates him for business trips and trips, computer equipment, and so on.

The owner of the company can afford many things at the expense of the company. This is not a problem, but in this case the owner does not pay himself dividends. But he just takes them in a different way.

What happens in the company if a junior partner appears?

The younger partner also wants to live well. And the junior partner often believes that his standard of living should not be lower than that of the main owner.

How to solve such a situation?

There are two ways. Or the junior partner will also consume the company’s resources. Either not.

In the first case, it is necessary to agree on the extent to which the junior partner can use the company’s resources. In proportion to their share or simply in accordance with the standard of living?

If in proportion to one’s share, then envy and misunderstanding may arise. Two owners – He is the owner and I am the owner. He has 80%, I have 20%. Why can he get a car for 80,000, but I can only get a car for 20,000? But they may not understand this. Everyone wants a car for 80 thousand. And two cars for 80 thousand is already a burden for the company.

Farther. How will these costs be controlled? When one owner, he knows that the income of the company is his income – I turn whatever I want. Although this is fundamentally wrong. Personal finances and company finances need to be separated and kept separate records for them.

But the owner of the company has the right to decide where and how to spend money.

What if there are two owners? How will the line be drawn: who can spend what? Often a situation arises when a junior partner comes and he has some restrictions on the use of resources compared to the main owner. Envy arises.

What is the solution to this problem?

Option one:

If the company really needs the junior partner and its retention is a strategic task and can only be solved by allocating company funds for this, then the only option is to clearly indicate all the benefits that the junior partner from the company has on paper.

The second option, which is very effective for working with a junior partner, is regular dividend payments. As a rule, the 100% owner of the company does not pay dividends to himself. He just takes money from the company a little differently.

In a company with two or more partners, paying dividends is the only way to keep employees in the company. Employees get paid for their work, and dividends are the bonus they get for staying at this company. Along with this, the main owner pays himself dividends and improves his credit history.