Navigating Business Ownership and Structuring

Business ownership often involves complex financial arrangements, including the division of equity and management fees among partners. For instance, personal guarantees are a common requirement, particularly from lenders like the SBA, affecting equity distribution—partners with guarantees may secure a larger share of any 'carry,' or profit sharing, beyond initial returns. A structured approach similar to private equity can be utilized, incorporating management fees based on unadjusted EBITDA, with profits shared after meeting certain preferred returns. Having partners who have or haven’t taken personal guarantees allows for increased debt capacity while maintaining operational roles within the portfolio businesses. This structure fosters collaboration by sharing financials across the business landscape, enabling partners to work together effectively while allocating control as per lenders' requirements.