Questions

If I own a company and the annual revenue is $100,000, and I have investors with a 15% ownership. Where does the money go?

3answers

First, you need to talk to an accountant to work out those details so everything is handled legally and correctly. The answer depends a great deal on what kind of company you have set up.

If you're an LLC then the profits get distributed to the owners based upon the percentage they own. The revenue first goes to the business to pay bills. Whatever is left over is considered profit. 15% of that profit would go to the investor and the rest would go to whoever owns the other 85%.

Of course you can both choose to reinvest the money back into the business. For tax purposes that money would be considered profit to you personally, but the money stays in the business to help fuel growth.


Answered 3 years ago

This will depend on a number of things including but not limited to:

* Structure of the company
* Shares previously issued
* Number and type of shares issued for the 15% ownership
* Number and type of shares issued for the remaining 85% ownership
* Priority of dividend payment against each type / class of shares your company has issued. As well as whether they are to be paid before any other outstanding debt the company has
* Obligatory dividend payments
* Contracted agreement for dividend payments to invetors

Given the number of variables, contracted or otherwise, I would strongly recommend you speak with an accountant who understand the applicable legislation to your company depending on where it was incorporated and where it operates.

Please give me a call if you'd like to discuss anything further.

Wishing the best for you

S


Answered 3 years ago

This question needs a lot of explanation. It depends what kind of business, what kind of investors and what is the long term goal of both.
If it was tech business, all the money would go to be reinvested in the business tone able to grow it and create as much value as possible. That is the only way investors will get their money back with a good return (and if everything goes well, which is 1% of cases)
If the moment was from family and friends and the business is a lifestyle one, then you should make some kind of repayment plan.
All this as long there is any money left. Remember that revenue is not profit


Answered 3 years ago

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