Sweat Equity In Business

Summary

Sweat equity in Ontario is negotiable and depends on factors like time, effort, and business value. Consider valuing your partners contributions as a salary and project the businesss future value for a fair equity split. Drafting a partnership agreement can help formalize these terms.

Full Conversation

The partner will invest zero money. The partner will work *%. I will do no work.
In Ontario, the distribution of equity can be negotiated between partners. Generally, sweat equity is valued based on the partner's contributions in time and effort. You might consider:
- Valuing the partner’s time equivalent to a salary.
- Determining a fair equity split based on the business's projected value.
Have you considered drafting a partnership agreement to formalize these terms?
Is there a standard for sweat equity?
There is no strict standard for sweat equity in Ontario. It's typically negotiated between partners. General guidelines include:
- Valuing time and effort as if it were a salary.
- Projecting the business's future value and splitting equity accordingly.
Have you discussed the potential business value and the time commitment with your partner?