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Profit division in a start-up

Srijit Banerjee (Self Employed) (39 Points)

18 March 2015

I am totally new to Corporate Law as I am from IT background.

Suppose we start a Pvt. Ltd. company where the investments are as follows.

1. Investor A - 2 lakhs

2. Investor B - 3 lakhs

3. Bank Loan - 2 lakhs

Now Person A and Person B have not invested any amount but are willing to be the partners in the company and Person A takes responsibility of Customer Support and Person B takes responsibility of Marketting.

While Investor A just invests the moiney and don't take part in any work. Investor B is the head of operations and deals with all the Technical Domain and operation of the company.

Now my questions are:

1. Will all (4 people) be the directors of the company?

2. Since Investor B has the main role, will he get the max profit share?

3. What will be the profit sharing ratio of the others?

Thanks

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1 Replies

Rajesh Kumar (Consultancy) (93 Points)
Replied 19 March 2015

Hi Srijit Banerjee,

1. You can appoint the working person as an executive director and non working person as an non executive director, its not complusory to appoint all four as director but there should be two director and for their partnership.

2. Allot them shares according to their investment like of A invested 70,000 Rs. Allot them 70% share and B invest 30,000 RS. Allot B 30% shares.

3. There is no profit sharing in the company as the company is seprate legal entity the profit earn by the company is invested in the company or given as a dividend to the shareholders.

Regrads

Rakesh Kumar