how should profits be distributed in a partnership ?

[jjk2]

say i have set up a limited liability partnership, and after paying off all the investors, we are left with performance fee and management fee.

how to split this between two founding partners who run the LLP together ?


one is involved with strictly investments, the other does only raising money, talking to clients.

should the one involved with investments generating alpha deserve a higher profit ?

 

[Corey]

Give incentive for each to do their job. Performance fees go to the manager, fees for assets under management go to the salesman. The salesman will do his best to bring in more cash, and the manager will do his best to perform.

Make sure there are special clauses for if the fund stops taking new money, etc...

 

[circadian]

Quote from jjk2:

say i have set up a limited liability partnership, and after paying off all the investors, we are left with performance fee and management fee.

how to split this between two founding partners who run the LLP together ?


one is involved with strictly investments, the other does only raising money, talking to clients.

should the one involved with investments generating alpha deserve a higher profit ?

You can start by basing the pay scale off of partner capital contribution ratios. If you're the one that put up the majority of the capital in the beginning, take a bigger piece of the pie, in proportion to your percentage of initial ownership. That's a start, and you can also pay yourselves interest on your capital accounts if you so wish. All the other performance pay should obvisously be consummate with your performances, and only you two know what you've done. Hope this gets some things rolling. Are you liquidating??? Or are you just now paying out after Q3's end???

 

[jjk2]

well i am looking to set up an LLP in canada, and have my friend in asia to raise the money....and i will be focusing on the investments....i might need a lawyer then.

also interesting to see the polls are so far half half...

 

[jjk2]

i would like more inputs from guys who are doing similiar stuffs...

 

[GermanTrader]

>>how should profits be distributed in a partnership ?>>

One for you, two for me...

I would never enter such risk as to involve other people with my money and talents. I would sooner miss my own trading signal than allow emotions of others to play a role in the success of my firm.

 

[Brandonf]

Obviously whoever creates the greatest value for the partnership is responsible for the well being and life of the people who create the least value. There-for, the person who creates the most value should have to split his take evenly with those who create the least so that no one feels left out or has hurt feelings.

 

[nonlinear5]

Quote from jjk2:

should the one involved with investments generating alpha deserve a higher profit ?

I'd say this is between you and your partner. What ET thinks is irrelevant here.

 

[Landis82]

Quote from nonlinear5:

I'd say this is between you and your partner. What ET thinks is irrelevant here.

True.
Moreover, this thread really isn't applicable with being in the TRADING FORUM.