How to split equity between 3 investors with 1 as the lead

7 Replies

Hi, I need help with equity in the deal for an apt complex I am working on.

This is the breakdown:
Investor A = $90,000 - Investor B = $20,000 - Investor C = $25,000

Myself and 2 other investors are buying an apt complex and need to split the equity.  That is not the issue.  We have the equity split just fine.

The issue is my 8% equity for being the lead investor who does all the work.  The passive investors agree to the 8% but do not agree how the 8% should be taken from the other two.

Investor A believes that 4% should be taken from both passive investors to be given to the lead.

Investor B believes since he is putting less into the deal, he should have less taken out of his share because he doesn't have as much to gain as the other investor.  Investor B believes that Investor A should have 4.5 times the amount of equity taken from his share because he investor B is putting in 4.5 times less than investor A.

I am investor C so I gain from the 8% increase in equity.

So, how should the 8% equity split be for investor A and B?

Thanks for the help!

@Dustin Heiner

I would, and have, broken deals up this way:

100% to start

You get 8% for doing all the work.  Leaving 92%

All 3 investors buy into the 92% that is left.

A - 61.333%

B - 13.630%

C - 17.037% + 8% = 25.037%

Pretty sure that adds up to 100%

I am for the 8% off the top.  That is what I presented to them but they both dismissed it.

I personally don't see how Investor B makes sense because Investor A is being penalized for putting in more money.  If they both put in the same amount of money, they would have the same percentage of 4% taken out.  

Thank you all for the input.