When Profit Splits Go Wrong: Why Your Partnership Agreement Matters More Than You Think
It’s one of the most common things I hear from early-stage partners:
“We’ll figure out the money stuff later.”
And almost every time, those are the words that come back to haunt them.
I worked with a client who built a $2M landscaping company with his best friend. They split ownership 50/50, but not the workload. One partner was putting in 70-hour weeks, while the other barely showed up.
When the working partner finally said, “I want out—pay me my share,” he expected a seven-figure buyout. Instead, he got blindsided.
Why?
Because they never wrote anything down.
And under California law, when there’s no buy-sell agreement in place, departing partners are often only entitled to liquidation value—what the business would be worth if everything were sold off and shut down.
That meant instead of $1M, he walked away with just $200K.
In this LinkedIn post, I break down what went wrong—and the four clauses that could’ve protected him from day one:
Sweat equity
Performance-based profit sharing
Contribution tracking
Regular equity adjustments
Read the full post here:
If you’re in a lopsided partnership—or just starting one—don’t rely on good intentions.
Let’s make sure your agreement reflects reality, not regret: www.lawpla.com
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