My equal 50/50 partner lent the company the original start up money. How do we pay the loan back? At first I thought that it was a company debt but then as I think about it. It seems like half of the pay back money would be coming out of her profit share because we would split whatever money is left. It seems like she would be helping to pay back her own loan that she lent the company.

What kind of company are you (partnership, corporation, LLC)?

If nothing was written with terms for how it would be paid back, she (the loan!) gets paid out of gross profits, and THEN you split the rest of the profits equally between you.
What you are essentially hoping is that you will only have to chip in half the payback. Sounds reasonable, right? WRONG. That would have meant that she put up half the seed money and you put up nothing, nada, zilch.

If this isn't obvious and you feel yourself getting resentful at how much she is getting, run it by us again, or your partnership is doomed.

There are two aspects either she contributed capital which entitles her to a share of the profits or it is a loan which is fully repaid from available cash. You will still have your 50% share and so will she

Thank you for replying. She lent the original start up money to the company as a loan. As a 50/50 partner she gets 50% of left over profits as do I. But we are both confused because it seems that if the company pays back the loan to her before we do the profit share than it would almost seem like she is partially paying back her own loan. Because that money that is being used to pay back the loan is half hers, right? SOrry, we are both equally confused and we both want to do what is right. Does the company pay the loan back then we share the remaining profit OR Do we split the profit and I alone pay back the loan out of my cut?

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Originally Posted by Oraclepromotion

Thank you for replying. She lent the original start up money to the company as a loan. As a 50/50 partner she gets 50% of left over profits as do I. But we are both confused because it seems that if the company pays back the loan to her before we do the profit share than it would almost seem like she is partially paying back her own loan. Because that money that is being used to pay back the loan is half hers, right? SOrry, we are both equally confused and we both want to do what is right. Does the company pay the loan back then we share the remaining profit OR Do we split the profit and I alone pay back the loan out of my cut?

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I think I figured it out. If there is $10,000 left in profit and there was a $2,000 loan/debt. The two ways I was looking at it was either we split the $10,000 50/50 then I paid the $2000 back to her which would leave me with $3000 and her with $7000. The other option was for the company to pay the $2000 out of the $10000 leaving us with $8000 t split 50/50. The second one is right because that would leave me with $4000 and her with $6000.

That's what I said.

If I may chime in here, I think you're confusing cash flow with profit. If the loan had come from a bank, you would still have to pay them even if you had no profit. Hopefully in that case, you would have the cash flow to do so. The loan payment doesn't affect profit or loss.

What has been lost sight of is that one partner contributed both capital, either cash or intellectual property and effort and a loan, the loan stands alone on its own merits so you both have $4000 in distributed profits and an entitlement to a further share when cash is available and the parner who made the loan has the money back. If the loan hadn't been made you would have nothing