Advice on Hypothetical Deal Structure with a Partner?

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April 21, 2026

by a searcher in Chicago, IL, USA

I have a partner that I am searching with and could use advice from this community on potential equity structures between the two of us. Context: Both of us are currently working. We have similar, albeit different, backgrounds and skillsets. I would leave my job to run the business that we acquire and be the personal guarantor of the SBA loan. Partner would transition over down the road once the business could support the two of us. They will not be a guarantor on the loan and it's kind of a non-starter based on where they are in life at the moment. Hypothetical deal: $5M purchase Price $500K Equity ($250K from each of us) Given the context, does it make the most sense to treat their equity as preferred shares (similar to an investor) with pref + step up? As an example: Pref: 10% Equity: 19.9% Step up: 1.5x 75/25 split post return of capital on future cash distributions
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Reply by a searcher
from New York University in San Diego, CA, USA
To me, your partner is an investor. You’re putting in meaningful equity and taking on the PG. Capital is not the constraint. Have your partner be a lead investor and you can have a discussion about how involved they are. But be clear- the operator who takes on the PG is the owner.
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Reply by a professional
from University of Michigan in Detroit, MI, USA
Hi Anon, I agree with the earlier comments, your partner sounds like an a passive investor (at least for now). With a $250k investment in a $5M deal, he's going to end up with around 7.5% of the company post 1.5x step up. This won't trigger an SBA guaranty requirement. Let me know if you want to discuss. Happy to talk. Reach out at redacted
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