0382 - A partner and I have an s corp and she has used personal credit cards to help finance us (payments made by the corp). She regards this as a "capital contribution" and wants compensation (financial or less work). Is this fair?
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stevec3
ANSWERS: 2
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There was value to her credit rating -- perhaps in lower interest rates, or perhaps you wouldn't have received credit at all... so she's right to want some kind of compensation. But I'm not sure how you'd measure it -- perhaps as the difference between what you would have paid in interest, vs. what you actually paid in interest. The fact is, she took a greater risk in starting the business than you did. Did you also have something "immeasurable" to offer the business -- like references, contacts, skills, etc? Bottom line is, she is feeling unfairly treated -- so you two have to figure out a fair way out of this pickle. FYI -- when Bill Gates and Paul Allen started Microsoft, Bill negotiated a greater than 50% founders share of the company because Paul Allen held a second job. Bill successfully argued that his own devoted contribution to MS was greater, because Allen had the safety net (and dual responsibilities) and Bill didn't. (It's more complex than this, but this is my 1 sentence summary).
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The money she put in is a loan to the company and she could be renumerated by charging the company a reasonable interest rate on the loan (the credit card rate PLUS).
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