Quote: "Does his 2.5% entitle him to 2.5% of the profits, after my partner and I draw salaries?" Sounds about right. However, with an LLC you can divide the pr

Quote: "Does his 2.5% entitle him to 2.5% of the profits, after my partner and I draw salaries?" Sounds about right. However, with an LLC you can divide the profits anyway you like regardless of the ownership. For example, you can agree to have your investor get no profits at all for the first 2 years and then after that get, say, 10% of the profits (basically any percentage you agree on). Or, you can even be more creative such as having your investor get all the losses for the first two years (to offset his income from other sources and reduce his tax burden) and then get him to receive 2.5% of the profits after two years. You have full flexibility with an LLC, but consult a good attorney or accountant to make the best of it.