I read someplace about how issuing internal shares could be a good solution to equity division when contemplating bringing in a new partner. I am in a partnership business (general partnership, yet to be incorporated) with two other partners bringing the total to three. We have initially divided equity equally among ourselves as each contributed equally. We also share profit and loss in the same ratio, i.e. 33.3% for each partner after deductions of applicable appropriations.
In order to grow the business, however, it has become increasingly necessary to bring in a new partner to broaden our customer base and contacts - the incoming partner will be of assistance in this respect. In this regard, and given the fact that we run the risk of crowding the “100%” holding (or so I think?), would it be more applicable to instead issue internal shares to accommodate the new partner? If so, what exactly are the accounting ramifications in Manager from such an exchange?
Thanks in advance for your responses.