LifeinAsia - 4:35 pm on Feb 14, 2011 (gmt 0)
Sort of, but it doesn't have to mean paying the salaries retroactively. What I originally meant was a way for the non-investing partner to create equity in the partnership.
For example, let's say partner A invests $100K, while partner B invests $0. All the investment money goes to equipment, rent, etc., so there is no money left over for salaries. Partner A is just an investor (no involvement in the day to day operations), while partner B does all the work. The partnership agreement states that partner B gets a "fake" salary of $100K/year, which is paid in equity in the company. So after 1 year, each partner has "invested" $100K each into the partnership, making each a 50% owner. (Tax-wise there's a bit more involved than that, but you get the idea.)