Sweat Equity

[Acownt4it]

Does anyone have a method for calculating "Sweat Equity" or have a link that I could research it?
Sitution is a partnership (LLC). 2 partners, one is the investor and the other will be operating the business with little or no cash/property investment. I need to be able to calculate how much the sweat equity is worth.
Is it based on the wages that would be paid to the partner if the money was there or some other criteria?

[ChEAr$]

Does anyone have a method for calculating "Sweat Equity" or have a link that I could research it?
Sitution is a partnership (LLC). 2 partners, one is the investor and the other will be operating the business with little or no cash/property investment. I need to be able to calculate how much the sweat equity is worth.
Is it based on the wages that would be paid to the partner if the money was there or some other criteria?

It's value will be what the members agree on. That may sound simple, but here's how
it (should) work.

For a (regular) partnership, the agreement should allocate profits or losses by some formula. Usually partnership accounting is taken up after basic accounting courses, usually in intermediate courses, and examples abound in those textbooks.

The usual example allocates along a three tiered formula:
First, "interest" (not for tax purposes) is allocated according to capital accounts, either
on basis of yearly beginning capital or maybe average capital balances.
After this interest is deducted, then an allowances for salary is made. Thus your "sweat equity" member is allocated $xx times # of hours worked during the year. After subtracting this, the balance is split as agreed beforehand: 50/50, 60/40, etc.

The same formula works for losses too, allocating interest first, then sweat equity (salary), and if balance is a loss, then allocated in same ratio. OR a different ratio if
the partnership agreement (Operating agreement in case of this LLC) so dictates.