This business journey is a two man show. Currently we are in middle of
researching the market and our customer?s base. We have already
decided that we are going to form an S-Corp based on the nature of the
business we are conducting. Since my partner is helping me out to
start this business, he has agreed to help me out to get the business
up and running. I?ve agreed to go half on the profits with him for the
first year.

My questions are:

How do I make him a shareholder/Owner that holds only 25% of the
company but receives 50% of the profits for the first year?  Please
include the forms involved to do this and if we need to write up any
agreements.

After the first year I like to reduce the 50% (profits) down to 25
%(profits) how do I go about changing that?

Also to have a higher authority over the business what do I classify
my self as and what do I classify my partner as?

If any of those questions are unclear please let me know by e-mailing
me. This is a new experience for both of us so we are doing what we
can to get this business up and running.

You might look into forming an LLC (limited liability
corporation/company). There is much more flexibility in them for
profit and loss allocating.

http://www.entrepreneur.com/article/0,4621,304800,00.html
http://www.bizfilings.com/learning/llcfaq.htm#scorp
http://www.alllaw.com/articles/business_and_corporate/article6.asp

Thank you for the reply.

I can see that the LLC can suit us better, but an LLC is also more
expensive to form.

What kind of flexibilities do we have with an S Corporation when it
comes to ownership and profit sharing?

The simplest way to pay him more than he's technically worth that
first year is to make his pay a salary instead of distributing a
dividend.

Nate