Offering a share of business contract

petrjanda

I'm starting a company and I want to offer this guy 30% share if he wants to work for me on this project.

The company isn't registered yet, and I don't want to register it until the product is done.

Is it sensible for the contract to say that his 30% share will be delivered to him once the product is complete?

How should I go about doing it?
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notageek · Posted: Sun Jul 28, 2013 4:19 am Post subject:

Is it sensible? No.

Not sure what you're getting for that 30pc, can't you just employ him?
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Muso · Posted: Sun Jul 28, 2013 4:25 am Post subject:

Shell out the $$$ for a lawyer. Get a proper contract sorted. In the long run, it will be cheaper. After all, you don't want him to be able to claim that he is owed 30% of your total assets

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pjp · Posted: Sun Jul 28, 2013 4:27 am Post subject:

Seek legal advice. Seriously. Here at least most will offer free initial consultation.

30 percent in a company seems high as a payout for a single project.
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Bones McCracker · Veteran Joined: 14 Mar 2006 Posts: 1553 Location: U.S.A.

Be specific. Offering him 30% of "the company" is quite vague and open ended. If he's contributing to the development of a product, then "30% of the profit directly attributable to that product for a period not to exceed X years" might be appropriate.

That protects you if you don't earn a profit, and if you create other products he didn't contribute to.

If you're talking about more than a few thousand dollars worth of effort, I'd come up with the basic arrangement you think you want and take it to an attorney for advice and probably to have the contract draw up.

If his contribution is so significant that it warrants a 30% stake in the company, then what you're talking about is a partnership of some sort, and that's also important to get legal advice on (after you read about it, as the laws pertain to it where you live).

petrjanda · Posted: Mon Jul 29, 2013 3:14 am Post subject:

Yes, it would be a significant contribution. I meant 30% of the company's profit/loss. The company is only going to have one product.

So it will have to be a business partnership.

What I'm wondering about is, what if he doesn't upheld his end of the deal? (ie. he's stalling the project, or just plain not working?)

The company doesn't exist yet (and wont exist untill the product is done).
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There is, a not-born, a not-become, a not-made, a not-compounded. If that unborn, not-become, not-made, not-compounded were not, there would be no escape from this here that is born, become, made and compounded. - Gautama Siddharta

pjp · Posted: Mon Jul 29, 2013 4:01 am Post subject:

Bones McCracker · Veteran Joined: 14 Mar 2006 Posts: 1553 Location: U.S.A.

You can't very well make him an employee (yet) if there's no company. You'd need investment to cover your operating expenses while you developed it. If the idea is good, you might get it.

If not, then a stake in the company (if not in the form if a partnership then in some kind of a profit-sharing arrangement or stock options is a reasonable idea). You probably need to form a corporation and make sure the agreement assigns all intellectual property rights to the product to the corporation.

Talk to a lawyer with a background in technology start-ups.

aCOSwt

notageek

energyman76b · Advocate Joined: 26 Mar 2003 Posts: 2025 Location: Germany

so you are founding a company. The problem is liability. Or in your case is not. So you have 70%, he 30... but in case something goes down. his money is on the line just like yours. that should give him some reasons to behave.

one way or the other. You need a lawyer.
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notageek · Posted: Tue Jul 30, 2013 2:45 am Post subject:

I don't think any money is involved in that 30pc he's talking about. More like sweat equity.
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energyman76b · Advocate Joined: 26 Mar 2003 Posts: 2025 Location: Germany

notageek · Posted: Tue Jul 30, 2013 10:36 am Post subject:

Oh, I was agreeing with you. The dude with 30pc is getting sweat equity. The dude of this thread is getting liability. Agreed.

Next?
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wildhorse · Posted: Tue Jul 30, 2013 12:32 pm Post subject:

Bones McCracker · Veteran Joined: 14 Mar 2006 Posts: 1553 Location: U.S.A.

aCOSwt · Last edited by aCOSwt on Wed Jul 31, 2013 12:43 pm; edited 1 time in total

notageek · Posted: Wed Jul 31, 2013 10:16 am Post subject:

Wow! What's going on? I'm able to understand and agree with aCOSwt!!!
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Ahenobarbi

As others wrote talking to an actual lawyer is probably best solution.

aCOSwt · Posted: Wed Jul 31, 2013 12:57 pm Post subject:

notageek · Posted: Wed Jul 31, 2013 1:40 pm Post subject:

5/You communicate better when area of discussion is bounded. For example technical topic.
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Bones McCracker · Veteran Joined: 14 Mar 2006 Posts: 1553 Location: U.S.A.

aCOSwt

Bones McCracker · Veteran Joined: 14 Mar 2006 Posts: 1553 Location: U.S.A.

Maybe not in Communist France, but the U.S. courts do place value on intellectual property.