I'm sure there are a lot of entrepreneurs out there who have experience with this, and many others who are looking to do the same thing.<p>I have built up a complete application myself, no funding/company, etc. I am bringing on a co founder who will help make this a reality. I'm willing to go 50/50 with him. But, as we've both discussed, we need to create some type of agreement (pre company formation/stock/etc) that protects me so if he can't just walk away with 50% of the company and do none of the work. How should this be set up?
You don't need a lawyer. You need common sense.<p>Why do you think you need to give someone 50% of YOUR company? Is your product ready? How much more work will it take before you are ready for revenues? And when you are ready, how long will it take before you generate enough profit (not sales) that can support two full-time employees? Is this person an employee or a co-Founder? Are you giving this person 50% because you cannot afford to pay salary and are you giving this person 50% because you need his intellectual contribution in addition to effort? Or are you just looking for a companion? And if this is a co-Founder, will you need still outside funding (VC or angel) once the person joins you?<p>In other words, lawyer cannot protect you if you don't know what you want. Work the problem backwards. Think about building the company and not the product. Focus on what the company would look like six months from today, two years from today, five years from today and then think about how to get there, with or without this new partner/employee.<p>Think about these questions first and then worry on the legal details.<p>--Denny--<p>Denny K Miu<p><a href="http://www.lovemytool.com/blog/startup-for-less.html" rel="nofollow">http://www.lovemytool.com/blog/startup-for-less.html</a>
Don't do 50-50; do 51-49 so there is a clear majority partner. It can be you or the other person but you need a way to avoid deadlock. You can involve a third person and go 49-49-2 so that you have a tie-breaker (or 49.99-49.99-0.02). Packard was 60% and Hewlett was 40% as an FYI. <p>The advice to do a vesting schedule (or a buyback/unvesting) is also good. You need to look beyond just this one person and think about what other "hats" or capabilities you are going to need to achieve your objectives. You may want to setup an option agreement. But you are going need to create some kind of company, and should consult with an attorney.<p>Denny Miu's advice to reach a "meeting of the minds" first and expressing it in plain English is spot on, don't rely on an attorney to help you reach an agreement with a partner, rely on an attorney to point out risks and issues that you may not have considered (e.g. setting up a buy-sell agreement).<p>Many more companies fail from a lack of customer development than product development so finding a partner who can help balance your strengths and offering them a substantial chunk of equity is not unreasonable.<p>I hope this helps./SeanM <a href="http://www.skmurphy.com" rel="nofollow">http://www.skmurphy.com</a>
You don't need a lawyer. I suggest an LLC with vesting. Just look up online for different types of company structures.<p>I have a little thing we got from Nolo press (nolo.com- the centrla cheap legal document hub), which was an original operating agreement. We have a 3-year vesting on the agreement that you can use and if he walks, he gets a small amount, but I would also build into the agreement an attachment for rights and responsibilities. We had one partner who was not performing and we had to include an addendum so that if people were not performing, bad stuff could happen. Just send me an e-mail.and I'll pass the doc over.<p>FYI, the number one thing that all CEOs regret is not getting rid of people who don't belong earlier. So make sure that this person you're hiring on is worthy.
Hi,I'm a lawyer (in the UK) and you do need a legally binding agreement in place to protect you. I'm sure someone at Y combinator can recommend a decent lawyer over there. You should not have to pay a great deal for this, but it is best to have it done professionally so that in the worse case scenario (that you guys fall out with each other), you're legally sorted from the outset. Its probably not a good idea to try and do this yourself. I do mean that sincerely and not in a patronising way at all, you want to be able to focus on your start-up and not be worrying about what would happen if things went wrong. Good luck.
So, you built an application by yourself, with no funding or help,and you're willing to give up 50% of the equity just like that?<p>I'd also recommend seeing a lawyer. Additionally, a partnership may not be the best idea if you don't know and trust this second co-founder. I'm no lawyer, but it sounds like an LLC might be a better choice. You can vest his shares over a time period that you feel is appropriate, and include a clause in the operating agreement that discharges him if he fails to perform the duties required of him.<p>Again, I'd go see a lawyer. It's not worth the headache later on.
I agree with the additional comments below, but whether you incorporate as an LLC or set up as a partnership or carry on by yourself, if you are going to ask someone else to join you (leaving aside the exact legal nature of your relationship)you must protect your intellectual property rights and if you carry on working with someone else and don't get the legals sorted there are risks.