Investment and Equity Ownership in a New Company

[TRFRSI]

Jurisdiction

New York

I was recently asked to help with starting a business, which includes putting together a line of products. My business partner founded the business in 2008, but was not able to get the line launched properly. Last year, he asked me to step in and help get everything launched, and become a legal owner/partner in the company. His initial investment in the product line is monetary, while my initial investment is the time, effort and expertise that I bring to the table. We have come to a verbal agreement where once the company reaches net sales of $100k, I will legally be granted 40% equity ownership in the company. At $250k I will be granted another 5% for a total of 45% equity. Finally, once net sales reach $500k, I will be granted an additional 4% for a total of 49% equity ownership in the company.

My question is this: What can I include in the formal written agreement that will protect my initial investment, should he decide to "fire" me just before reaching sales of $100k and not granting me my rightful equity ownership? I truly do not feel that he would ever do this, but I am looking for ways that I can protect my interest in the company, in writing. The time and effort I have put into this project at this point far exceeds his monetary investment (in my opinion). I want to have something in writing so that if he decides to terminate our business relationship, I will still be compensated somehow for my initial investment in this venture.

Any ideas? If there are multiple options for me, what are the pros and cons?

Thanks!!!

 

[army judge]

I was recently asked to help with starting a business, which includes putting together a line of products. My business partner founded the business in 2008, but was not able to get the line launched properly. Last year, he asked me to step in and help get everything launched, and become a legal owner/partner in the company. His initial investment in the product line is monetary, while my initial investment is the time, effort and expertise that I bring to the table. We have come to a verbal agreement where once the company reaches net sales of $100k, I will legally be granted 40% equity ownership in the company. At $250k I will be granted another 5% for a total of 45% equity. Finally, once net sales reach $500k, I will be granted an additional 4% for a total of 49% equity ownership in the company.

My question is this: What can I include in the formal written agreement that will protect my initial investment, should he decide to "fire" me just before reaching sales of $100k and not granting me my rightful equity ownership? I truly do not feel that he would ever do this, but I am looking for ways that I can protect my interest in the company, in writing. The time and effort I have put into this project at this point far exceeds his monetary investment (in my opinion). I want to have something in writing so that if he decides to terminate our business relationship, I will still be compensated somehow for my initial investment in this venture.

Any ideas? If there are multiple options for me, what are the pros and cons?

Thanks!!!

Sorry, you do yourself a disservice seeking FREE advice to protect your efforts.

I suggest you consult a licensed attorney in your county about your required protections.

That said, the other party generally cares very little about protecting you.

The other party (parties) are more concerned with EXPLOITING you!!!

I can tell you GENERALLY, if you act on oral promises alone, you are already at risk.

If a contract is violated, you then prepare for legal warfare in some courtroom.

The protections you seek are extremely difficult to achieve.

 

[TRFRSI]

Sorry, you do yourself a disservice seeking FREE advice to protect your efforts.

I suggest you consult a licensed attorney in your county about your required protections.

That said, the other party generally cares very little about protecting you.

The other party (parties) are more concerned with EXPLOITING you!!!

I can tell you GENERALLY, if you act on oral promises alone, you are already at risk.

If a contract is violated, you then prepare for legal warfare in some courtroom.

The protections you seek are extremely difficult to achieve.

As I said in my post, I am in the process of putting together the WRITTEN agreement, which is why I am seeking advice. I am looking to hear from peers who may have put together a similar written contract so that I can weigh what's best for me and my situation, and THEN I will be taking it to my attorney. Thanks for not properly reading my post, and making all of your ridiculous assumptions, though!

 

[TRFRSI]

Army Judge,

As I said in my post, I am in the process of putting together the WRITTEN agreement, which is why I am seeking advice. I am looking to hear from peers who may have put together a similar written contract so that I can weigh what's best for me and my situation, and THEN I will be taking it to my attorney. Thanks for not properly reading my post, and making all of your ridiculous assumptions, though!