Inputs on partnership startup
I am planning to work as a partner in a startup along with my friend. Since he is a critical resource so he is taking a major chunk of the equity and holds the decision making power. I being a part time guy is getting a minimal equity. I am little bit worried being a minority partner whether it would be a good decision to be part of it or not. Can I be a full time guy ever with such a minimal equity make up the good profits. Just wanted to know the factors that I have to considered before I get into it as I have a limited knowledge on the partnership.
Any insights would be helpful.
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BNot enough information. A lot depends how big you expect the company to be etc. - without information the gneerlal answers wont be helpfull. – Net Tecture 13 years ago
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thanks for the response, how about the factors which i have to consider for playing a safe bet . – Jds 13 years ago
1 Answer
Being part time and having minimal equity seems to put you in a position of very little risk at the moment.
If it gets to the point where you want to go full time in the venture then they need to be profitable enough to pay you to do so. Either they pay you a salary, or the profit distributions paid out to you based on your equity is enough to pay you to work full time.
So the company just needs to get to the point where it has enough income to hire you. Until then you work part time at your convenience.
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Thanks for your inputs . There are few of hard clauses i would like to bring in your guys notice so that it would be easy for you to assist me with your thoughts. 1) Putting up the performance equity i.e deducting 5 % if the partner is enable to finish the task on time.Being a part time this will always applicable for me . 2) decision making final power will be hold by the majority holder only. – Jds 13 years ago
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In your agreement you should definitely have some outlines of what happens if there is a deadlock on your 50/50. One wants to sell, the other doesn't. Stuff like that. Right, yeah and if you do all the work and he doesn't go out and sell/market it then I would say he is not living up to his side of the deal. – Ryan Doom 13 years ago
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what he had to say is there won't be change in the equity despite of me join as a full time . i have to continue with what is allocated now . Do you see that as fair? Do you think that it would be a fair to have the 5% deduction clause in case if the guy is enable to finish off the task ? Because this is clearly goes for me since i am a part time time guy now.Appreciate if you can assist me with some thoughts. – Jds 13 years ago
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Any thoughts ,Please? – Jds 13 years ago
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There should be something regarding performance or expectations in the contract. Wouldn't want you sitting around doing nothing and still get a portion of the company. I guess you have to deal with your allocation - but when it's time to become full time you'll have to have the company pay you a salary. Otherwise you'll continue and only work part time. So, might outline that? That you will only become full time once dividend payouts or salary can be equal to what you currently make. – Ryan Doom 13 years ago
