Equal partner is making demands that go back on our initial agreement in writing


1

I'll try to outline this quickly.

Two equal, 50/50, partners - one is building/creating the product, running all operations, etc…the other is footing the bills and will be doing the sales.

At the beginning the partners agreed that the partner creating the product would garner the first $100K of product sales before the second partner drew a salary. This is because the first partner, the builder of the product, worked on this full-time - usually 80 hours a week, for a year, while the second partner invested about $10K per year.

Now, that's not to say if we received orders for $25K per month, for a year, we'd obviously just split it at that point. But, if orders came in, for the first years at a rate of $5-10K per month, this money would go to the first partner as payback for his 4000 hours of product development.

Now the second partner - who at this point, now that the product is ready to deliver and reviews are excellent, is little more than an investor - is demanding that everything be
split 50/50 from the very first check we get. Which goes against his written agreement.

Any advice???

Thanks!

Equity Investment

asked Nov 15 '12 at 12:14
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Calais
51 points
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  • I think you need a lawyer at this point to explore legal options of forcing your partner's compliance with the agreement or your protection if the partnership is dissolved. – Karlson 8 years ago

1 Answer


1

is demanding that everything be split 50/50 from the very first check we get. Which goes against his written agreement.

The usual rule of thumb is that reward should match risk. The issue is the division between equity (dividends from profits after expenses) and operations (salary/expenses). There are 2 ways of negotiating

  1. positional - ie only written agreement is valid = can be polarising
  2. principle - why is dividends being taken out before sustainable sales?

There are a whole bunch of factors that I would be loath to give any detailed answer (I am a paralegal) without know the circumstances ... but if you see a potential conflict, now is the time to start documenting the facts like how much time did you each spend respectively. Trying to understand why the position has changed may allow you both to come up with a compromise or you can negotiate an exit strategy (eg both have copy of code but split the customer list).

answered Apr 30 '13 at 17:16
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Drllau
501 points

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