Our startup has a person who holds a very high percentage of the company's common stock.
We don't have any money yet, and we've been working for a year.
This guy has done an extremely minimal amount of work (maybe 1 hour per week) since we started. His effort is not enough to qualify for any type of equity. We made a mistake by originally agreeing to give him stock, but we had higher expectations that he just didn't fulfill (though according to him he fufilled those expectations).
We want him out. What options do we have to completely kick him out and not have him part of the company anymore? Myself and the other cofounder have majority shares.
Assuming he is fully vested and the stock is not restricted in any way then clearly he owns it and it is his property. Trying to take something away from him against his will is tantamount to theft; the best you can do is buy it from him at whatever price you can agree on.
Your other option is to simply walk away from the company. You state it has no money, does it have any customers? If the company has no assets just walk away and you and your friend start a new company. Did you sign anything like a non-compete agreement that would prevent you from doing this? Remember as far as software is concerned (if you wrote any), that belongs to the person that wrote it unless there is some other agreement. And it certainly sounds like the company has not purchased the software from you.
Perhaps the best way to look at this is as a valuable learning lesson and don't make the same mistake next time.
Strategy 1: Dillute the shares. Award yourselves options based on your performance. You have majority ownership so push through an options package.
Strategy 2. Salary. Pay yourselves a lot. From his equity.
Strategy 3: Chicken. If you are the assets in the company. You play a game where you raise capital based on high valuation. If he is in, you are not and vice verca. If he is in you quit the company and let it fold. He has effectively given you money. If he is not in, he is dilluted.
Strategy 4: Start a subsidiary. Do a private placement selling stock in the sub to all owners of parent. If he is not participating and he is effectively dilluted, make sure sub rakes in most of the profits.
I mean - sneaky lawyers know how to do this sort of thing.