Profit sharing and trade secrets


I've been developing an online trading algorithm as a hobby project for 3 months during the summer. It seems that two more people will join to me, due to external circumstances not entirely up to me. It is also quite likely that the trading algorithm will soon start generating income.

However, in order to make money the algorithm must be kept secret. Obviously, when the two new comers join, they will have to have access to the algorithm source code in order to be able to work on it. The algorithm also has an online account associated with it with $ funds.

1. How should I divide the income of the trading algorithm? I have already spent a large amount of my time on it (3 months), while the new comers will only start working on it now.
In addition, I'd like to focus on the project a lot, while the new comers might only work on it part-time. For example, they might go on vacations and partying, while I choose to work.

2. How can I prevent a new comer to use the credentials of the algorithm for the online account, take all the money from it and leave? 3. How can I prevent a new comer to steal the algorithm and start a competing online trader?

Trust Secret Sauce Profit Sharing Income

asked Oct 23 '11 at 21:30
195 points

1 Answer


  1. You need to create a company, eg. an LLC or a C corp. You need figure out who the owners of the company are, eg. just you or all three of you. The ownership need not be equal and can be vested over time. You could consider having the other two be consultants or employees at first. Given what you describe, I would not part with ownership at this point, and make sure the other two do good work and are committed by giving them a trial period as consultants.
2-3. The only way to do this is by contract. You need a consulting/employment agreement that provides you with all of these protections. You should also have some trust in your colleagues before bringing them on board. After all, they could breach the contract, and the only way to go after them would be to hire an attorney, which you may not be able to afford.
answered Oct 23 '11 at 23:02
1,936 points

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Trust Secret Sauce Profit Sharing Income