The owner has an online business which brings in a high $xx,xxx in profits (nearing 6 figures) with minimal costs (hosting, etc). Owner is looking to start fresh with an LLC setup and a partnership agreement specifically for this venture.
I will do the day to day business management, development, upgrades, etc -- Owner will be there to provide guidance and direction as needed, but will keep main focus on other separate ventures.
Initial offer was: ~$50k yearly salary,
20% potential equity stake,
4 years to vest (0% 1st year),
No profit sharing
My thoughts: I would also like to structure in some sort of profit sharing and goal setting for increased profit sharing that is fair to the partnership and provides me with incentive for increased performance.
I'm not required to bring anything financially to the table other than hard work and dedication.
Owner has asked me to come back with my own thoughts and my own idea for how to set it up - basically giving me an opportunity to negotiate the terms.
Community thoughts? (Thank you.)
I have no experience with this at all, so take my thoughts with that disclaimer: Depending on the goal of the business, Equity could be far more valuable than profit sharing. If you are expecting an out (acquisition, IPO, etc.) then you may not have any profit (re-invest all the earnings back into the business to grow fast for a big exit). In that situation haggle for equity not profit.
If on the other hand no exit is in site, then equity isn't going to do you any benefit financially and you should really be pushing for profit sharing too.
It depends on the goal/plan for the business.
~$50k yearly salary
The business is solid already and you're getting a low equity stake. You will be doing all the development, infrastructure and support work, your salary should be around $100k.
20% potential equity stake
You're part of the first layer of employees of the company. check this. if you stay working alone for two years, you deserve the whole 20%.
4 years to vest (0% 1st year)
Four years, it's ok. but you should be getting a 25% of your shares in the end of the first year, plus 2% monthly.
No profit sharing
You're earning your participation, there is no reason to not take profits. you are acquiring equity. you deserve a participation of profits according to your equity.
tell us how everything goes once you've finished your negotiation, please