I’ve seen a lot of these sort of proposals, almost of all of which get turned down after some fairly simple calculations, and a look at the share of burden and risk.
I’d provide a cost estimation if I was paid in full for all development, allowing for changes in direction/discovery if the idea hasn’t been planned in detail, and allowing for consultancy and research time. I’d evaluate what the partners existing efforts to date and ongoing commitment would be worth. This forms the basis to negotiate equity from.
Then balance these costs against what the enterprise would be worth in worst case/best case scenarios and if it’s entirely unsuccessful, would the work be resaleable/reusable.
In almost all cases, the equity share necessary to balance my efforts versus the effort put in by the person with the idea is sufficiently high (generally way more than 50% to myself) that they’d no longer be motivated to continue. The ideas in many cases aren’t nearly as innovative as the inventor thinks, and fail basic research into competition and feasibility.
I’ve also found that a key test whether people are seriously committed to an idea is how much financial risk they are willing to bear relative to their means. I’ve dealt with a few instances where the other party have been extremely wealthy but not willing to commit resources trivial to their means, which while not making any difference to their lifestyle, would get the project started on a proper footing. If they can’t balance their side of a partnership with either work or money, then chances are deep down they aren’t going to be sufficiently committed or dedicated if the going gets tough, and that’s not a characteristic I’d want to be in partnership with.
If you want him to be motivated, just pay him more. Sharing profit model is not always clean cut and may end up w/ frustration. Just pay him more if he does good job or replace him. That’ll certainly motivate me.
You can decide the percentage for your partner. I would like to recommend you for the 50% partnership. Or even you can give him the money for his helping.
If your the “inventor” and hes the “builder” then treat him as such,
hire him as a “builder” to build the website for a single price, and then pay him extra for maintenance, same as you would pay a builder.
If you plan to work with him as a partner, expect to give him around 49% or 40%.
Also partnerships have a tendency of only existing at the beginning of a company launch.
This is funny to me… Don’t you guys realize that most partnerships start off this way? You and your buddy that go way back and have always been best friends, trust them with everything…etc…
However when money starts flowing in the door, or as in most cases, OUT of the door it’s amazing how quickly lifelong friendships break down. Trust??? blah! You should be VERY careful who you trust, especially in business when money is involved.
If anything I would urge people to NOT enter into partnerships with friends or family. Chances are that after the partnership ends you will no longer have them as a friend and it will make all future family get-togethers rather uncomfortable.
Friendships cloud a persons better judgment. You must approach a partnership not from a ‘friends’ position or not from a ‘family’ position… It’s all about the business. It’s all about the money…
The question you asked requires professional advice if you want to avoid making dumb mistakes. It is a legal matter and you should not be considering any of the advice from people on forums. Very few have any real expertise or qualifications to give you a proper answer.
I noticed a particularly WRONG suggestion to you - “that you do a 50/50 split” that is absolute garbage!
You determine the splits based on a) what you want to achieve and b) who contributes what.
(For instance you might cut your mother in - as you would not be here without her (and also your dad, wife, kids, etc - they don’t have to contribute if you decide that)
A partnership is a Legal Agreement and should be properly prepared by an Attorney
You can split the sharing of a) Income b) Expenses c) Losses d) Capital Profit on Sale e) Ownership - and decision making
If you do not set the percentages for these then the law will simply apply an even split - which is how most partnerships end up as 50/50 - and probably not reflecting accurately contributions of the individual partners.
(That is how fights occur because One partner figures they contributed more and expects a bigger share)
NOTE: If you do not spell it out then it will be under the law EQUAL Slices of all profits and Losses - income and Capital
You probably gathered I am a lawyer - and further advice you will have to pay for!
I feel sorry for people - strange for a lawyer I know. But you are so wet behind the ears.
As you don’t know who is going to contribute what until they do it then you could make agreement for a shift or alteration to the equity split over time based on actual contributions and earnings or any other criteria.
If he leaves the job before completion then his share should be ZERO - so spell it out!
If he completes the job his share can be 10% of INCOME - but zero for Capital Ownership or whatever you decide.
If Income (or profits) exceeds a certain figure then he gets More.If you bring someone else in then the Partnership agreement must be altered at that stage.
I think that is enough Freebies to let you see a lot of the decision areas to be covered,
Best of luck
One further point:
Partnerships can lead to one persons being left with heaps of debt - if the other runs out or duds them. Partnership can lead to grief!
Which is why the sensible approach is to form a corporation - that limits personal liability to the actual contributions which have been made.
If you do not have $200 to form a company then you should not be in business with anyone. (But if you need a lawyer - you are going to need a lot more than $200)
This is funny to me… Don’t you guys realize that most partnerships start off this way? You and your buddy that go way back and have always been best friends, trust them with everything…etc…