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Ask HN: How to get rid of a co-founder

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Re: Ask HN: How to get rid of a co-founder

#41

Post by naivedeveloper »

skraelingjar wrote: post #35

I can empathize, OP. I started a company with a good friend almost a year ago. I run tech, he does business. A few months in, and I moved 1000 miles away and have been building a client base on my end, while he has done nothing to help us grow in his location. However he has done his part outside of that. We had a frank discussion and decided while we're happy to work together, this isn't something he's interested in…

Thank you, glad to hear others have been here before. That sounds like exactly what I should do, I even like the way that you phrased it.

In your situation did you write up a partner termination agreement?

Re: Ask HN: How to get rid of a co-founder

#42

Post by djrogers »

Sounds like you don't have an equity plan yet - I'd start by proposing one to him. Propose a 50/50 split, but between technical and non-technical, then explain that if you need to add an additional non-techincal founder it will have to come out of his 50%.

This conversation can lead a number of good places - 1) he gets motivated and things go back to the way they were at the beginning, 2) he agrees to add a third person and split his share, 3) he decides to walk away, perhaps with a small share of equity for work already done.

Re: Ask HN: How to get rid of a co-founder

#43

Post by ahakki »

eplanit wrote: post #15
dragonwriter wrote: post #9

Earlier quoted context omitted.

> It doesn't sound like you actually have a "company". Or do you? > If you didn't incorporate yet, then you owe each other nothing. Anything that does business is a company (incorporation is needed to form a corporation, which is a specific kind of company; the term is often also used for forming a LLC, another particular kind of company); if two people have joined together with the intent of making a for-profit ente…

I know IANAL, but I don't think you are either: "if two people have joined together with the intent of making a for-profit enterprise but with no formal agreement, it is a partnership." No, it's not. What is "joined together....but with no formal agreement"? You can't take that to the bank, or to the court house.

At least here in Switzerland this is definitly a legal business arrangement that you could go to court over. Proving your claims will be more difficult than if you had a written formal agreement, of course.

Re: Ask HN: How to get rid of a co-founder

#44

Post by naivedeveloper »

dsr_ wrote: post #40

Offer him a buyout based on the first year's revenues. Or a flat fee, but delayed until you have revenue to pay for it. Or anything, really, but make it clear that you don't think he's as committed as you are to this, and you want to take the risk and gather the reward. And if he says no, dissolve the whole thing and go find something else to work on. Odds are good you would have pivoted to something else anyway.

That's a great idea, thanks for it.

Re: Ask HN: How to get rid of a co-founder

#45

Post by naivedeveloper »

weego wrote: post #24
naivedeveloper wrote: post #5

Earlier quoted context omitted.

I don't know how much non-technical work remains. If I knew that, then that would mean that I'm in charge of both technical and non-technical work, with him acting as an employee and not a co-founder. That I can't count on him to "own" his area within the company is precisely the problem.

That's not what knowing implies. Why don't you know? You claim to be committed to your idea yet only know half of what is going on and thus only half of what it is going to take to launch? If you're so keen to get rid of him why do you not already know what he's not doing and needs to do? How will getting rid of him help you if even you don't know what you need to do to make this work? There's 2 of you, you don't hav…

I know some of what he's not doing, because it's things we've been talking about for several months. But of course I don't know every single non-technical requirement. Isn't the point of having a partner to split up the work? If I did all the research into what legal requirements we have within our field, etc. then I'd be doing all of the work, instead of just most of it.

Re: Ask HN: How to get rid of a co-founder

#46

Post by dragonwriter »

eplanit wrote: post #15
dragonwriter wrote: post #9

Earlier quoted context omitted.

> It doesn't sound like you actually have a "company". Or do you? > If you didn't incorporate yet, then you owe each other nothing. Anything that does business is a company (incorporation is needed to form a corporation, which is a specific kind of company; the term is often also used for forming a LLC, another particular kind of company); if two people have joined together with the intent of making a for-profit ente…

I know IANAL, but I don't think you are either: "if two people have joined together with the intent of making a for-profit enterprise but with no formal agreement, it is a partnership." No, it's not. What is "joined together....but with no formal agreement"? You can't take that to the bank, or to the court house.

> I know IANAL, but I don't think you are either

I'm not, but I did pass Corporations (which, despite the name, covers all manner of business entities) before I left law school, so there's that.

> No, it's not.

Yes, partnerships absolutely can be formed why mere combination with a common purpose and no formal partnership document. In fact, much of the law of partnerships arose out of courts deciding how to resolve problems where people had done that.

> What is "joined together....but with no formal agreement"?

A relatively common situation that potentially creates a legal mess when it falls apart, or some third-party makes a claim involving the business.

> You can't take that to the bank, or to the court house.

You probably can't take it to the bank, because banks hate dealing with legal uncertainty and will demand that you resolve it first. You absolutely can take it to the courthouse, and many people have; of course, you'd usually do better to have a written agreement in place first, but that's often clearer in hindsight.

Moreover, other people can take you to court for it (including based on the conduct of your partner), so if you have formed a partnership by cooperation that you no longer want to have, you absolutely do want to make sure you have effectively dissolved it.

Re: Ask HN: How to get rid of a co-founder

#47

Post by naivedeveloper »

bmh_ca wrote: post #39
nandorsky wrote: post #26

Is your company generating revenue? Is it worth anything? Unless you're talking about equity split in a company that is worth millions engaging with a lawyer is a waste of money. I wouldn't even waste time trying to re-engage him. If it's this early in the game and he is already checked out and it will only get worse. Sure, he may re-engage for a little but he'll go back to his ways in a matter of time. You have the…

> Unless you're talking about equity split in a company that is worth millions engaging with a lawyer is a waste of money. I disagree. The company doesn't need to be worth money now for engaging with a mediator or getting legal advice to have value. For example, a proper Full and Final Release, mutually agreed upon, can not just save you a fortune in future litigation, it can free you to seek investment in a future v…

Thanks, you and others have said similar things. I think how I should pursue this now is to:

1. Give him a little time to turn things around. Be perfectly clear about the expectations and keep asking him about his progress.

2. If he still doesn't seem motivated, try to convince him that it's better if we separate. Draw up a letter of separation and get him to sign it.

3. If he refuses to do that, try a buyout as dsr_ suggested.

4. Worst case, offer some small stake.

I'm really hopeful (1) happens but this gives me a plan to try and resolve this quickly if it doesn't. Grateful for everyone's advise here!

Re: Ask HN: How to get rid of a co-founder

#48

Post by skraelingjar »

naivedeveloper wrote: post #41
skraelingjar wrote: post #35

I can empathize, OP. I started a company with a good friend almost a year ago. I run tech, he does business. A few months in, and I moved 1000 miles away and have been building a client base on my end, while he has done nothing to help us grow in his location. However he has done his part outside of that. We had a frank discussion and decided while we're happy to work together, this isn't something he's interested in…

Thank you, glad to hear others have been here before. That sounds like exactly what I should do, I even like the way that you phrased it. In your situation did you write up a partner termination agreement?

No, I couldn't be bothered. It was essentially a handshake deal. Sure, I'm not protected legally, but there's no way this company is going to make a huge amount of money. We've been friends for almost 10 years, I doubt he would do anything to jeopardize the business.

We have to refresh our paperwork with the state this September and I'll either remove him then or dissolve that business and incorporate solo in the state I have moved to.

Re: Ask HN: How to get rid of a co-founder

#49

Post by jpn »

I really like the Dynamic Equity Split paradigm. Essentially, it comes down to:

1. Recording the contributions of each founder. 2. Assigning weights to the contribution. 3. Distributing equity based on the totals.

Check out this video for more detail:

https://www.youtube.com/watch?v=G7kgEbXmBFc

Re: Ask HN: How to get rid of a co-founder

#50

Post by siegel »

tptacek wrote: post #21

What's your vesting plan? Please say you have one: if not, you can't safely pivot without your soon-to-be-former partner, because everything you do going forward will be tainted by the partnership. I have been in legal drama over these issues before. It is not fun. If your partnership isn't well documented, you should consider walking away from the work, including all the code. People on HN have talked about how vest…

The only concern here is that they likely have a partnership, legally, and each partner owes a fiduciary duty to the other. He can walk, for sure, but my guess is the co-founder will claim he was frozen out and, if OP is successful, will sue for breach of fiduciary duty (and other things).
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