How should I structure a partnership agreement?

I'm sure there are a lot of entrepreneurs out there who have experience with this, and many others who are looking to do the same thing.

I have built up a complete application myself, no funding/company, etc. I am bringing on a co founder who will help make this a reality. I'm willing to go 50/50 with him. But, as we've both discussed, we need to create some type of agreement (pre company formation/stock/etc) that protects me so if he can't just walk away with 50% of the company and do none of the work. How should this be set up?

Hi,I'm a lawyer (in the UK) and you do need a legally binding agreement in place to protect you. I'm sure someone at Y combinator can recommend a decent lawyer over there. You should not have to pay a great deal for this, but it is best to have it done professionally so that in the worse case scenario (that you guys fall out with each other), you're legally sorted from the outset. Its probably not a good idea to try and do this yourself. I do mean that sincerely and not in a patronising way at all, you want to be able to focus on your start-up and not be worrying about what would happen if things went wrong. Good luck.

You don't need a lawyer. You need common sense.

Why do you think you need to give someone 50% of YOUR company? Is your product ready? How much more work will it take before you are ready for revenues? And when you are ready, how long will it take before you generate enough profit (not sales) that can support two full-time employees? Is this person an employee or a co-Founder? Are you giving this person 50% because you cannot afford to pay salary and are you giving this person 50% because you need his intellectual contribution in addition to effort? Or are you just looking for a companion? And if this is a co-Founder, will you need still outside funding (VC or angel) once the person joins you?

In other words, lawyer cannot protect you if you don't know what you want. Work the problem backwards. Think about building the company and not the product. Focus on what the company would look like six months from today, two years from today, five years from today and then think about how to get there, with or without this new partner/employee.

Think about these questions first and then worry on the legal details.

--Denny--

Denny K Miu

http://www.lovemytool.com/blog/startup-for-less.html

I agree with the additional comments below, but whether you incorporate as an LLC or set up as a partnership or carry on by yourself, if you are going to ask someone else to join you (leaving aside the exact legal nature of your relationship)you must protect your intellectual property rights and if you carry on working with someone else and don't get the legals sorted there are risks.

Thanks for the perspective. I believe I've done it backwards, in that I know what skills I have and lack, and what this partner can bring to the table. To me, it's entirely worth splitting the company, as they'll do the lion's share of bringing it to market. What I am interested in is what needs to be put in writing to ensure that I am not giving away half the product, but actually splitting the work, capital required, etc. If I should go straight to a lawyer, then Ok :-)