Need help on partnership agreement

by ProGuy
4 replies
Hi guys,

My friend developed an online service that can be used by social media marketers. At the beginning, I participated with him in development and testing phases but my participation was like 10% only from my friend's overall effort. The service is now available online and being subscribed by good number of customers every day.

Now, we would like to make an official partnership, I suggested 50-50 partnership where each one will pay 50% of costs, and each of us will get 50% of profits. Also, we both should participate in the development and operation the current service, do the bug fixes, and support customers. Should we also agree on how many hours each should work per day and how?

My friend wants to have exclusive ownership on the domain, script, and customers database so that I won't be able to go away and build another competing or similar service with the same script and customer base, I am not sure if this is right or not.

Also, what's the fair share distribution of such partnership. What should happen if I for example don't want to be involved anymore, what will be the proper and fair exit strategy?

I need some guidance to build a successful partnership for both of us.

Regards
#agreement #partnership
  • Profile picture of the author Gambino
    Originally Posted by ProGuy View Post

    My friend wants to have exclusive ownership on the domain, script, and customers database so that I won't be able to go away and build another competing or similar service with the same script and customer base, I am not sure if this is right or not.

    Also, what's the fair share distribution of such partnership. What should happen if I for example don't want to be involved anymore, what will be the proper and fair exit strategy?
    In my opinion, is seems like your friend is getting the bad end of the deal. He's the one that put 90% of the time and effort into building it and he's willing to give away 50% of the profits? That's crazy.

    I would consider the script the intellectual property of whoever created it. If your friend is the one that built it it would make sense that he keeps it and probably should have you sign a non-compete if you decide to leave for some reason. You could really go either way on the domain but I don't see it as a big issue. As far as the database, it should state in the contract that the customer database stays with the business.

    Not many businesses are split even at 50/50. I would urge your friend to split it at 50.1 and 49.9, or more. Your exit or your partners should both be outlined in the contract. Likely, you'll have to sell your interest in the business to your partner or to someone he agrees with.
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  • Profile picture of the author Frank Donovan
    I agree with Gambino. From what you describe, I'm not sure why your friend would give up 50% of the shares unless you were bringing some serious business or marketing expertise to the venture - especially as it would seem he doesn't trust you unreservedly. That said, you say the 50-50 split was your suggestion; don't know if it's been agreed, but I suppose I can't blame you for trying.

    If you're both intent on a partnership, you can set up as a registered company and have the particulars, such as intellectual rights and exit conditions, legally spelled out. Of course, the precise nature of the set-up would depend on the country or jurisdiction you're in, but for both your sakes, I'd get a lawyer involved from the start.
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  • Profile picture of the author Kay King
    My friend wants to have exclusive ownership on the domain, script, and customers database so that I won't be able to go away and build another competing or similar service with the same script and customer base, I am not sure if this is right or not.
    I'm with others here - if he did 90% of the initial work of course he should retain ownership to protect his investment.

    If you plan on trying to regulate hours worked by each of you - might as well stop right now. There should be a division of responsibilities based on time/money invested - and that should be clearly defined in writing in a partnership contract. There should be an 'exit clause' should either of you want to dissolved the partnership - leave the business.

    I need some guidance to build a successful partnership for both of us.
    Sorry, but I think the other guy needs some guidance. Doing 90% of the initial work and handing over half the business is crazy. There needs to be a controlling partner...not a 50-50 split - and that probably should be him. If you have a 50/50 split and disagree....what happens to the decision making process?

    That might change depending on how much money you are investing in the business. If your investment matches the 90% of work he did...that might be different. Doesn't seem that is the case from the OP.

    Put everything in writing - use an attorney to make sure it's legal - don't 'assume' anything - focus on creating a healthy, fair, working partnership rather than getting as much as you can for yourself. It will pay off in the end.
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  • Profile picture of the author OptedIn
    Three words. Business advisor. Lawyer.

    Not doing so will result in one word. DISASTER!

    You'll both sleep better at night.

    Thank you.
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