legal, equity, websiteI’ve built a website with a friend and it could generate profit. We don’t want to officially register as a company since it’s just a side project, but if we manage to make a few thousands $/year, we’ll have to split it. How can we have an “official” agreement that says I have 75% and he has 25%? What if he stops working on it after a year?
Can I just write a contract that details the conditions of the profit sharing and we both sign it? If this works, do you know of a template I could use?
I’m quite a newbie in this process and I’ve tried reading lots of papers about it but I haven’t found a case where the creators don’t register as a company with official shares of equity.
Doing it without founding a company officially is quite hard, and as mentioned already you might found a company by accident. In e.g. in Germany you would automatically found a company, just because you are working together with the intention of making money - it is called GbR.
I don’t know where you are from, but that is something I would check out, so you don’t do anything there that does not work for you in the end.
And handling your tax returns just become a mess if you don’t have a company. Also there is the question of liability - as long as you don’t have a company founded you will usually be liable for anything happening with all of your private assets, which can turn ugly fast, especially if you aren’t entirely sure what you are doing. So I would recommend maybe checking out what the company type with the least bureaucracy attached is, and consider founding it. That is more work in the beginning, but will probably pay off in the long run.
Typical company forms to start out with are LDT in the UK and UG in Germany, and I believe LLC in the US.
Good luck with your website!
In this particular case you could write a Memorandum of Understanding (MOU).
MOU can be used to create an agreement between two or more parties. This agreement does not need to include legally inforceable promises. Although, in the future it could become the basis of a formal contract.
The MOU would simply state an understanding of each of your roles and what you would get in return for doing your part in the event that the company made any money. It could also state what would happen if either of you stopped working on the project.
The benefit of writing this intentionally non-legally binding document is that you two have to discuss it. You have to work through the process of working out what each of you thinks is fair and come to an understanding. It can then be written, signed and referred to - more formally than a handshake.
You both must understand that in writing the MOU you are not intenting on enforcing the agreement legally, that it is non legally binding. However, if the MOU is written in such a way to appear as a contract (containing all of the markers of a contract) then it could unintentionally become legally binding as a contract.
I would recomment searching for ‘Memorandum of understanding’ and there will be a few examples. But it may be best to write your own in obviously straight foreard language so as not to confuse the thing with a contract.
(I am not a lawyer and have no formal legal training)
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