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A business partner and I have been "working" through email together on this idea HE had. I've put in 25 hours a week for the past 3-4 months developing it, and he hasn't done much of anything on his end (business side).

We haven't signed any legally-binding contracts so far, just a gentlemen's handshake to work on this idea together. However, he isn't pulling his weight.

Can I just jump ship and work with another business person, and start from scratch with a new name and completely re-develop all the code without being legally bound to work with him? It just hasn't worked out well after 3-4 months of busting my butt for him to not do much.

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Sounds to me, based on this and all your other very similar posts, that you would not be steeling the idea. You put work in. He abandoned you. Besides, an idea is worth nothing. – MikeNereson Dec 2 '11 at 21:35
Reality check: You HAVE a legally binding contract with proof of negotiations. Dont be stupid enough assuming you need a sign under a writte ncontract - fo most things this is not true. – NetTecture Dec 3 '11 at 11:26
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Have you watched The Social Network? – Steve Jones Dec 6 '11 at 18:11

5 Answers

up vote 18 down vote accepted

I can't speak on the legalities of what you are suggesting, but I can say that what you are suggesting is morally wrong. Not only is it a moral issue, but it has the potential to hurt your reputation, which could lead to you having problems finding good partners in the future. Do you really want to damage your reputation in such a way? Lastly, regardless of who is right legally (with a good lawyer anybody can be right), if your partner decides to take legal action against you it is going to cost you thousands of dollars to defend yourself. Are you financially and emotional prepared for that outcome?

My advice is to talk to him first, if you haven't already. Have you told him that you don't feel like he is pulling his weight? Tell him how you feel, and how things look from your end, and then listen to what he has to say. As a business partner you have the right to have a clear idea of what he has been working on.

However, keep in mind that it's entirely possible that you are mistaken. Odds are you are not seeing all the work he has put into the business. As an engineer working on the business side of a startup, I can tell you that technical folks tend to dismiss the business side of running a tech startup. There are a lot of things involved in working on the business side of things that you may not hear about, because frankly it's usually pretty boring stuff.

If your partner is doing his job well, for the most part you shouldn't have to worry or think about anything business related. He should be taking care of all of that, and your only job should be product development. If you find yourself thinking about and working on "businessy" type stuff, then that's a good sign that your partner may not be pulling his weight.

Also consider that your startup may require more upfront technical work, possibly to prove the concept, with the later stages being heavier on the business stuff. Again, that's something you need to discuss with your partner and make a decision on.

Keep an open mind when talking to him. One of two things will happen. Either he will convince you that he is (or will be) pulling his own weight, or he will not convince you. If you feel comfortable continuing the relationship after your discussion, then put your agreements in writing to avoid a messy split up in the future. If you don't feel comfortable continuing the relationship, then discuss with him your options for splitting up the business.

Good luck!

Edit: I found a similar question that may be helpful. Particularly this answer.

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Agree with you 100%. – Ricardo Dec 2 '11 at 18:17
I have told him he doesnt seem to have enough time to dedicate to the startup as he said he had when we first started chatting about it. The next thing I know is, he wants to involve someone he knows whose a good 'marketing / gen. business' person to handle where he cant dedicate right now. – Meow Dec 2 '11 at 19:23
Last time we talked (about 3 days ago) via skype I asked how his end with the business side has been going. He said nothing new, I dont have much else new to tell you. So basically in a nutshell he didnt do much at all since we last had talked (1.5 weeks before) – Meow Dec 2 '11 at 19:24
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You're going to have to get a bit more aggressive and tell him that saying "nothing new" isn't going to cut it. That you want details or you're going to assume that means he hasn't done anything. And proceed to tell him that if it turns out that he hasn't been working that you want to end the partnership and work on the idea on your own. And you're absolutely right about startups taking time to reach high profitability. It's very important to have realistic expectations. – Zuly Gonzalez♦ Dec 3 '11 at 3:18
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Zuly - amazing feedback! Seriously, amazing help! Thank you so so much!! – Meow Dec 3 '11 at 3:21
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up vote 3 down vote

I suggest that you ask your friend to buy the rights to YOUR half of the idea from you. Approach him with "Friend, this is an acceptable idea. You should buy my half of the idea from me for $25,000 cash".

When he says that it's not worth it, let him put a value on how much he thinks your half is worth. When he points out that YOUR half is only worth, $1000 (or some small number, which he will surely do), agree with him.

If he says that HIS half is worth $100,000. Be prepared ask and let him write you a check for YOUR half. Usually, this doens't happen though.

At some point, agree with him that half the idea doesn't have much value and offer to do him a favor and buy his half. Be prepared to offer to buy his half of the idea for the low amount that he agreed that it is worth. If he agrees, you are in the clear. If he doesn't agree, you're in the same place.

In short, let him put his money where his mouth is or get out of the business.

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up vote 2 down vote

That depends on exactly what your idea is and how much he has contributed to developing your intellectual property (if you have any). The only accurate way to tell is to consult a lawer.

My advice would be to talk to your partner and come to an amicable arrangment. He may be happy to just split with no claim for the business or he may be happy for you both to agree you are free to persue the idea independently. (in any case make sure you have it on paper)

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He's contributed by: getting a logo made by some freelancers on a website, and... that's about it. (Extensive emailing doesnt count because that was both ways) – Meow Dec 2 '11 at 19:28
up vote 2 down vote

Zuly linked to my previous answer on a similar question, but it's worth repeating here. I am not a lawyer but I've been through a similar situation and am passing on the advice I received:

If you operate any sort of business arrangement in the absence of a formal contract, then you are viewed as a "general partnership" in the eyes of the law. Under this arrangement, you have very strong, legally-binding fiduciary agreements to your partner. This basically means you have to look out for his best interests, as he has to look out for yours.

There's a common myth among founders that -- if you haven't signed anything -- you don't owe anyone anything. This is 100% false.

Your best bet is to convince him to agree to leave the business, and get it in writing. These types of documents are called "Releases." At minimum, it should say that:

  • he assigns all of the businesses assets to you
  • he forfeits all intellectual property rights
  • he forfeits all claims to the business in perpetuity
  • he won't misrepresent himself as an agent of your business

It'll take lots of coaxing -- you'll probably have to give him money -- to get him to sign this release. The best way to do it is to sit down with him, work out what you both think the business is roughly worth, and then offer to pay him half (from your own personal money, not the business's). It's important to keep in mind that it must be an amicable agreement. If he gets cold feet, then you've only created bad blood, and you're still stuck with him.

It might sound impossible, but it's necessary. If you don't get him to sign, he'll turn into a huge liability for your business. No VC will want to invest in a company if they know that there's an estranged ex-co-founder out in the wild who could decide to sue the business for 50% of its assets whenever he wants.

Not only will he tank your deals, but it will absolutely ruin your relationship with him. There'll be intense bitterness and resentment and it will only get stronger as you grow more successful. You need to reach an agreement that you're both comfortable with, as soon as possible.

If you can't get him to sign, then you need to give up on the business and find something else. It's virtually impossible to build a successful business knowing that an estranged and bitter co-founder is out there.

Have a lawyer look over the document before you present it. You have to play softball as much as you can and be willing to pay him a lot. If he walks away from the agreement, you're screwed. You can't let that happen. Put on your happy face and genuinely try hard to work something out.

Good luck.

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up vote 0 down vote

Don't take chances. Tell him you want to own the idea out-right. If he says "you can have it", get it in writing. If he hesitates, reluctantly tell him you'll buy the idea for $100. Bring cash. Lay out the twenties in front of him so he can see it's real money. Get it all in writing, he him to sign a copy for you, and a copy for him.

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