Tell me more ×
Answers OnStartups is a question and answer site for entrepreneurs looking to start or run a new business. It's 100% free, no registration required.
up vote 2 down vote favorite

I really need advice in how to protect myself with a new venture I took on.

In January 2011, I became an adviser and sat on the board to a beverage company as I taught the CEO about channel distribution, and really the whole grocery industry. I was given 1,000 shares of equity for my contribution.

In June 2011, I was made Vice President of Sales. Besides the CEO, I am the only other person in the company who works as hard as he does. I was given 100,000 vested shares of equity for my compensation.

In January 2012, my equity was raised to 200,000 shares because of the tremendous success I have brought to the company. I left my "paying" job to take this on full time. I am not receiving a salary, benefits, expense reimbursement. I am still only getting vested shares as compensation.

In the time that I have been with the company, I have paid for all of my expenses, allowed my SUV to be wrapped with the company logo (and still remain owner of the vehicle) and have been the only person working on this company to date. I have not personally invested any money of my own, as I felt my time, resources and dedication to the company would have made me a partner, especially considering that I own the 2nd largest share in the company now. I have also brought new investors to the company, outside of massive sales dollars and strategic placement of the product in the industry in less than a year.

I recently found out the CEO is quietly looking for a minority stake partner and only considers me an "employee" of the company as the VP, despite everything I have contributed thus far. I want to know how to protect myself with this enlightenment, and if I should be concerned that despite my contributions and share of equity, I am only being considered an employee and not a partner. I am still not making a salary or being compensated besides the vested shares either.

The CEO is a long time acquaintance and someone I have grown up with since kindergarten and is like a big brother but this is business and while I know he may have my best interest at heart, I do not want to end up like Eduardo Saverin from Facebook if the CEO brings on a Sean Parker character as partner. It's been on my mind for some time now, and while I am not a business major and this is my first executive position, there is awareness that things can go wrong fast if I don't protect myself.

I am meeting with him today to discuss this and would really love some insight on how to approach this with as much well informed information that I can possibly bring to the conversation.

share|improve this question
Is there a written shareholder agreement? Also do you have a copy of the articles of incorporation? Also are your shares restricted in any way (letter stock)? – JonnyBoats Mar 22 '12 at 15:00
There is a shareholder agreement. It's an incentive stock option (ISO) and the shares were given to me as an option grant. I do have a packet of our S corp. I am not sure if the shares are restricted. – AVGvpsf Mar 22 '12 at 15:21
1  
If you own equity then that makes you a partner. And there can be several partners no? – frenchie Mar 22 '12 at 23:22

3 Answers

up vote 1 down vote

The only advice that can be given here is to talk to your friend the CEO. Not doing so will only help to ensure that there will be problems in the future.

share|improve this answer
I am going to be speaking to him today. I am not sure how to approach this which is why I am trying to get all the information I can so I can enter the conversation well-versed and with some knowledge on how to best approach this. Thanks. – AVGvpsf Mar 22 '12 at 15:42
1  
Personally, I'd go into the conversation more from the heart and less from the head. Talk like you used to, assume no evil, see how the land lies. You'll know pretty soon if you have something to worry about, and if so, you can bail on the conversation, or start discussing the details as appropriate. Good luck. – Nick Stevens Mar 22 '12 at 15:48
up vote 0 down vote

Let say your option to buy the share is offered at $5 one day.. are you going to have $1 mil to buy the entire 200,000 stock, or are you going to have to sell some of those shares to buy the rest? All valid questions..

share|improve this answer
up vote -1 down vote

I hate to sound harsh, but not all stock is created equally. Having a situation where he gets unrestricted common shares while you get options is a little bit like an agreement where you each get half the profits - $1,000,000 profits, great! he gets $500,000 in US currency, you get $500,000 in monopoly money.

At a minimum you have a right to understand what you have. You used the term "partner", if you really are on the same level as him than you should have the same rights to see all the corporations books and records and make copies of them. If he is allowed to have access to things than you are not; then I guess that some are "more equal" than others.

share|improve this answer

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.