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2 colleagues and myself won a contest, for a business idea (my idea). We jumped into things and immediately bought a domain, incorporated in a partnership, bought a computer, some business cards and... Did nothing else for 6 months.

Finally, after explaining to people for too long that it was on the back burner, I found a company to outsource the work to in India. Through this process, we've spent the rest of the $6K we won and invested about $1500 each and we finally have our app completed, being submitted to the App Store whenever we say.

The other two guys have done almost no work on getting the app created. One has probably put in an hour and the other maybe 5-10 hours. I've put in anywhere from 2-10 hours per week for the past 7 months. I've had all the ideas and put forward all the initiative and I've have the ideas that turn a small app into a business (which I haven't shared with them). I'm in the final stages of being picked up by a startup accelerator and have explained the situation to them and they have given me the advice to have my partners and I divest our shares form a new company and get shares in a new company that vest in 4 years. The kicker is they move from owning a third to 5% each and the startup accelerator gets 10 and my new tech. co-founder and I split the rest equally.

My question is what are my options if they don't go for this, even though their shares will probably be more valuable than their original shares, in the long run. Looking for whatever help is out there.

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"incorporated in a partnership" is this an oxymoron? Which is it, are you incorporated with stock or are you a partnership? – JonnyBoats Mar 24 '12 at 14:30
I would concentrate on the app, go back to why you even wanted to start, it sounds like you may be worring about bigger things and thinking about shares and allsorts when the focus really should be on the app and your target market, im guessing that you did customer development during the time that you put in, hopefully there hasn't been a big gap between any contact that you had with potential users/customers and the stage that you're at now. – user14718 Mar 24 '12 at 14:45
It doesn't sound like you did that much more than the others... Have you done any real work? It's not clear what you have actually done. – TimJ♦ Mar 24 '12 at 19:36

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Currently: You: 1/3 Person A: 1/3 Person B: 1/3

and you want to move to:

You: 40 Tech co-founder: 40 Accelerator: 10 Person A: 5 Person B: 5

You are definitely in a tricky situation since your current arrangement probably has 0 notes or outlines on duties, expectations or vesting schedule. So, they just get 1/3 for nothing based on the documentation you all have signed.

Switching them down to 5 may be very hard unless you can have a good upfront conversation with them about how they aren't really needed for anything going forward and that they get that 5% they don't have to do anything for it - and they can go about their business. They get no votes etc. Maybe you could convince them that is a good idea, but it's going to be a hard conversation.

Maybe after having that conversation you can just buy them out for their initial $1,500 investment?

Or if they aren't interested in that option you can politely say the only option is to then dissolve the company you guys have put together and you will start a new one without them. Since they aren't interested in actually doing much work - their option will then be 0 (closed company) or 5% in the new.

Some people are very irrational about this, other people will look at it and be like "yeah you're right I haven't done anything, sure this makes good sense - thanks for keeping me on and good luck with the project going forward. I'll try to help out and be of use as I can or if you need any opinions"

The resolution to this needs to start with what will most likely be an uncomfortable conversation with Person A & B

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Great thoughts Ryan. In regards to dissolving the company, can I walk away from it and start a new company with the same idea? I know that I probably would lose the app we've had built, but now that I have an interested tech co-founder, we're in a good position to make an even better app with the additions I've come up with in the development process. I'd prefer to keep them on and give them a percentage, but want to be prepared for things if they don't go smoothly. – Jason Mar 25 '12 at 7:15
Unfortunately, you can attempt to sue anyone for anything. So, you will want to draft up some documents after you come to an agreement of moving forward. Which sounds like A] keep them on as low % they have to suck it up and be silent partners. B] Let them keep 100% of the current company in exchange for an agreement that you can do whatever you want, have no obligations to them, and can compete with them. C] Dissolve the company completely, have everyone sign something that gives everyone equal rights (or zero) to the product thats been built. Document everyone can pursue any interests. – Ryan Doom Mar 25 '12 at 14:37

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