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About a year ago, I started my own (Michigan) LLC, of which I am the sole member, so that I could release an Android application that I developed as part of my computer science program.

Now, I have developed another application for another class, but this time it was as a group consisting of myself, and two others.

If we were to try to sell this application we are developing, and chose to release it under my LLC to avoid the overhead of getting set-up with the Android market, what would be the best agreement to reach with my two group mates?

Should they become members (I hope the answer is no, as this would be far from optimal)?

Ideally, we would reach some agreement where they simply receive some percentage of the profits generated by that app. What do I need to look out for in coming to such an agreement? What sorts of legal risks for my LLC would this entail?

Sorry if this question is not formed well, or seems ignorant. The truth is, I know little-to-nothing about this sort of stuff, and I figured this was the place to get the insight I need. Thanks!

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There's no need to bring them into the LLC -- you can sign an agreement where the LLC gets the rights to the software and they get a continuing royalty. But, it can get a little complicated, especially if the software isn't finished, and you have to worry about a person leaving before the software is finished. That's the sort of problems you pay a lawyer to figure out.

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Well, I think it will end up being the case that it wont be fully complete, and I (and maybe one other group mate) will continue development over the summer. What concern comes up if its not done before-hand? Because whoever does more work may want a greater steak? – finiteloop Apr 11 '12 at 0:41
Exactly. Or, worse, when everybody knows "I'll get 1/3rd, regardless of whether I keep working," they have an incentive to shirk. – Chris Fulmer Apr 11 '12 at 2:16
Yeah, I agree with that. I think we would enter the agreement with the understanding that I will be doing the majority of future enhancements, and thus, they would get <1/3 of the profits. None-the-less, I imagine it would still be wise to consult a lawyer. – finiteloop Apr 11 '12 at 2:28
Chris is right. You don't need to bring them into your LLC. Draft a little document that says profits will be split X% Y% Z% each quarter for the application minus any taxes, fees or costs incurred by the the LLC for managing and being the liaison for all communications regarding the app. Something like that which would give you some flexibility and a little safety incase the app doesn't make more or costs your company money for some reason. Plus YOU as the LLC will have to pay taxes on any income. – Ryan Doom Apr 11 '12 at 2:51

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