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 recently quit working with my co-founder. We had started a software business together and had agreed on a certain profit share. But shortly after the launch of the apps, we had to split because he had lost motivation and wasn't investing enough in the project.

He doesn't own any equity in the company and we have had no formal agreement on the profit share so far. We had only discussed it via email.

Currently, he has handed over the signing keys for the apps and the source code to me but naturally has a copy of them at his disposal. Although I trust him generally, but still this is a risk to my business.

We have decided to sign an agreement with each other according to which, I will pay him a smaller share of the profit for a period of one year in exchange for his non-disclosure. But I'm not sure what exactly needs to be included in the agreement. I need to protect all my IP.

Any pointers are much appreciated!

share|improve this question

2 Answers

up vote 0 down vote

It's not clear what stage of the business you're at - or levels of income. Or whether your partner lost motivation due to lack of progress or simply because that's the kind of person he is.

A couple of things strike me:

  1. as long as you have all source code that's fine. If he was too lazy to do anything with it when he worked with you, I strongly suspect he's not going to be suddenly inclined to start exploiting it now.

  2. with regards to revenue share hold any entitlement back as long as possible. For instance if you can pay him 1 year down the line anything he's owed (or even 6 months) this not only helps cash-flow, but is a pretty strong factor in keeping him on side and behaving - i.e. ensure that if he steps out of line payment will not be forthcoming!

Hope it works out okay!

share|improve this answer
up vote 0 down vote

You're right-- you need to protect yourself.

The unfortunate thing (bad news first?) is that from the time he left until the time he signs your contract/agreement-- anything could have happened, and anything "can still" happen.

Add to the agreement that all intellectual property will be owned by the company, and add clauses for non-disclosure as well as non-compete (start here: wikipedia:NDA, wikipedia:NCC)

You're also right; he will keep a copy of the source-code, for sure. No matter how much apathy is shown, still take measures to protect yourself. In fact, if you're as paranoid as I am, you'll hire an attorney to handle it for you, or at least draft it for you to present if you don't want to scare your friend off.

I wish you luck with this--- sadly, you'll have to indicate what a "breach of contract" will mean for all signed parties. Like 500,000 USD, for starters? (Or something to that effect -- basically write down the amount of which your entire business amounts to and a little more)

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.