First partner/employee

**psychobyte** · 10-05-2010 01:17 AM

I've got a pre-funded startup and I've finally found a person that is interested in joining my venture. I'm not sure what type of contract I should make with this person, employee or partner? My product has not made any money yet. So I can't pay him, initially. The company has no real value so equity and stocks amount to zero $. How can I compensate this person for their effort and time and at the same time not sell away all my equity in the company. If I keep giving away percentages of my company eventually I will have nothing or at least a non-majority share. What do you guys suggest? What if the person leaves in six months? What is a fair stake in the company having just started off? What's typical? 5% 10%?

I was thinking of giving him 12.5% of profit of sales (50% of 25% of profit, half of that to me, and the rest goes into the company). Then if we get funded. We will negotiate a salary, employment, stocks, and/or partnership.

What do you guys think? What type of agreement did you settle on with your first employee/partner?

BTW. this person will be one of the head Programming managers so he's not like some regular employees.

**generationy** · 10-05-2010 10:22 AM

Well it sounds like a typical situation in which a partner needs the other but doesn't know how much to give in return. Hmm...I would just balance the resources and skills that each individual brings to the table and divide the equity keeping that in mind. Giving away a percent of profits sounds nice right now but as the company grows, more people join and investor come in as well, people will start viewing it as a bad deal. Why? because one person is getting all the profits or a majority of it. Keep the deal concerning youself with only equity %. Perhaps 40 60 or 50 50 etc.

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