New Company - Need Urgent Advice

[TimSmith]

Hi there,

I'll give you a little background on my situation, basically, i have started up and own a website that is getting increasingly popular and have a great and clear vision of what direction to take the site in and a fantastic idea for a revenue stream. I've got a lot of experience in the selected niche the site is in but working for other business.

Currently we are a website, there is myself as the owner of the domain and idea and have spent quite a bit getting to where we are, an old colleague and good friend of mine is also in on the venture and has been contributing here and there financially and is contributing majorly towards the content, and finally a third "partner" who is behind a lot of the more technical aspects of the company.

I haven't actually registered the company yet, we're working on complete gentlemans agreements thus far, and as great as it is, i want to move into a business, so my questions are.

1) How do i set up a partnership between the 3 of us, what are the steps that i need to take in order to do this?

2) How do i divide up the company into the correct percentages for each person and what does that really mean? I have an idea of the percentages i want to split it up into, but what will that actually mean when the company is not as of yet making money.

3) I have someone wanting to invest money in this venture, but what is it that i offer them, a percentage of the company, sure but where am i taking this from?

Thank you for your help. I'm sure i have more questions but i think thats it for now.

[zharlene]

This is a very complicated situation. I've had a few experiences with partnerships and all I have to say is: NEVER AGAIN! My personal advice & opinion (you don't have to take in):

If you are in a "partnership" split the profits equally and also assign duties equally (not necessarily equal number of duties but equal in terms of contribution leading to profit). That way, everyone will want to work hard for maximum profit. If you split the profit by percentages they might be okay with it now because you are not earning much. Believe me, when the money starts rolling in, so will the problems.

OR

You've had enough time to know who works the most. If you feel you work a lot harder than they do, I suggest you register as the sole owner of the business and negotiate salary with them.

[AndyMc]

Another option for the friend who contributes here and there.
You could have them as silent partners...
But giving equity to someone who is not THAT vital is a big thing. Not knowing the full details of everything.
Always go into a business thinking it will work and make money. Then think, is the person's time and effort put in worth the value of a profitable business in the future? Or would they be worth $x in salary...
There are so many options out there for you to approach this. Profit sharing, Incorporating, writing strict partnership agreements, etc.
I think it may be best to consult a small business lawyer and go over ALL the details with them. They will be able to give you the best advice knowing your in's and out's of your situation.

[Keith.S]

I've a not so good experience in partnership too. Now sole ownership is my preference.

[jawzishere]

I would recommend first and foremost drafting a contract laying out all the specifics of the partnership and then get everyone to sign it. That will settle of lot of things right there.

Next step create an LLC for the website. It only costs a couple hundred bucks and about 30 minutes of your time.