Question

How do determine ownership stake in an emerging business venture?

So, I'm currently working on a product that I will eventually take to market (about a month or so). The product is a modern-styled lamp design with a few extra features added to it.

There are roughly four total people involved in the project (including myself) and I am starting to worry how we are going to divvy up the resulting profits according to the contributions that each person has made.

So far, I have contributed 100% of the work done so far (acquiring raw and finished materials, raising capital, finding distributors and manufacturers, marketing,....oh yeah, I was the one that came up with the entire idea and the initial design).

When the other people begin to do their part, one will do a virtual render in an Auto CAD program and the other 2 people will troubleshoot my circuit design and possibly manufacture the first circuit boards using my money.

Since this is my first business venture, I would like to get an opinion of more experienced business-types that may have already gone through this process. How do you think the profits should be distributed?

If necessary, I can go into more detail if the right questions are asked. Thanks!

2 years ago - 1 answers

Best Answer

Chosen by Asker

STOP!!!

Before you do ANYTHING else, talk to a business attorney BY YOURSELF and have an agreement drafted involving how the profits/company or whatever will be divided up. DO NOT use a handshake or verbal agreement. HAVE THEM ALL SIGN THE CONTRACT/AGREEMENT.

Now, as far as how to divide it up...

It sounds like YOU are the business, and the rest of them will be offering services such as tech support, circuit design, and CAD. If I am understanding this correctly, why in the world would you give them ANY percentage of the business or profits?

These people are not partners, they are employees or contractors. PAY them for the work they perform but do not give them any percentage of the company or profits. I hope you have ALL of your designs so they can't copy your product.

Again, DO NOT give them any percentage of the company or profits. Pay them for the services they render, and have them sign a contractor agreement. Have an attorney draft it for you. If they don't agree, find someone else who can do the work.

2 years ago