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WHY YOU NEED A CONTRACT WHEN DIVIDING UP A NEW BUSINESS

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Anytime you start a business with other individuals or you own a business and bring on a partner, you need to seek out the expertise of a business lawyer. They could be your best friend or a very profitable investor, but it's still critical to make sure all your i's are dotted and t's crossed to protect everyone involved.

The best way to look at it is to consider how the equity will be divided on paper in order to make sure the money is fairly distributed and protected. There are many different ways to share equity among co-founders of a company. Consider these ways in which an article published online for The Muse breaks down the different ways in which equity can be shared.

What Does Each Member Contribute?

This should be the main question asked when drawing up partnership documents. What has each individual invested in the company and what will their involvement look like? If a founder has provided start-up equity or will be working full-time instead of part-timer, perhaps they should get more equity than another founder.

What Role Does Each Member Plan to Execute?

If a founder comes to the table with different skill sets that affect the company in different ways, this may be an indicator to divide up the company equity differently. Perhaps one partner has years of experience as a CEO, while the other does not.

How Will You Keep Founders Invested?

Writing specifics into the contracts that keep founders invested through an equity vesting process will help keep the founders involved with the company's success versus leaving after only a few months while still profiting from other individual's work.

Contact Quatela, Hargraves, & Chimeri, PLLC today for a free consultation about your business partnership contract needs.

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