Business partnership question?

[darce]

So my friend has a clothing company. He has the patent for the logo and the name of the company.

He plans on selling skateboards, tshirts, beanies, hats, and socks.

The company has not taken off yet due to lack of funds. He started it a couple years ago but has only invested his time and money into a run of samples for t shirts, skateboards, beanies, and hats.

He has already sold a few skateboards and has kids and cousins wanting more of his product. Also he has gotten great reviews from random people as well as friends on how great the brand looks and how great the logo looks.

So he introduced this to me a couple months ago and asked me to help him bring up the company since it has not taken off at all. He has not had the funds and needs to find more resources for beanies, hats, embroidery, and etc...

I have a knitting company that can make the beanies, as well as office space where me and him can base the company from to take calls and etc... I also told him i was willing to put my heart out into getting the company into the right track. I also have an investor that i know that is willing to invest money as well as me myself, putting my own money into the company (and my time).

He does not have any money to get the company to go further, plus he told me he cant do everything on his own, in terms of finding resources and getting samples made and etc... so he needs me.

SO NOW MY QUESTION IS, what do i deserve? I have already put my time into a couple meetings with him to talk about the company and where it should be headed as well as i put my time into finding resources already for him. I feel like i cannot do any more work or put any money into his company without a fair share of the company. But, how much? Based on everything i said above about what i have to offer him, what do you think i deserve? 50%? 30%?

It has really been a tough decision for me. I have faith in the brand, but i feel i cannot put all my time and effort and money without some sort of security.

[kenway]

You'll need to create a financial projection of earnings over the next five years and estimate the level of personal investment of time and energy you and others will make. From that you should come to an agreement of what level of ownership is appropriate based on the level of contribution to your partnership. Also, you can consider if any of you will receive a guaranteed salary or only make draws from partnership earnings.

[lazaro94]

^agreed.

Another thing to consider is how you'll be paid. Ownership of the company? Preferred stock? Will you be a silent investor or will your intentions matter with regard to the direction of the company.

"we're going to change our logo to swastikas now" - what happens then?

A partnership, or as a high level stockholder there are many, many questions to write out and decide ahead of time so as to attain a high level of clarity.

A question I enjoy asking is:
"How much money would this company make without me?"
"How much money would this company make with me?"
"What is the middle point between those two numbers, multiplied by 10 years?"
"Will those profits continue to increase with my continued involvement, or, will my usefulness taper off?

This gives me a nice line of profit to look at and the ability to easily rationalize my compensation.

[winfrid12]

This is of course a difficult question but i think ultimately, you need to decide in your own mind the following: How much would you be willing to accept? What is your bottom number? After you make this mental decision, you will feel more comfortable during the negotiation process. In any event, contact an attorney to get a legal opinion can only help and perhaps instill within you even more confidence. Ask for their advice.