How to ensure I have a stake in a future venture/company?

Asked over 2 years ago - Orange, CA

Good Afternoon, Me and a relative are working on launching a new type of food product. It is his idea, but I am on board, creating surveys assisting with the Business Plan, contacting Attorney's for Trademarking, giving suggestions, and assisting with other financial duties. Right now everything is just starting and it is all unofficial.

My question is, if this does takeoff, and for whatever reason I get dismissed, what do I have (or what can I do) to ensure I still have a stake in his venture or receive something for the the work I've contributed? Thank You

Attorney answers (4)

  1. Anthony B. Cartee

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    Contributor Level 10

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    Answered . In law there's a saying, if it's not in writing, it never happened.

    If you are contacting attorneys regarding trademarks and securing the IP of the "company," you need to have an attorney actually form the company. Because you already have the fear of being squeezed out, I would recommend using counsel for this, rather than a chop shop who say they'll just file the paperwork for you.

    The problem with start ups is that they usually are penny wise and pound foolish ... meaning they will eventually consult with an attorney when something goes wrong. The good news is that you've already recognized this problem. If your partner/relative is hesitant in using an attorney to actually form a business entity, then you need to put your partnership agreement in writing. Unofficial or not, if money becomes involved ... somehow it all becomes official. Best of luck! PS - launching a food product always have regulatory issues that you would need to consult with counsel about anyway unless you guys are experienced in those matters, so someone who can get you all of that would be helpful.

  2. Andrew Kevin Jacobson

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    Contributor Level 16

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    Answered . GIIW -- Get It In Writing.
    1. Having a lawyer draft a contract signed by both parties is best, but if that's too expensive,
    2. Type it up yourself and get him to sign it. If he balks at doing that,
    3. Send him an email of the terms and tell him this is what the two of you agreed to, and invite him to contradict it now.
    GIIW. Get It In Writing.

    www.bayoaklaw.com. 510-208-5500. This answer does not create an attorney-client relationship. It is not legal... more
  3. Kenneth Allyn Sprang

    Contributor Level 15

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    Answered . This is a common issue with start up companies. You mentioned counsel for trademarks--I hope you have counsel for the business issues which are likely even bigger.

    First, you may wish to have an employment agreement with the equivalent of a golden parachute. If you get fired, the company will pay you enough that it will feel the pinch and you will be well paid. Second, if you are given vested equity in the company, you have some protection, though you may wish a shareholders' agreement to tighten things.

    I urge you to speak with the relative candidly. If the two you you decide how you want the future to look, e.g., what percentage of the company will be yours, any of us business lawyers can readily provide pretty decent protection for you. Particularly because this is a relative and any later conflict is doubly difficult, I urge you to nail down details in writing now. The documents you will likely want, with the caveat that I need to know more to be helpful, are an employment agreement, a commitment to issue you equity in the company, and a shareholders agreement if you are a corporation or an operating agreement if an LLC.

  4. Robert John Murillo

    Contributor Level 20

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    Answered . You protect yourself by talking with a local business lawyer and have them draft a contract. If you two setup an entity (corporation, LLC, so on), then the attorney will draft the shareholders or operating agreement.

    Get advice and do not do this yourself.

    This answer is for informational purposes only and is not legal advice regarding your question and does not... more

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A business partnership is an arrangement whereby parties enter an agreement to cooperate for their mutual benefit.

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