Basic Training: Too Late to safeguard Ownership Rights?

Entrepreneurs often get so excited (and involved with) obtaining the business off the bottom, that’s it isn’t until much later that they look back and realize they could not need protected themselves adequately with regards to ownership rights. Could it be ever too late to revisit history?

Q: I have already been the only real creator, brand manager, operations manager, production manager, marketing manager, sales director, web designer, photographer, journalist, admin asst., advertising manager, customer support, development director, and shipping department for a company I helped start for a customer. I have already been paid a monthly fee because of this work with the knowing that eventually a co-founder, partnership will be devote writing and we’d begin to build the business enterprise and seek investors. Up to now, my client has seen growth in the business and is wanting to find outside backing.

Do I present a sweat equity partnership agreement, giving me credit for work already performed and future work, or a deferred compensation agreement? I must say i have to increase my earnings at this time and want to negotiate that aswell – should all this maintain one agreement? If we are approached by investors soon, I would like compensation to be arriving at me that’s add up to what I’ve taken to the business.

A: Among the issues with "eventually" putting something on paper is that "eventually" may never come. It certainly is astounding how people may praise you to the heavens, however when it involves actually parting with a molecule of business ownership, they hem and haw and hedge.

The compensation arrangements in partnership agreements are as varied as the firms that formed them. Legally, you may well be on slightly shaky ground trying to improve your ownership percentage predicated on the work you have previously done and have recently been paid for. Generally, in the event that you got paid for the task as an unbiased contractor to a customer, that’s deemed the fair compensation you negotiated and so are entitled to–unless you already had an agreement on paper saying otherwise. However, in the years ahead, you should carefully evaluate this home based business as well as your ownership percentages by looking at the period of time, money, skills, and connections each owner is bringing or providing to the business enterprise.

You can also want to look carefully at your current needs and future goals. In the event that you "should increase earnings" to enable you to pay your bills, suddenly quitting your fee to become sweat equity partner will not be the wisest financial move for you personally. You also have to think about "Plan B": that’s, imagine if you did begin to raise ownership discussions as well as your client balks? Are you ready to continue to supply the services you been providing at your present rate? Are you ready to walk away out of this current arrangement to find other clients? That could be a necessary negotiating tactic showing that you will not get pushed around.

I would recommend that you consult with an area attorney about your alternatives. There could be leverage you may bring to the situation according to the nature and wording of the agreement you have together with your client for your present services. In fact, you could be worth more to him now as a Jane-of-all-trades then as a business partner. Once you feel an actual owner of the business, it’ll be more difficult to get from it if the problem turns sour or the investment finance you’re seeking doesn’t come through. Are you passionate enough concerning this business because of its own merits? And is your working relationship with the existing owner strong enough? They are issues you need to ask yourself and consult with your attorney.

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