- After negotiating a ballpark sale price, I was advised to get an attorney, and that was excellent advice. The attorney cost 10K or 20K, and it was worth every penny. My partner trusted each other enough to share an attorney we had worked with previously. I trusted the attorney to work with both sides, even though the attorney was probably representing the business more than myself.
- Any exit plan that involves deferred compensation should be crystal clear, and I encourage you to focus on discreet payments that do not require you audit the company's finances, as it's a lot easier for both sides if the only thing you have to do is cash a check (e.g. you receive a fixed payment of X regardless of how well the company does, and avoid things like you get X% of sales over a certain period)
- just keep in mind that you and your partner will likely have wildly different ideas about the company valuation
- one option you can consider is staying with the company and offering to buy out your partner. My partner was the one who originally wanted to exit, but she ended up buying me out, and it worked well for both of us!
- be nice (or at least civil) throughout the process, as breaking up will be hard, and you need trust to be preserved to feel good that any deferred payments are likely to happen. Also, you might wanna work with each other again in the future.
- don't negotiate an exit payment so high that the business might not be able to pay it
Jim would never leave me the company and frankly, I have no interest to stay even without him
Right now Jim probably thinks there is serious value in the app. The odds are overwhelming that isn't true. While he believes that, your likelihood of getting paid are dramatically higher, so again go for the 100% immediate payout if you can.
Something like (obviously don’t use these exact words) “Hey Jim, I know it’s a drag that I’m leaving the company like this. I’m sad I have to go too. I know it’s messy if I retain equity, but is there any way you could pay me a buyout to reflect some portion of the hours I’ve put in so far? I’m pretty broke and it would make a huge difference.”
Then if Jim honestly feels that is fair, and he (very big consideration) feels like he can actually afford it, he might just do that.
The number, in that case, will probably be lower than you imagine. Because everyone tends to value their time highly and other people’s time less so.
But it would sidestep any fighting, and Jim will feel less resentment because it was genuinely his choice.
Or he will say absolutely no. But again that’s what you’re likely to get no matter how much you fight, the only difference being the damage done by fighting.
And in either event, whatever Jim does, you can focus your mind on your next thing in life.
Edit: Because remember, starting a company always had the risk you would work a whole bunch and end up with nothing to show for it.
Either find some consulting work and work something out with Jim to stay in the game, or cede all the risk and reward to him. Building a company isn’t for wimps. My apologies for my brutality, but I’m actually in your position and see it from my Jim’s perspective.
For two years of fulltime work or are we misunderstanding?
You own 40% of this company without encumbrance and you have it in writing in an official corporate registration document filed with your government, correct. If this company is worth anything at all your 40% is worth vastly more than a couple thousand. You could sell your rights to a third party.
Also, everything the partner did, and which you did, as a registered legal partner, is owned by the company. Not by him, not by you. The company. He can not claim it is his and take it elsewhere. That would be illegal. You own 40% of the value of the software code, just as he owns 60% of the work you did.
All the endemic downvoters here should explain why for two years of full time work that brought this company to the point where it can be sold by a cofounder is only worth at most $2000 total and you yourselves (state your legal name) would be happy yourselves with the deal you are pushing to this guy.