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The mistake you made was two years ago, by not putting in vesting in your initial contract. But since we can't fix the past...

You appear to own 40% of the company, which means you own 40% of the IP. Whether Jim paid for the development or not isn't super relevant, the relevant part is the contracts between Jim and freelancers. Who is assigned their IP? Who is listing as hiring them on the contract, the company or Jim?

Jim can try to play games by re-incorporating and moving the IP around, but you'd still be entitled to 40% of it. But you might have to sue to get it.

The good news is that you can just walk away now, and if it gets really big later, you can file your lawsuit if it might actually be worth something (see Facebook). In the meantime no need to stress about it.

Of course I'm not a lawyer etc etc, but from my experience this is how it would go down.

BTW if you wanted a fair deal, you'd get 20% of the stock now and forever. That's what you would have vested in with a standard four year vesting agreement.




> You appear to own 40% of the company, which means you own 40% of the IP.

Actually, I'm going to bet that he owns 100% of the IP he wrote because if they didn't have good documents around something like vesting, they probably don't have good IP documents either. That gives him the upper hand in negotiation.

To the OP: without a vesting schedule or agreement on what happens when you leave, your partner is stuck with you. If you've done most of the work up to this point, don't be bullied or browbeaten into giving up your shares. I wouldn't even give up that 10% you were going to right off the bat—that's giving away something for nothing,

Most attorneys will have a conversation with you and give you at least some background and let you know what general options are. I've been through a situation similar-ish to this one and if it wasn't for the fact that my partners were so completely sloppy with their paperwork I would have been completely screwed out of several years of my life—they certainly weren't looking out for me. As it was, they took more than half of the proceeds when we eventually sold the company even though pretty much everyone but me had ghosted a couple years earlier.

> Jim can try to play games by re-incorporating and moving the IP around, but you'd still be entitled to 40% of it. But you might have to sue to get it.

Remember, if you didn't sign IP assignment papers when you founded the company, you own 100% of what you produced. Copyright goes to the creator in the absence of any agreement to the contrary. That also means Jim can't transfer it to a different company (which he couldn't do anyway without inviting a shareholder lawsuit.)

> BTW if you wanted a fair deal, you'd get 20% of the stock now and forever. That's what you would have vested in with a standard four year vesting agreement.

Agree with this—if you really think the company has a good shot, I"d negotiate a generous buyout (generous to your partner that is) of half your equity and keep the other half.


Thanks a lot. I think regarding the IP it's very messy and questionable who owns how much, because he may have paid for the development, but it was based on by sketches & app flow, and I've contributed to the development with a lot of testing & design stuff. Even if he wanted to take his chances, Jim would be in a worse position than me since it would be pretty unclear what I'm entitled to & that could be toxic for investors or in case he wanted to sell it right away.

We have a meeting scheduled for tomorrow, I'd stand my ground as you've and others suggested and we'll see what happens. If it gets really messy maybe I'd think about bringing on a lawyer, but it would have to be certain that I'm not going to lose money because of that since lawyers... well, aren't cheap


I think the parent was assuming you did most of the development yourself. Judging by what's been said, it's more likely that your contracted developers themselves own the IP, not either of you.


The contract with developers states that Jim will own the finished product. My role in the app development was to make the initial sketches & app flow (both in the beginning and during the development), some design stuff, and Android testing, so I guess it can be argued that Jim doesn't own 100% of the current app because I've contributed something to the development as well


Yeah that’s quite a bit dicier. I did assume you had done the actual development. Copyright on visual presentation is much more difficult to argue your case with.


Thanks a lot! To address one of your points:

> Who is listing as hiring them on the contract, the company or Jim?

Jim is the one. People around here suggested though that it doesn't really matter because for example I've contributed something to the app as well (sketches, app flow, design, etc.) and the app was clearly made for the purposes of the company


I'd tell him that he has two options:

- Find an amicable agreement to buy you out in the short term

or

- You'll back up all of your documentation around incorporation and wait until the app gets larger, hire a lawyer and go after 40% of the significantly higher value. You have a solid claim, and this would be much more painful for him. He has a fiduciary duty to protect the value of your share, if he takes action to attempt to devalue your portion he could be personally liable to make you whole for more than 40%. Especially egregious action could rise to the level of criminality.

Either way, probably worth consulting with a lawyer now.


Great take, thanks!


Yeah you still clearly have a claim but it just makes it a bit harder. If the contract said Company Inc. on it, it would make things a lot clearer.


That's right, but I remember that Jim really wanted to have his name on that contract which I've accepted at that time since he was the one coming up with the money for development


This comment right here is potentially your kryptonite. Technically, if this is the case, then Jim owns the development IP personally and would then be “contributing” it to the company as a member/investor. The business org itself is valueless.

In my opinion, Jim is lazy, but not dumb. It doesn’t sound like you guys have been very good at formalizing things under the company and Jim knows that and has positioned himself quietly as the one with all the power.

Setting my analysis of Jim’s character aside, I think your best bet is to not demand a thing, just keep your already agreed to equity you have documentation on and walk away. The reason being you don’t want to give Jim the chance for a new document to muddy things up more in case of later litigation.

He may restructure or do some sneaky thing to make himself feel as though he’s bested you, but the likelihood whatever is made is going to make a huge amount of money is slim (especially with what I see as severely amateur behavior here coupled with a lacking in ethics). He’ll have a hell of a time raising any funding either way if investors do their due diligence.

If it does succeed sometime in the future, send the whole file to a decent attorney and let them do their jobs then.

In the meantime, just understand the tactics he’s employed and do think defensively, preserving what you do have now. Then store it in case you need it later. After that, move on with your life and forget about it.

I’d probably remove Jim from your life though. Every comment I’ve read from you about him has had the between the lines description that his behavior has never been in your best interest. He doesn’t care about you at all.


Yes, just be careful what you sign when walking away now.


Yeah, at this point I'll be careful about everything I sign & do, not only with this startup but with any I'd potentially join in the future




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