Co-founder never did any work, verbally agreed to vesting. Not listed in any company documents

The situation is simple, but maybe not so simple.

The only record of an agreement is a verbal agreement. There is nothing formally signed. There are texts and emails recording the discussion of working together. Including me asking the co-founder to do some research and do a certain minimum amount of work. Which was never done.

The verbal agreement is the only ‘proof’ of equity split as well. It was to be split 30/70. The co-founder told some people it was 50%, the co-founder said it to me once in a message while discussing someone else’s business and the way they had split. I completely ignored it. I was drunk at the time and continued the conversation as if it was never received.

When people told me the co-founder said he owned 50% of the company, I always corrected them and told them about the vesting.

There are no single triggers in the verbal agreement.

No money has been received from the co-founder for any equity. <– A big issue I think.

On all company and legal documents only I exist. The co-founder never existed anywhere on paper.

Founder and co-founder never talk anymore. In fact, 6 months passed without a word. Including the holiday period. No Merry Christmas, etc.

I did all the work. Programming, Planning, Design, Policies, Research, etc… etc… I’m still doing all the work.

The co-founder has done nothing. I mean, literally nothing.

The co-founder was asked on more than one occasion to do something. Mostly research for different things. One or two occasions are recorded digitally, the rest are verbal.

Co-founder has started 2 ‘businesses’ with a friend of his own. Both are ripoffs to ideas I have coined and told the co-founder about.

The biggest thing here I think, is the fact that no money was received for any ‘equity’. So would that invalidate any stock?

His access to everything was removed a year ago. He has yet to mention it. It will be another year before the ‘product’ is launched. Maybe another 3 years before it is worth anything.

Keep in mind nothing has been contributed by him, ever.

I would hate to think this is a dick move to do. If he had contributed something I would give something for it. I can’t see any reason to give him anything. It would be extremely unfair to myself, as I have been the only one to do everything.

Tried searching on here to see if anyone has been in or seen a similar situation before.

If anyone has any insight, it would be greatly appreciated. 🙂

  • If this person want’s to be a dick he will be able to cause trouble. And if he really feels that he owns 50% of the company then he’s likely to be a dick if you are successful.

    Getting advice online is okay for this but there’s no substitute for a quality lawyer.

    If there was no work done and you can prove it then you might be ok. However, if he did any work at all (including research) and he was not paid for that work then he could try to claim he owes equity.

    A great lawyer will be able to figure out the best remedy for your particular situation. Don’t freak out about how much it costs… will be worth it.

  • Agree with above. Start building the paper trail of you and “cofounder” and lawyer up. Every email correspondence, recorded conversation, and timeline of events and work product. Add financial records if you had a business account showing deposits and withdrawals.

  • Just because he didn’t put a dime in the company doesn’t mean he legally deserves nothing. That’s not how the law puts it (in the US anyways). If both of you start the company together, without any formal agreements, both of you own 50% of the company.

    Now it sucks you did all the work. And legally you might be able to get a lawyer to say he really wasn’t part of the company AT ALL. But if there was some paper trail that he somehow was a co-founder, then he could cause trouble.

    You seem to believe just because he was not formally given equity and your name is on all the documents you’re safe. That’s a poor man’s solution. The proper solution is to do the right thing and square it off with him. Don’t be chickenshit about it. Sometimes a lawyer (or lawyer friend) might be able to talk more sense into your friend since they can speak with more credibility than you (of course he’s going to say you’re screwing him – maybe you already did).

    Good luck

    • Continuing from my previous comment. Here’s another way to deal with it if he won’t relinquish equity. (He might since he abandoned the company).

      Pay him off. You might be surprised how a little money might go a long way. If he really thinks the company is so hopeless to not even bother working on it, he might really think its a lost cause and take whatever you offer to him.

  • I also think you could drop your drama factor. If he really did NOTHING, and there is no contract of co-founding agreement, there’s nothing to worry about. Drop him and move one.

    On your part of personal responsibility, stop having business discussions via tex while drunk. If your supposed co-founder has spun TWO businesses off your ideas, STOP talking to him. He’s a dick (as said above) and will continue to be one. So step up and decide to actually run a business, not buddy up with a friend.

    Lastly, stop worrying about being a dick yourself. A great teaching of the world says sometimes you have to play the integrity of the world – ie you have to be a dick to beat a dick.

    AND…now matter what it costs you to get our of this relationship (pay him off) you’re still getting out cheaper than what it will cost you if you keep going. The biggest lesson – get a lawyer and don’t ever enter into a co-founder situation without a written agreement. EVER. (and no, I’m not a lawyer!)

  • I was in a somewhat similar situation. I recall that one day he referenced being entitled to 50% because he had the title of co-founder – lol!

    In my case, paperwork ended the situation because it freaked him out. While he acknowledged not putting money up and not wanting to stay long. He wanted the full amount of equity with no vestment, and it referenced how he could be removed for incompetency. At the time I was hurt because I personally gave him every single reason to trust me that I could think of so he would just go and knock it out the park, prove his weight. If he had done his job, I would have offered him 50% because he would have had a matching contribution to the company. After months of back and forth, he finally agreed to vesting, but never signed the papers.

    In hindsight, it’s pretty funny as his first reaction to the paperwork proved he was too immature for founding a company. He didn’t understand business.

    In the end, I got lucky because he was so focused on equity and not doing what I or the customer asked that he failed to do his job. He later abandoned when I asked him to sign paperwork for the fifth time. I had never put so much trust into someone else before, or invested that much faith, time, and money so it was disheartening to me to watch all that time and faith go to waste.

    But, my business is so much more important to me than trying to cure someone’s emotional baggage around an irrational fear of being fired or losing equity.

    At the time, I thought it was the end of the world and it truly wasn’t. It’s not for you either. It was the hardest, biggest business and life lesson I’ve learned and I’m grateful for it.

    Have a talk with him and force the conversation about you and him to sign the docs with his job description and performance based milestones. If he doesn’t sign it’s because he either:

    1) doesn’t want to be a part of the company

    2) knows he personally doesn’t add value (only fearful)

    3) isn’t mature enough to handle what will come with the money (fearful and feels entitled without wanting milestones)

    If he signs and doesn’t meet his performance, he fires himself and returns the equity back to you. If he doesn’t sign, but delivers the work, then you have a mess on your hands. BUT, if he doesn’t sign and doesn’t deliver work, the most you’re potentially liable for is minimum wage for the hours worked (depends on state).

    Clearly, not a lawyer, just a perspective from the outside looking in.

    Now, for a harsh bit of friendly advice….

    Be honest with yourself, has he truly not done any work? If he’s not around for a year, if you haven’t talked to him in a year, are you really running a business together? Plus, who the heck runs around talking about equity splits to people not involved in the business? Get the paperwork signed (or not signed) and focus back on the business.

    Good luck and it isn’t the end for you although it feels like it’s everything going to sh*t, it’s not. You’ll get through it. If you end up cutting a check in the future, it’s because he was able to prove his hours within the statute of limitations. (Depends on state)

  • Consider how likely you are to get sued. In particular: past history of it, present/future value of equity, other person’s financial status, other person’s financial skill set, etc.

    If you judge any realistic chance of it, I’d negotiate an offer where you cough up some small percentage (under 5%) in return for a quit claim on all other rights.

    It isn’t that you are or are not right – it is that a full blown lawsuit will cost you time and money. The very fact that there was some electronic trail means any lawsuit brought by the other isn’t going to be automatically thrown out of court, meaning the threat of lawsuit is credible, and the punishment isn’t the loss of the lawsuit but rather than financial and time expenses mentioned above.

  • This is why people need to have the legal side of their business in place instead of acting like they can just ignore it til all hell breaks loose… Try using some of the legal tech out there. I know Shake Law creates contracts for free and Traklight has a free cloud storage system that verifies documents (point being you can use it back up claims within court).

  • Take him to court for damages – causing losses by abandoning of his responsibilities , be first to do it. Plus- newer admit on public that you where drunk.. And blessings

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