By Shaun Murphy
Question: What sort of contract should you have when you’re employing a developer for equity?
Is this contract what you would give to employees other than the compensation part? What is the regular practice if a company plans to give more equity for one employee over another? If I’ve 50% equity and a contracting developer has also 50% equity, what happens if I choose to bring another member on and offer them 10% equity? Is it possible to take 5% from the developer and my equity to pay this person?
Answer: To start, it’s impossible to get a complete answer to this question here. You’ll need to check with Coachella Valley business transaction law firm who work frequently with corporate work to create an agreement to capture what the two parties intend to do. With that said, besides the employment agreement, you’ll also have an operations agreement in place with said company. There will be variation depending upon the kind of corporation, other form of partnership or limited liability.
Since the contractor is going to acquire his equity within the company, you must have this agreement set to govern the operations and provide owners to enter or even sell their interest. While it’s possible to convey 50% interest with another, you must have it drafted properly by Coachella Valley corporate law firm to protect everyone.
- A Business entity is a corporately formed with a portion of the appropriate shares issued to the founding members.
– There should be sufficient shares authorized although unissued to the development corporation.
– The developer is brought on the team as a contractor and not an employee since employees are paid at minimal minimum wage.
– Developers qualify as independent contractor(s) (please refer to the post below.
Prepared documents will include:
- Individual Contractor(s) Agreement(s)
– Stock Agreement(s)
– Resolutions Board of Directors
You could possibly collect all of these documents on your own, however, there is almost no likelihood that your business would be formed properly. Always secure an experienced lawyer like Coachella Valley corporate attorneys to assist you.