My question involves business law in the state of: California
Basically the situation is a contact of mine approached me with an idea he had and told me all about it and it basically got down to us talking about doing it 50/50 profit wise. He is based in California ("Party A") and I am based in Australia ("Party B"), but the contract / agreement will be setup to run under California / US law.
Now, he's a web designer and I'm a web developer, so we both have our roles sorted out - plus he will handle most of the business side of things and a lot of the marketing and at least initially most if not all the costs.
Since we have been discussing it I have contributed a number of good ideas to the project, one of which is rather critical and from what I have seen is rather unique to what is currently on offer at the moment with our competitors - on top of that I also came up with the website / business name.
So on the business side of things we have been talking of how it will work. We discussed a partnership idea but because of various reasons decided it's too messy / too much paperwork etc with us based in different countries plus he said he would prefer to keep controlling interest in it since the original idea was his - so like if he wanted to sell the company for example I couldn't stop him.
So then we started talking about profit sharing and how that would all work; I started searching around the web and found out you can get sample contracts for a "Profit Sharing Agreement" or something else that may suit our case with that being a "Collaboration Agreement" - so I'm not sure really how much these differ and what would suit us best.
Some points of note:
- The business will be registered to Party A only
So basically some points we want to cover:
- Party B will receive 50% of ALL profits related to the business, but will not be responsible for any losses
- Party B should also receive 50% of the sale price if the company is ever sold
- Party A should have controlling interest in the company to have the final word on all decisions
- If Party B fails to build the website within a specified amount of time, Party A can forfeit this agreement and find someone else to do the job - however, if this happens Party A will still need to pay Party B 10% of all profits for the website (+ 10% of any sale of the website) unless Party A removes features from the website that were the idea of Party B
- All costs related to the website will be covered by Party A unless otherwise agreed
- Financial documents (account statements, tax return etc) will be shared with Party B on request
- Not sure the best way to handle this, would need some thought, but something to cover case where of either party didn't want to (or were unable to) maintain or update the website anymore - like they shouldn't just stop getting their 50%
- Something to state when Party B will be paid their profits - like a schedule
- Profits may be chosen to be reinvested back into the business by either party; said amount will need to be an equal agreed upon amount from both parties.
Think I have covered everything unless anyone can think of anything else? But those are the main points.
So anyway, basically wondering which of the two agreements would suit us better!?
Thanks a lot!