We are proud to announce our NEW community destination. Engage with resident experts and fellow entrepreneurs, and learn everything you need to start your business. Check out the new home of StartupNation Community at startupnation.mn.co

Alleviating Big Development Costs

NovashunNovashun subscriber Posts: 4
edited July 2009 in Startup Funding
Ive thought of some different ways I would like to fund and build a few applications and scripts for my business. We are a small company - Our business is Web marketing, develop some apps/scripts, and own about 43 Web Sites. Im trying to avoid a partnership at this stage.
1 Division of the company I have created is software/development. I have a programmer (Freelance/Contractor) that Ive been using and starting to get a little close to. Hes a bright guy, and I think it would be in my best interest to offer something for the scripts/applications he`s developing for me. My intention and reasoning are these. (Please help me if Im wrong or need some more information )
a) If I offer him a percentage of the Development Division within the company, say 4% of anything he has built for me, he has to agree to support the scripts until sold completely or if I should sell the business. So any fixes, version changes, or bugs throughout the life of the scripts and apps - He will do this.
b) Im not a technical guy, so if I were to pitch these scripts and applications to companies... I could do so.. But not the Techincal.. He would have to come along and pitch the technical. 
I think this would motivate him with a 4% share per year... If I were a programmer I would want to discuss, explain, answer questions, and support my product I developed. The more money generated from the sales of this app - The more money I would make. Hes not quite an employee, Im not an employee owned company, and Im just a SP entity.
This has actually kept development costs down by offering him something other than thousands of dollars... We have discussed, nothing in writing yet.. And I dont know how or what to put in writing if I did.
Any Thoughts?  
How could I do this, has anyone ever did this, why is this good or bad? Would this be considered a Limited Partnership? If so, Im American, hes is from another Country.   
Novashun7/16/2009 1:35 AM


  • robertjrobertj subscriber Posts: 0 Member
    Enabling him to participate in the results (sales revenue/profit generated) of his development efforts is a good way to keep him involved. I can`t speak to the percentage - but if you both agree that the exchange is value for value then it`s probably the right number. Be sure the agreement spells out ownership and rights.
    However, before you move forward "officially - I`d suggest giving some thought to your business structure.
    If you`d like to discuss your specific situation, send me a PM or contact me directly.
  • NovashunNovashun subscriber Posts: 4
    Is this considered a Limited Partnership? Whats this actually called?
Sign In or Register to comment.