How much of a loan or cash investment we talking bout here? Is he getting the cash himself or are you going to be on the paper as a second?
Depending on what your relationship with the guy is and what his intentions are, and how much he`s bringing to the table, there are a couple of ways to go about it.
First, you could go 50/50 on the company shares and you get a salary or hourly pay for your work.
Second, you could treat him as a Angel Capital Investor and give him 30% of the company over a fixed period of years and then his involvement would end. (planned exit strategy)
Third, you could go 60/40. You getting the 60%. That way if he turns out to be a flake down the road at least you have major ownership and can still call the shots.
This is by no means the only way to go. But it might be a good place to start your discussion with him. You have to look out for yourself, because I believe the sweat equity is the greater investment and you don`t want to agree to anything that doesn`t protect that. And you should assume that the relationship might go south, so either way, create a scenario where you don`t lose what you`ve worked for.
But before you accept any money, make sure you have an agreement, get it writing through your chosen corporate attorney and move forward. In my business, my "silent partners" have for the most part appreciated my work, and they also know that without me, there would be no business. So there`s some security in that.
Spider Climbing, Inc.
2009 Elevator Pitch Contestant
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