Forums: Discussions for entrepreneurs and small business.

I am working on a start-up and currently have 4 friends helping me. They are not official employees, simply working on the same project. I am planning to share equity with them soon though. We are developing a product and I did not have them sign anything. I am concerned that if for any reason we get in bad term, they may decide to develop the product themselve. If there is a time to have them sign something, it is certainly at the beginning. What document should they sign: NDA? Confidentiality agreement? Anything else? Where could I download them?

Here is one I found: http://www.ilrg.com/forms/partnership-agreement.html

It says that profit and losses are share equally among partners. I certainly do not want that. They are helping but not to the point to split like this!

Since I am already in a LLC, can I define them as partners without changing the operating agreement?

Well there are ways to allow them to be partners even if you`re already operating as an LLC. I.E. Stock grants. It really depends on what you want. You should hike on down to the library and get a few books. Then you should talk to a lawyer. This is not the sort of issue best solved on an internet message board, as mistakes here could be very costly, and the particulars of your situation are undoubtedly relevant to the kind of contract you wish to draft. Bottom line, either educate yourself or hire a lawyer. Best if you can do both.

Tough one... Let me ask you something, do these friends of yours have anything to do with you forming your LLC? Are they in anyways involved i.e. Board members (Does an LLC have board members too?) Not big on LLC`s

There is no time limit as to when you should have them sign an agreement.. What can happen is that, since you let it go too long.. there might be some resentment towards you (from your friends)... they might even get offended... I think that for the sake of your product, you call a meeting and you say something like... for the sake of the company, I think it`s best if we all sign a NON-DISCLOSURE AGREEMENT..Even you to make them feel better...

See the minute you involve a lawyer, they might feel threatened and leave...
Although, this is a 1/2 legal.... there is also the other side; "the friendship" issue..

The biggest mistake you can make is not having things written down.  When things go well (or bad), people conveniently forget the verbal agreements.  I would even review the agreement periodically to make sure everyone is on the same page.

Most definately get a NDA.