Legal Question in Business Law in California

If you have a proper non-disclosure then that is a good start. The next step is protecting your concept (ideas are not able to be protected...you need to develop it). Protect it by registering it with the Copyright Office, register the name with the Trademark Office, and form an entity (corporation or LLC) that makes you the major owner. Let me know if you need help doing these steps specifically. We do this for many of our clients.

First, you need to sit down with all of your potential business partners and discuss how you are going to proceed with the business venture. This is assuming that you have already done your due diligence and are comfortable with having each as a business party. Follow your gut in this. No type or amount of paper is going to save your from untrustworthy business partners.

Then, all of the participants need to agree on the business plan (not just cocktail napkin treatment). A written agreement should be reached on the business entity to be used to execute the business plan. Partnerships and joint ventures are common, but involve joint and several liabilities to all business owners. A corporation or LLC limits such liability against the owners, if set up and operated properly. The business partners� tax advisors should be involved in the final decision, as the tax tail sometimes wags the business dog.

Once these matters are agreed, an owner�s agreement should be drafted and signed setting forth the business plan; the business entity; the capitalization dates, types, amounts and events; and the ownership split and profit split, if different (possible with LLCs). The parties need to decide in advance, who will be the initial or continuing directors or managers (LLC); which decisions are to be made by the owners versus the directors or manager versus the officers; and who will be which officers, including the tax matters partner for LLCs.

This agreement also needs to cover withdrawal rights (if a partner just wants to leave) and restricted rights to transfer ownership to protect the remaining owners from undesirable new owners. Any future obligations to loan money or provide services should be covered by loan documents and restricted ownership interest agreements, so that ownership interests do not vest prior to future performance of each owner�s obligations.

The above information does not constitute legal advice and does not establish an attorney-client relationship between us.

If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at [email protected].

As a franchise attorney I can say the other attorneys are right on point here. A good nondisclosure agreement is the starting point. I don't know that you need, or should say, you are the majority "stakeholder" (whatever that means). Consult with a good business or franchise attorney in your area for specific advice.

Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.

Franchise Attorney

Franchise Foundations APC

Whether you are the major stakeholder or not may be totally irrelevant. The outsiders are dealing with, and making contracts with, your business entity, not you personally. Maybe you will sell 99% of your company to Microsoft ot Google next week. That's your business, not theirs. The people you deal with need to agree with your company, not you personally. Maybe before you proceed too far, you should get either a lawyer or an MBA on your team to assist you in grasping fundamental business concepts.