Legal Question in Business Law in Utah

I am starting a website and have been in negotiations with a programmer. He is willing to develop and program the website in exchange for a portion of the money generated by the site. I am thinking for trying to make a Profit Sharing Agreement with him, but am not sure if it is legal and how I can protect myself and his interests. I will be forming a new LLC for the website. My questions are:

1. As he is not a salaried employee, is this legal to do a profit sharing agreement?

2. Would this be taxable to the LLC or a deductable expense (like payment to a contractor or something)?

3. Can I put terms that would allow me to buy him out of the agreement?

4. Are there Pros and Cons I should know about?

Given the situation described, I would also welcome other ideas to best protect both myself and the programmer.

Thanks you for your time


Asked on 1/14/10, 10:48 am

1 Answer from Attorneys
Alvin Lundgren Alvin R. Lundgren, L.C.

1. Whether it is legal depends on the nature of your business and the website.

2. All income is taxable, you may be able to declare a deduction if it is set up properly.

3, Yes

4. Probably.

These kinds of business agreements need to be carefully tailored so you do not accidently create a partnership or in some other way fall afoul of the law. This is the service that attorney's render.

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Answered on 1/19/10, 11:46 am


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