4 months ago I officially launched a company with my friend (big mistake I know - live and learn). We are 50/50 partners. He put in $3000 at the beginning because I spent well over a year out of work creating this company (I had the idea and I developed the app, the website, etc.) before we launched. We are now 4 months in and aren't seeing much success. He is visibly demoralized and made it clear at times that he is only here because he trusts me (my ideas), but he personally has no clue if the idea will work himself. Just a few weeks in he told me he doesn't know if he can do this for a year without making money (he is from a family where his parents are putting pressure on him). Mentally this is really eating away at me because I am committed but to know he might walk at any time is discouraging. I feel like if he doesn't personally believe in what we are doing (especially since he is the one that is trying to pitch the idea to potential clients), he is not really a partner. I would rather him believe in what we are building than to trust me and only be here because of his trust.

He is now telling me he thinks it will be better if he gets a job and we can use what he makes for stuff like advertising. It is clear his parents are dictating his actions by forcing him to get a job. He is telling me that most (even though I believe it should be all) of what he makes from the job will be going into our startup. I am confident that him getting a job is his first step of giving up. Even if he gets a job, I have always put 100 hours a week into this. I am not confident in his ability to keep up. I would say he is putting in 4-5 hours a day right now and taking weekends off because of commitments in his life.

Given that it is clear he doesn't have much confidence in this startup, I want to get full ownership before things get messy. I feel this is what is best for both of us. I don't think it is a good idea for him to put more money into this. How should I approach this? Should I offer him to take what is remaining from the initial $3000 (essentially buy him out with $1500 or so)? Should I offer more? We are not making any money right now so I'm not really sure what to value his 50% at. He has told me in the past he has regrets doing this so maybe he is clinging on because he is ashamed to tell his parents (who pressure him) that it didn't work out.

Edit: I can't comment for some reason so I have to respond here. I am not trying to be dramatic, sorry if it comes off that way. This is my first startup so I figured the more info the better? These are actual things I have been told. He told me even before we started his parents were putting pressure on him. He told me his parents are pressuring him to get a job, despite our previous agreement that he doesn't. He told me he would canvas for 8 hours a day, he is only doing 2. It may sound dramatic, but when we were young we tried to start another business and his parents kicked me out of their house (I moved in to work with him) and it ended because we were not making money. I am a bit antsy that they are capable of doing this again, forgive my fear of them being able to dictate his decisions (which are not what we agreed on in the first place). I don't understand what thinking I would get a free full time developer means? I am the developer. His only task is to canvas around and get registrations from business owners, and I am starting to worry about that because he told me he doesn't believe in what we are doing, which is why I am a bit confused he wants to (or feels obligated to) even contribute at all going forward. I'm not oblivious to the fact that most startups fail, of course there is a good chance my idea will not work out. Yes maybe I am selfish for wanting the company, but as his friend I am also genuinely worried about him. He has referenced the failure rate of startups many times in a way he is implying ours is next. I feel like there is a high chance if he had the chance to get out he would, but at the same time I am scared to bring it up in a serious matter because I don't know how to approach it without possibly offending him. I am not looking to "take" what is his. Of course he currently owns 50%. That is why I am here looking for advice on what he deserves. From a personal standpoint, even though I thought I could and it is my fault completely, I cannot continue to keep putting in 100 hours of work when he is not putting in 25. Of course he has the right to stop contributing to this project and pursue a job, but at the same time, so do I. Thank you so much for the responses so far, they have been helpful :)

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    At the end of the day, his half is worth whatever he'll take to sell it. Do you have any projected cash flows over the next, say 5 years? – D Stanley Jun 29 '18 at 15:50
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    I hate that you had to include all the drama in this question. It is unnecessary. – Pete B. Jun 29 '18 at 15:54
  • @PeteB. This is not a question about personal finance so I'm not sure why it hasn't been closed. – Eric Jun 30 '18 at 3:04
  • You need to review your partnership agreement. What work is he obligated to perform to maintain 50% ownership? Or, does he get 50% for that initial investment and doesn't actually have to do any more work contractually? If he has no obligation to do any work, but can maintain 50% ownership, why would he even want to sell? – BobbyScon Jul 2 '18 at 16:50
  • Wow! This is an interesting (and common) case. On the one hand you're bitching at your partner for not putting in the hours, while wanting a day-job to pay his bills. On the other hand you say the company is failing. Meanwhile you think you have the right to have more, just because you feel you work harder than he is. To me this sound a like a trust issue, and your partner should probably not trust you, since you want him out after seeing that both of you alone, are incapable of carrying the weight and drive the company forward. – not2qubit May 21 '19 at 18:37

I don't think it's valuable to attribute some sort of motive to your business partner or this quasi blame on that person's parents.

It seems to me that you thought you'd effectively get a free full time developer and you foolishly gave up 50% of your operation for that. Now you disagree with your 50% decision maker and want him out. Your partner thinks he can keep up his efforts and contribute even more to push the operation forward if he had other income, and you for whatever reason think that income/paid in capital stream would be bad? I don't know what you're working that you spent a full time year developing but gave up 50% of it for $3,000 but that's the bed you made.

It feels like you want him out more than he wants out. I think you need to start from a place of asking him what he would want to leave. There's the obvious business is business attitude that you could take that the company was worth $x when your capital showed up, it's worth $y now, your 50% is worth $z. But you can't really do that when it's a friend and you're still well in to the seed stage.

Personally, if I was your partner and you wanted me out, I wouldn't easily give up that 50%. I bought 50% of this app and I've put in 4 months of time and you think you can just boot me?

If you want out of this cleanly, you probably need to drop this business of "his parents are dictating his action" and "he's visibly demoralized" because he owns 50% of your company and doesn't have to sell it.

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The biggest question of all is do you have any money to buy him out?

If it was me, I'd offer him $300 for full ownership. Essentially you have a struggling business and it is not uncommon for businesses in such a state to sell for pennies on the dollar.

In a sense, he is right, no one knows if your business will be successful. Despite your earnestness, you could be very wrong and this business may never be profitable. In fact without him helping you, the possibility goes down by some amount for a profitable venture.

So you should not pay the full 3k, or even half. Start with 10% and go up some from there.

I do wish you well and hopefully you can grow this business into something profitable.

Its okay for him to seek a more conventional career path, you need to allow him that. He has parents he can trust to give good advice, that is a gift. It is okay for him not to have the same passion for this venture that you do.

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    But the friend wants to put more money into the company, not take what he can get and leave. Why would he take $300 when he's already invested $3000 and is willing to invest more? – Nuclear Hoagie Jun 29 '18 at 16:00
  • @NuclearWang? "He is visibly demoralized", " it will be better if he gets a job", " he has regrets doing this". It could be just fluff from the OP, but I don't read it that way. – Pete B. Jun 29 '18 at 17:08
  • I think this is a valid money perspective, but would most certainly destroy their friendship, that is off topic here but is worth pointing out! – Joe S Jun 29 '18 at 20:31
  • Regardless of the statements OP made, why would the partner be willing to take less than what he put in if he's not contractually obligated to do X amount of work to retain that 50% ownership? (Purely a hypothetical question). $3,000 really isn't that much money in the scheme of things. If there's no clearly defined partnership requirements, the partner has no motivation to take $300 and walk away as opposed to maintain 50% ownership and not do much work, potentially reaping profits later. Just my 2 cents. – BobbyScon Jul 2 '18 at 16:47
  • @BobbyScon so you think people, in general, make smart money decisions? Perhaps you do, but there are others that keep check cashing stores in business. – Pete B. Jul 3 '18 at 10:51

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