# partner vs. employee



## rockclimber43 (Sep 16, 2008)

Hello! I am new to the forums, but I can already tell this is a great community. 

I am a partner in a start-up apparel company and am quite naive with the business side of things. My role is the artist/designer for all of our garments - However, as a partner in the company I will be taking a percentage of all profits. 

Thus far, all the agreements made have been verbal. The head of the company has given me the run-around regarding the time it is taking to set us up as a corporation. Trademarking has been taken care of, as well as our RN# etc. but I have yet to see or sign any contracts. I would like a little ammo to bring to the table next time we meet - as far as the type of things to watch out for (so I am not taken advantage of!) I am being pressured to hand over artwork, and as eager as I am to get our first samples made, I'd like to sign something! Should I be worried about handing over artwork at this point and if so, is there some type of contract I should have drawn up to protect myself/artwork? 

The research I have been able to come up with state things like, "the employer owns the artwork - but only if the artist has been paid." We have investors - but I don't expect to be paid for the artwork until we start to turn a profit. As a partner, am I technically an employee to someone with a larger percentage held in the company?

It seems like this community is knowledgeable about these types of questions. Any advice or links to other posts regarding these "fears" would be greatly appreciated! Thanks in advance!


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## COEDS (Oct 4, 2006)

I Really we could all give you our opinions and they would be just that. I think you need legal advice to get things going in the right direction I advise you to find a attorney to get things on track. I think you need to have someone looking out for your interest and the money spent would be well worth it to you over time. I wish you the best of luck. .... JB


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## Girlzndollz (Oct 3, 2007)

Rockclimber, I agree with JB. This seems too big to go in unprepared. It could deeply affect your future for years to come. Get a lawyer, someone who is a lawyer/CPA would be perfect, but get a pro to look out for you. It'll be an investment that will payoff for years to come.

There is a member here called Novanutcase, and I believe he may have some good words of wisdow for you. Maybe send him a pm, but that is not advice to substitute for the pro on your side. I think John (novanutcase) could give you great direction in what you will be asking the lawyer and/or CPA to do for you, and to make sure you get your money's worth out of them as well. 

Good luck to you, hope it goes great for you.


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## novanutcase (Aug 6, 2008)

NO NEED TO FEAR! NOVANUTCASE IS HERE!

LOL! Thanks Kelly!

I would say that Coed and Kelly have pretty much nailed it on the head. Remember, best laid plans......

First of all, if no corporate agreement has been filed stating that you are a shareholder in the company then, at this point, you have nothing. In your corporate agreement it should state what it is you are entitled to and how the assets will be disbursed. 
I wouldn't give any artwork away until I know that all the i's have been dotted and the t's have been crossed. 

Of course, this is just my opinion and shouldn't be construed as legal advice. You need to go talk to a lawyer that has YOUR intrest in mind so that you get a fair deal!

John


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## Girlzndollz (Oct 3, 2007)

novanutcase said:


> NO NEED TO FEAR! NOVANUTCASE IS HERE!


Holy Moly - how did you do that???? I nearly fell of my chair! 

_That was less than 10 minutes!_


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## novanutcase (Aug 6, 2008)

I'm the "Spiderman" of T-Shirt Forums! Where ever theres trouble! LOL!

John


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## rockclimber43 (Sep 16, 2008)

Hi everyone!

Thanks for the quick responses!

I will certainly seek some legal advice - Do the things I brought up in my original post sound like the right kind of questions to bring to a lawyer? I want to be sure I get my moneys worth when speaking to one.

Again, Thank you!


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## novanutcase (Aug 6, 2008)

rockclimber43 said:


> Hi everyone!
> 
> Thanks for the quick responses!
> 
> ...


Yup! Any attorney worth his salt(Is there such a thing?!?) will probably ask you more questions than you him.

John


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## Jasonda (Aug 16, 2006)

rockclimber43 said:


> I will certainly seek some legal advice - Do the things I brought up in my original post sound like the right kind of questions to bring to a lawyer? I want to be sure I get my moneys worth when speaking to one.


Yup.. If you have email conversations with your business partners, bring those in too.

Make sure you talk to a lawyer who specializes in business contracts, partnership agreements, etc. Almost any lawyer can advise you on these things but if you get someone who specializes in them you will save some time. And small firms are usually cheaper (less overhead).


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## COEDS (Oct 4, 2006)

I agree any type of correspondence you have,or anything you can remember write it down. The more info the Attorney has the more qualified the answer can be. ... JB


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## utemtu (Mar 3, 2008)

I agree with all postings listed above. Just remember, there needs to be a clear distinction between being a partner/owner/shareholder and that of an employee. Often you will be both a partner and an employee, but each role comes with different rights and obligations. I would suggest that you get the professional advice, legal with accountancy background would be ideal. But think about what you expect as a partner (your obligation is to the best interests of the company) and what you expect as an employee (wages etc.?).

I wouldn't hand over any artwork unless you have it in writing what the implications of doing so are.


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## rockclimber43 (Sep 16, 2008)

I'll be sure to post the results of how things go - I'm sure other artist are in a similar situation.

Thanks again everyone!


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## COEDS (Oct 4, 2006)

Good luck, I look forward to hearing the outcome. I'm the money spent will be compensated by less friction and heartache of going into a situation and not being prepared. .... JB


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## novanutcase (Aug 6, 2008)

COEDS said:


> Good luck, I look forward to hearing the outcome. I'm the money spent will be compensated by less friction and heartache of going into a situation and not being prepared. .... JB


I've seen so many companies go down in flames because it wasn't clear from the beginning what everyones responsibilties and disbursements were going to be.
The honeymoon stage of any business is always rosy. It's when things start to go sideways that make for a harrowing experience.

John


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## cookiesa (Feb 27, 2008)

And of course if they get huffy and aren't interested in signing then it may be time to walk away.. Don't feel pressured in to "seeing" how things go etc. Remember if both parties agree then terminating a contract is not difficult, however after the fact trying to prove a verbal/gentleman's agreement satisfactorily will not only prove very expensive but quite difficult.

Don't be afraid to suggest (no doubt your lawyer will anyway) that the signing etc be done at his office so if they have any questions (they should really consult their own lawyer to look through it on their behalf) can be answered on the day, and any amendments needed/agreed upon can be changed then and there. It then just becomes a formality rather than you "getting lawyered" up against them.


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## deChez (Nov 10, 2007)

rockclimber43 said:


> as a partner in the company I will be taking a percentage of all profits.
> 
> - but I don't expect to be paid for the artwork until we start to turn a profit.


Along with all the other good reasons the others have given for seeing an attorney, is the method of payment.

Will the other partners be taking a draw or salary, or will they be paid based only on profits as well? Will the other partners be paid only when the company begins to see profit, or will they be paid before that? And, is that gross profit or net profit? Who is keeping the books? Is it one of the partners?

As the artist, your role is very important to the company. You are more than an investor; you are a working partner.

I would also suggest that as well as getting advice from an attorney, contact your local SCORE (Service Corps of Retired Executives) office.


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## TripleT (Apr 29, 2007)

rockclimber43 said:


> Thus far, all the agreements made have been verbal...
> 
> We have investors -


Hi, Rockclimber - There's an old saying in business: If it's not written, it's not done."
So, get all your agreements in writing.

Do you know the investors? Do they have written contracts? Something doesn't sound right. People who put money down on verbal contracts are asking for trouble. As others have already mentioned - run this by an attorney ASAP. Good Luck!


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## rrc62 (Jun 2, 2007)

As an employee anything you do and any copyrights on your artwork belong to the company. for that to happen and hold up in court, you have to be a legal employee. That means on the pay role as a W2 employee. As a partner, you should be named in the initial articles of incorporation as a shareholder along with the total number of shares issues and the number of shares each partner owns. It sound like you don't really fit into either category right now, which means he could take your artwork and run and there's probably not a lot you could do about it. Incorporating is a very easy thing to do. If he's making excuses not to do it, I'd be a little nervous.

I'm not sure how the copyright thing works in a partnership or if a "partnership" would be different than a "corporation" where you own a percentage of the stock. Both are different business models. That would be a good CPA question. I have a friend who left a partnership with a patent that he filed in his name and sold the patent. As a shareholder working for the company, you may technically be an employee and not a partner.


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## tshirtsep (Feb 15, 2007)

rockclimber43 said:


> I am a partner in a start-up apparel company and am quite naive with the business side of things. My role is the artist/designer for all of our garments - However, as a partner in the company I will be taking a percentage of all profits.
> 
> We have investors - but I don't expect to be *paid for the artwork* until we start to turn a profit. As a partner, am I technically an employee to someone with a larger percentage held in the company?
> 
> It seems like this community is knowledgeable about these types of questions. Any advice or links to other posts regarding these "fears" would be greatly appreciated! Thanks in advance!



So if your designs don't make enough profit, will they just get another artist to replace you?

Apparel Companies will use many artists with different styles and ideas so what happens when other artists are eventually hired and other designs are used?

If you will only get a percentage of shirts printed with *your* designs, it sounds like you're an artist working on commission.

If you're really an *"Owner/Partner"* you'd get a share of the company's profit regardless of who creates the designs now or in the future.


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