contract-law business corporate-law arizona
I am working with a colleague to create a game. We agreed to split profits 50/50. Would creating a contract promising 50% be legal?
<p>The game will be owned under an LLC I created to protect ourselves from copy right. The reason I own the LLC is because I did the entire website and I plan to do more content without him as well. My colleague is not a member of the LLC.</p>

<p>Could I create a contract promising him 50% of profits from the game? The contract would be created by the LLC. </p>

<p>We both agree to do this as well. I just don't want to get bitten in case there is some sort of wage law I don't know about. This is in Arizona.</p>

<p>A contract agreeing to share 50% of the profits from the game with him would be legal but it would be unwise, because it could create a general partnership, depriving him of the benefits of limited liability associated with the LLC.</p>

<p>The better course would be to amend the Operating Agreement of the LLC so that he would be a "Class B" member and to provide that "Class B" members do not have voting rights and share 50-50 in profits from the game but not in profits from other sources.</p>

<p>This would give everyone limited liability protection and would make it absolutely clear that he is receiving profits as a co-owner, rather than wages as an employees, thereby avoiding the incidents of employment of which there are many.</p>

<p>As I found to my misfortune , get a lawyer for a business contract. The wording needed can be subtle and important.</p>

<p>So the setup would be that you own an LLC owning the game, and your friend gets 50% of the profits. And suddenly the game gets very successful, and your friendship ends. </p>

<p>As the owner of the LLC, you decide for example what salaries are paid. If lots of money comes in, you change your salary to $50,000 a month, and suddenly there are no profits anymore. Your friend now gets 50% of nothing. </p>

<p>Looks like a good deal to you. As your friend, I would definitely not accept it. And if you are friends today, you shouldn't propose it. </p>
