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Seeking advice about investing

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My name is Jimmy and I am an Australian distiller living and working in Asia.I recently started a company with a business partner and so far things are progressing really well.

At the current time I am looking to protect my interests in the company. Up until recently all of the agreements we have come to have been verbal. I have contacted a lawyer as I want to make them more legally binding.

The background information is that I invested a small amount to money (compared to my partner) with the promise of receiving shares in the company. I have been working on a greatly reduced salary as I don’t want to burn all of the capital before we even have a chance to grow. My partner runs the business side of the venture and I run the distillery (developing recipes, fermenting and distilling.)

My partner and I recently had a argument about ownership of the recipes. He believes that because I am using company resources that the recipes belong to the company and that I should teach them to the other distillery workers. I told him that until we have some sort of legally binding contract I would not teach anybody anything.

My biggest fear is that I teach unskilled distillery workers my recipes and methods and my partner finds a way to get rid of me without any form of compensation. I feel a way to protect myself from this is to have shares in the company, as promised, and also receive a percentage of sales of all the recipes that I create.

So my question is what do you think is a fair percentage of shares and a fair percentage of sales of the recipes I create?

Keeping In mind these facts:

  • Initially I invested 10% of the capital in the company

  • My partner invested the rest of the capitol

  • at the present time the company is not making a profit and the running costs are coming out of my partners own pocket.

  • Conservatively speaking, within two years I feel the company will start making a profit.

  • At the present time my salary is very low and I am not being fairly compensated for my experience, talent and time.

  • All of the recipes are being created and developed by myself.

Thank You

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1. I am no lawyer.

2. He who has 51% has control, and he who has control calls the shots.

3. You own 10% of the company, (in theory), but there is no written agreement.

4. You are an employee and deserve fair compensation, even if it is rolled forward as to when the company can pay it. Regardless, the intellectual value belongs to the company, but you still have to put a dollar value and or share value to make it fair.

5. The skill set that both of you bring to the table are both unique and synergistic, together both of you have to work that out. He could fire you right after you teach others your skill set. Draft an agreement so that doesn't happen.

6. Verbal, though defensible, is a fast way to loose your ass. People change when it comes to money and perception of worth. My partners are life long friends and good business people, but we drafted a complete working agreement prior to starting any significant work. So we all know where we stand.

I hope this helps, I did have a guy try to steal my company through some shrewd actions, untruths, and deception. My partners and wife saved my life. Thank God,.......... there are real sharks out there.

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Central to your question are several intersecting issues relating to ownership vs. control, etc. As stated above, a clear set of organizational documents should be in place before any business begins. I'm not a practicing lawyer, but I do recommend their services in these matters. Don't build your distillery on the sand.

As for protecting your recipes, they are generally only protectable as trade secrets. They have to be truly secret, which means they can't be in the public domain. Your secret bourbon recipe may not be so secret. Too much emphasis on secret recipes as a business asset can be dangerous, and misleading. Instead, focus on building a long lasting business. Verbal agreements lend themselves quite well to battles that will destroy your business. If you truly have a secret recipe, you must take reasonable measures to establish it as intellectual property owned and protected by your company in writing.

Companies use non-disclosure agreements to require secrecy by all to whom they are shared. Recipes can't be patented or copyrighted. It wouldn't be in the public interest to forgo food or beverage options for anyone. Imagine if I couldn't make a grilled cheese sandwich without paying you a license fee. Keep in mind, a trade secret is not protection against independent discovery.

Last, trade secrets are generally governed under state law, so start local if possible in your search for counsel as with all things.

Here is a link to a great resource provided by the U.S. Patent and Trademark Office on aquiring intellectual property protection for food products:



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Thanks for the advice guys. I will definetly be writing up a contract with a lawyer as soon as possible.

It is true that I am merely an employee at the present time, but I feel my situation is somewhat more complicated than that. My partner knows that I could be earning 5 to 10 times more money doing that same job in Australia. He also knows that I would not be here unless there is some backend deal that compensates me for my skill, experience and time.

It should also be noted that our distillery and company is located in Asia, not the USA. I understand that in the USA the distillers are paid a fair wage and the recipes belong to the company. However, I feel that my situation is different. Would you give up all your trade secrets for a couple of thousand bucks and an uncertain job security?

In the end the deal that is worked out is between me and my partner. Just thought that maybe there was some other people out there in a similar situation.

Thanks for the adobe guys. It was of great help.

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Jimmy you should discuss setting up at least 2 formal Agreements a Share Holder Agreement, that describes the value and interest in the Company and how you operate at the Corporate Level and additionally an Operational Agreement that specifies you and your partners working role within the Company....Perhaps you should discuss with your partner that you have invested 10% which is your present value (it sounds like), but then there is a percentage earn (whatever you agree to with your partner) in each year so your partner can be assured that you won't walk and you are motivated to stay for more equity each year....The point I think all these great posts here are making is whatever you do it needs to be in writing....Good luck!

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