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.
Could I create a contract promising him 50% of profits from the game? The contract would be created by the LLC.
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.
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.
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.
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.
As I found to my misfortune , get a lawyer for a business contract. The wording needed can be subtle and important.
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.
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.
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.
