I am currently dedicating my free time to developing a mobile/web application, which I consider a side job.
I initially created an app for a former colleague, for which I was compensated. However, he is interested in further professional enhancements to the app but has a limited budget. Consequently, I proposed a partnership, though we have not yet discussed the specifics. Meanwhile, I have begun developing the API and the mobile app.
In this partnership, my responsibility will be solely in development, while he will manage administrative tasks and potentially hire personnel for sales, installation, etc., though he may also undertake these roles himself.
Despite my seemingly greater effort, the original idea is his, and he will oversee the sales aspect. Therefore, I am inclined to agree to an equal 50% share.
The app will operate on a subscription basis, with different pricing tiers, e.g., Package A at XX francs per month, Package B at XXX francs, etc.
Our proposed financial model is to first cover operational costs like server fees, employee salaries (if applicable), etc., and then evenly split the remaining profits.
During the COVID-19 pandemic, I registered a sole proprietorship but was informed that activation required securing a client and entering a contractual agreement. At that time, I did not pursue this further. I assume my business is currently sleeping, but this new opportunity could revive it.
- Is splitting the remaining profits 50/50, after expenses, a sound strategy? If not, what would you recommend?
- What business model should we adopt, considering we are both self-employed? Should I retain the rights to the app/codes and sell licenses to him, which he then resells to his clients? Or should we proceed with a 50-50 profit share? If so, how can I incorporate my company into this arrangement, given the presence of two separate entities?
- As I am already employed full-time, will owning a company offer any tax benefits, or is this approach bad?
My goal is to avoid a dynamic where I simply develop the app under his direction, giving the impression that he is my employer.
And Of course, I will ensure that we formalize our arrangement with a legally binding contract.
I appreciate any advice on this matter and hope I’ve brought my issue to the right place.