Co-founder never did any work, verbally agreed to vesting. Not listed in any company documents

If this person want's to be a dick he will be able to cause trouble. And if he really feels that he owns 50% of the company then he's likely to be a dick if you are successful.

Getting advice online is okay for this but there's no substitute for a quality lawyer.

If there was no work done and you can prove it then you might be ok. However, if he did any work at all (including research) and he was not paid for that work then he could try to claim he owes equity.

A great lawyer will be able to figure out the best remedy for your particular situation. Don't freak out about how much it costs.....it will be worth it.

Agree with above. Start building the paper trail of you and "cofounder" and lawyer up. Every email correspondence, recorded conversation, and timeline of events and work product. Add financial records if you had a business account showing deposits and withdrawals.

Just because he didn't put a dime in the company doesn't mean he legally deserves nothing. That's not how the law puts it (in the US anyways). If both of you start the company together, without any formal agreements, both of you own 50% of the company.

Now it sucks you did all the work. And legally you might be able to get a lawyer to say he really wasn't part of the company AT ALL. But if there was some paper trail that he somehow was a co-founder, then he could cause trouble.

You seem to believe just because he was not formally given equity and your name is on all the documents you're safe. That's a poor man's solution. The proper solution is to do the right thing and square it off with him. Don't be chickenshit about it. Sometimes a lawyer (or lawyer friend) might be able to talk more sense into your friend since they can speak with more credibility than you (of course he's going to say you're screwing him - maybe you already did).

Good luck

I also think you could drop your drama factor. If he really did NOTHING, and there is no contract of co-founding agreement, there's nothing to worry about. Drop him and move one.

On your part of personal responsibility, stop having business discussions via tex while drunk. If your supposed co-founder has spun TWO businesses off your ideas, STOP talking to him. He's a dick (as said above) and will continue to be one. So step up and decide to actually run a business, not buddy up with a friend.

Lastly, stop worrying about being a dick yourself. A great teaching of the world says sometimes you have to play the integrity of the world - ie you have to be a dick to beat a dick.

AND...now matter what it costs you to get our of this relationship (pay him off) you're still getting out cheaper than what it will cost you if you keep going. The biggest lesson - get a lawyer and don't ever enter into a co-founder situation without a written agreement. EVER. (and no, I'm not a lawyer!)

I was in a somewhat similar situation. I recall that one day he referenced being entitled to 50% because he had the title of co-founder - lol!

In my case, paperwork ended the situation because it freaked him out. While he acknowledged not putting money up and not wanting to stay long. He wanted the full amount of equity with no vestment, and it referenced how he could be removed for incompetency. At the time I was hurt because I personally gave him every single reason to trust me that I could think of so he would just go and knock it out the park, prove his weight. If he had done his job, I would have offered him 50% because he would have had a matching contribution to the company. After months of back and forth, he finally agreed to vesting, but never signed the papers.

In hindsight, it's pretty funny as his first reaction to the paperwork proved he was too immature for founding a company. He didn't understand business.

In the end, I got lucky because he was so focused on equity and not doing what I or the customer asked that he failed to do his job. He later abandoned when I asked him to sign paperwork for the fifth time. I had never put so much trust into someone else before, or invested that much faith, time, and money so it was disheartening to me to watch all that time and faith go to waste.

But, my business is so much more important to me than trying to cure someone's emotional baggage around an irrational fear of being fired or losing equity.

At the time, I thought it was the end of the world and it truly wasn't. It's not for you either. It was the hardest, biggest business and life lesson I've learned and I'm grateful for it.

Have a talk with him and force the conversation about you and him to sign the docs with his job description and performance based milestones. If he doesn't sign it's because he either:

1) doesn't want to be a part of the company

2) knows he personally doesn't add value (only fearful)

3) isn't mature enough to handle what will come with the money (fearful and feels entitled without wanting milestones)

If he signs and doesn't meet his performance, he fires himself and returns the equity back to you. If he doesn't sign, but delivers the work, then you have a mess on your hands. BUT, if he doesn't sign and doesn't deliver work, the most you're potentially liable for is minimum wage for the hours worked (depends on state).

Clearly, not a lawyer, just a perspective from the outside looking in.

Now, for a harsh bit of friendly advice....

Be honest with yourself, has he truly not done any work? If he's not around for a year, if you haven't talked to him in a year, are you really running a business together? Plus, who the heck runs around talking about equity splits to people not involved in the business? Get the paperwork signed (or not signed) and focus back on the business.

Good luck and it isn't the end for you although it feels like it's everything going to sh*t, it's not. You'll get through it. If you end up cutting a check in the future, it's because he was able to prove his hours within the statute of limitations. (Depends on state)

Consider how likely you are to get sued. In particular: past history of it, present/future value of equity, other person's financial status, other person's financial skill set, etc.

If you judge any realistic chance of it, I'd negotiate an offer where you cough up some small percentage (under 5%) in return for a quit claim on all other rights.

It isn't that you are or are not right - it is that a full blown lawsuit will cost you time and money. The very fact that there was some electronic trail means any lawsuit brought by the other isn't going to be automatically thrown out of court, meaning the threat of lawsuit is credible, and the punishment isn't the loss of the lawsuit but rather than financial and time expenses mentioned above.

This is why people need to have the legal side of their business in place instead of acting like they can just ignore it til all hell breaks loose... Try using some of the legal tech out there. I know Shake Law creates contracts for free and Traklight has a free cloud storage system that verifies documents (point being you can use it back up claims within court).

Take him to court for damages - causing losses by abandoning of his responsibilities , be first to do it. Plus- newer admit on public that you where drunk.. And blessings