Ask HN: How bad is the decision to work as a co-founder without legal contracts?

From your standpoint, without proper documentation: (1) your biggest risk is getting ripped off for your labor; (2) you would have leverage in that any IP you would develop would belong to you and not to the company until you assigned it by formal documentation; (3) if you did get ripped off, you could bring a legal claim either for breach of a verbal agreement or for fraud; (4) such claims are difficult and expensive to bring and thus not practical in most cases; (5) a lawsuit almost always leaves you worse off than does almost any other alternative; (6) therefore, get some reasonable understanding up front of what you can expect to get from your efforts and use at least informal means to document it.

You may or may not learn from this experience, depending on whether the other founders bring you into their inner circle.

Finally, I have seen this pattern work just fine very often in spite of the legal risks. In most of the good cases, though, the founders know each other and have a relationship. The cases where most of the problems arise are ones in which the founders do not previously know each other (what might be called opportunistic teaming). From your description, and from the length of time they want you to do work without documentation, I would say your case falls in the higher-risk category. Your legal downside would very likely be limited to losing your labor while getting cheated of any promised equity. The company has the greater legal downside from failing to document, mostly relating to its IP.

I'm not allowed to talk (much) about it, but the short version is: been there, done that, to the tune of several million bucks that are currently missing from my pocket.

So, the answers to your questions (in order):

1) Worse than you can imagine.

2) Some do, but not all. Which means, to be safe, you have to pretend no one does.

3) Yes, undoubtedly. There's only two ways to find out: a) lawyer up, or b) roll the dice, and pay the price. I'd strongly recommend the former.

4) Not much. You might get lucky and draft an agreement that is as good as a lawyer would write. You might also get hit by a meteor made out of twenty-dollar-bills. I wouldn't count on either.

5) Diddley-squat, if your goal is to protect yourself.

To sum up: pay the damn lawyer. View the expense as something like health insurance-- it's a pain in the ass to pay for it when you don't need it, but it's a zillion times worse to really need it and not have paid for it.

More likely - organizer claims that your contribution is worth significantly less than you think that it is. (Perhaps he'll say something along the lines of "it was my great idea and organization while anyone could have done what you did".) You get a pittance and walk away, mad. On the way out, you'll sign over what you did.

Point out that you own everything that you create until there's a formal agreement otherwise and that that will make it impossible to get investment. The organizer will probably then decide that such a formal agreement is necessary. At that point, you point out that said formal agreement needs to include "consideration" for you. (It actually doesn't, but ....)

At the very very least, get a specific list of deliverables, your profit share percentage, and his ownership rights to your code on paper, then get him to sign and date it. Be as explicit about everything as possible. Not being able to afford a lawyer is no excuse for not getting your general agreement on paper.

If he resists, remind him that the paperwork protects him as much as it protects you.

Thanks keltecp11. I am still thinking.

Otherwise, don't start working until the registration is complete.

In my experience? Pretty bad... A better financial decision is to make a bet with the other coders. $2000 says he doesn't pay up.