Side Project - Conflict of Interest?

[Hardball]

I own a small delivery company with a partner who is also my best friend (I know, bad idea). I have owned a business in the past and he hasn't but I believed he would be a good asset. It turns out that he is not quite living up to my expectations (in terms of creativity, innovation, initiative) and is more like an employee than an entrepreneur. However, I would like to continue working with him.

At the same time, I've been wanting to develop a software application with the intention of using it in the company for day-to-day operations as well as licensing it to other companies. I feel that my partner would provide absolutely no value towards developing this (I have a technology background and have software development experience). I would like to develop the software as a side project but allow our business to use it for free and I would also benefit from real-world testing by using it in-house.

Is it wrong to want to do this on my own and for my own benefit? Should I keep it in the company so my partner benefits? I don't want to cause problems with my partner and I feel like he would expect that he should have part in it since it is related to our business. How do I handle this?

[Steve B]

I think the two things are unrelated and that you should be able to develop and benefit from it on your own.

[Freelancier]

Yes, you should be able to do this legally, but...

But will it create hard feelings with your partner and friend if the product takes off? Is that important to you?

[huggytree]

since software and a delivery company are 2 completly different things i dont see where the issue is

start a 2nd company and develop away
and as far as your partnership goes it sounds doomed to fail....the sooner you end it the better for you AND your partner....sounds like its already bad for you

end your partnership and odds are your friendship....never become a parter with a friend or a relative

[GreaterVisibility]

Another vote for doing the side project on your own. It isn't part of your business with your partner.

Hey, do you need a partner on this software gig? I'm not really talented in that realm, but I'm good at doing nothing and would love to get paid for it, so I'd make a fantastic business partner. ;)

[Harold Mansfield]

Another vote for doing it. A business partnership in one thing doesn't mean that you are life partners and he's privy to everything you do outside of it.
I agree with Huggy that you should completely and legally separate it from your current business and partnership.

Don't use any money (except your own salary of course) , computers, tools or resources from the business. Don't work on it in the shop. Don't have him cover for you while you work on the software in anyway. Never use working on the software as an excuse for not doing something for the business.

Basically, treat it like Fight Club. Don't talk about it.

[seolman]

The main issue is: if you use assets from the partnership to develop the product you are morally and legally obligated to get your partners approval to keep it separate (either by him gifting his part to you or by you paying for the time/assets used).

If you personally cover all costs of the software development out of your own pocket the software should be yours (and separated into a new business) provided you don't have anything in your partnership agreement that prevents you from engaging in other business practices outside the partnership.

[Hardball]

Thanks everyone for your feedback. The big thing that's holding me back is that the program I want to develop would be related to our business and I want to use the program in our business (so he would benefit from its features, I would benefit from debugging and getting feedback from real-world use). I guess I will tell him I'm going to do it on the side, with absolutely no resources from our existing operation, and see what he says.

[ArcSine]

I'll just pile on with agreement to the opinions already given. Take note, though, of Seolman's caution and make sure there are no strings there. Similarly, make sure your work on the side project doesn't reduce the input and effort level you put toward the delivery biz, below that which your partner has a right to rely on.

Best of success with the software development.

[Steve B]

I'll add a cynical and practical note all in the same comment.

Since your original partnership (and friendship) is going to end anyway, you may as well do it now so you won't have to worry about this side business issue.

[billbenson]

I agree with Harold (which is pretty much everybody here). But do it in a way that can maintain the friendship. Perhaps giving him a bigger share of the original company. Something that softens the blow. Maybe you still can be friends.

[huggytree]

I'll add a cynical and practical note all in the same comment.

Since your original partnership (and friendship) is going to end anyway, you may as well do it now so you won't have to worry about this side business issue.

exactly how i feel....this new plan of yours is going to put additional stress on the partnership when your debugging the software with your company

[GreaterVisibility]

I agree with Huggy and Steve, in that you should probably just end the bad partnership. I don't know how much your friend put into this, but if he's not pulling his weight, you will have to end this eventually, so do it now before complicating it with the software deal. If it ruins your friendship, the reality is that something was going to anyway, as I see it. Partnering with him in business probably just hastened the demise of the friendship, but who knows, maybe he'll understand if you presented it well. I wouldn't worry so much about the friendship if it requires you to give him a larger part of the original deal as mentioned above, because you have no obligation to do so and he hasn't earned it. Don't feel guilty because you have other skills and plans for bigger things, this is something apart from the original deal and he's going to benefit with free software if this pans out, which he should be grateful for.

[Freelancier]

I agree with Huggy and Steve, in that you should probably just end the bad partnership.

What ya'll are failing to hear is that the OP plans to use the partnership's business as a testing ground for the new product. And I'm sure as the cash cow to fund it (indirectly). So he's not going to just drop a business that he views as part of the future of his product.

[Steve B]

Nobody said to drop the business, just drop the partnership. I'd offer to buy out the other guy. Or, cease operations and immediately start up another business that is exactly the same without the partner (I'm taking a wild guess that they have nothing in writing to prevent this).