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Sweat Equity: How to Trade Your Services for Business Ownership

sweat equityIf you’re looking for multiple streams of income to support you, trading your services in exchange for sweat equity in Internet startups is one way to accomplish your goal.

From computer programming to search engine marketing, the possibilities are endless if you have a skill set that others want to use.

How do you trade your skills for business equity?

Typically, you’ll want to a hybrid package of compensation where you’re paid a portion in money and the balance for your services in equity consisting of corporate stock or LLC membership interests.

How much sweat equity should you receive when you barter your services?

That depends upon what you bring to the table and how much your client needs your services.

Which Internet startups are most receptive to giving you equity in exchange for services?

Small ecommerce businesses and startups that aren’t funded by venture capitalists or angel investors are your best bets for cutting a deal where you end up with partial ownership of the company by providing services.

However, it’s important to carefully evaluate these companies carefully because of high failure rates and the dishonesty of some entrepreneurs.

Should you trade your services solely for sweat equity?

It rarely makes sense to provide services only for equity. Most companies will not become the next Google or Amazon.

This means you’ll still want to generate some money on the front end to support yourself and consider the equity essentially a bonus if it pays off for you later.

Equally important, the client who insists that you trade your services solely for equity likely is broke and has a bad business model that will fail, leaving you with nothing to show for your hard work.

What about bartering services in exchange for payment over time by an Internet startup instead of equity?

In some limited circumstances it may make sense to accept partial payment now and becoming a long-term creditor of your client for the balance due for your services. This is different than the common practice of getting paid in installments based upon completion of certain milestones during a project.

As a practical matter, you’ll want to make sure you’re getting paid over the long term and there’s security in place to protect you in case the client defaults.

Whether you’re trading services for sweat equity or becoming a creditor by accepting payments over time, your Internet lawyer can draft the right legal documents to protect your interests so that you get the best deal possible. Remember, that if an agreement isn’t in writing, chances are you’re going to get screwed even if your client has the best of intentions.

To speak with Internet Lawyer Mike Young, the first thing to do is schedule a telephone consultation.

Mike Young, Esq.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

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