I'm a recent college graduate who's been contacted by a student at the Stanford business school to work on an internet startup. He just got an engineering degree and developed a website that he wants me to help with, and VC or angel investor funding seems imminent. I've negotiated with him and he's offering me 60/40 ownership, which seems fair because he did a lot of work to set up the site and he's using his newly formed connections to secure funding.
One concern, though, is that I've never met him in person. He actually found me through a Stanford mailing list, but I've moved home recently so I can't meet him in person. While he seems like a legitimate partner and definitely a bright guy, there are still many unknowns. But given that I don't have any obligations right now and this is a once-in-a-lifetime opportunity, I feel it's worth the risk. I'm going to make sure to agree to some sort of legally binding contract before we even get investor money, and we're both going to gain equity through a 4 year vesting schedule with a 1 year cliff.
Of course, I probably need to consult with a lawyer in person, but I was wondering if you had any general advice about how to proceed. What do I need to do to set up the best basis for incorporation? I've read it's best to set forth the agreement before we get funding, but I don't have much money and I'd obviously like to keep legal fees as low as possible. I hear Y Combinator provides free generic forms (http://www.ycombinator.com/seriesaa.html), but I don't know enough about the legal aspect yet to know if they're suited for us.
Also, how do we agree on our division of labor? He's in business school right now and I'll be working full time on this project, so I'm worried about how much time and energy he can devote to the project. He's not willing to take a leave of absense at the moment. What sorts of agreements do people usually make in those circumstances? Also, we'll be paying our living expenses with investor funding. How do we decide on what we'll pay ourselves, and how will we go about doing that?