sweat equity partnership agreement
not all contributions to a business are financial. sweat equity is the increase in a business’ value thanks to hard work. but you will want a legal document that protects your right to equity. but you don’t need a sweat equity agreement for your employees for one simple reason—they aren’t owners and you don’t intend to make them owners. the term refers to an ownership stake in the business, and a sweat equity agreement is only necessary if you want to grant an ownership stake to someone who doesn’t have capital to buy their way in. when you form a partnership, each partner brings something to the arrangement, usually start-up capital as well as their labor. you might also need a sweat equity agreement if you are forming a different business structure with someone who wants to earn equity by working. if you are unsure about whether you need a sweat equity agreement, meet with an attorney to discuss your case.