Be a partner, CTO or just a freelancer?
"I write software myself and was involved in a couple of start ups.  One failed, another was wildly successful, but I did not receive much in compensation. The former I received stock, but since it failed, it was worthless anyway.  There should be compensation for your time in addition to equity in a company.   Any agreement needs be in writing.  In the later situation I was told to expect about a 17%/year bonus, but nothing could be guaranteed.  Translation:  ""It will never happen.""  It didn't, but I meet my lovely wife there so I have that for a bonus. Agreements need to address the bad things can happen.  What happens if one of you is no longer interested in continuing?  What happens if one of you die, or addicted to something?  What happens if one of you gets thrown in jail or disabled?  Right now you are full of optimism and hope, but bad things happen.  Cover those things while you still like each other. It might be enough to have a good salary, and some stock options.  You man not be interested in running the day to day business. Most of all good luck, I wish you all the best!" First, determine the workload he will expect.  Will you have to quit your other work, either for time or for competition?  How much of your current business will be subsumed into his business, if any?  Make sure to understand what he wants from you.  If you make an agreement, set it in writing and set some clear expectations about what will happen to your business (e.g. it continues and is not part of your association with the client).  Because he was a client for your current business, it can blur the lines. Second, if you join him, make sure there is a business entity.  By working together for profit, you will have already formed a partnership for tax purposes.  Best to get an entity, both for the legal protection and also for the clarity of law and accounting.  LLCs are simplest for small ventures; C corps are useful if you have lots of early losses and owners that can't use them personally, or if you want to be properly formed for easy consumption by a strategic.  Most VCs and super-angels prefer everybody be a straight C.  Again, remember to define, as necessary, what you are contributing to be an owner and what you are retaining (your original business, which for simplicity may already be in an entity).  As part of this process, make sure he defines the cap table and any outstanding loans.  Auntie June and Cousin Steve might think their gifts to him were loans or equity purchases; best to clear this issue up early before there's any more money in it. Third, with regard to price, that is an intensely variable question.  It matters what the cap table looks like, how early you are, how much work he's already done, how much work remains to be done, and how much it will pay off.  Also, if you do it, expect to be diluted by other employees, angels, VCs, other investors, strategics, and so on.  Luckily, more investors usually indicates a growing pie, so the dilution may not be at all painful.  But it should still be on your horizon.  You also need to consider your faith in your prospective partner's ability to run the business and to be a trustworthy partner (so you don't get Zuckerberg'd), and to market the business and the product to customers and investors. If you don't like the prospects, then opt for cash.  If you like the business but want to hedge, ask for compensation plus equity.  There are other tricks you could use to get out early, like forced redemption, but they probably wouldn't help either because it'd sour your relationship or the first VC or knowledgeable angel to come along will want you to relinquish that sort of right. It probably comes down to a basic question of your need for cash, his willingness to let you pursue outside work (hopefully high) and your appraisal of the business' prospects. Being a CTO is different than freelancing, obviously.  You have to ask yourself what you would more prefer to do! My initial recommendation would be to receive your normal freelance compensation for the freelance work you do AND separately deal with the issue of being a CTO.  At some point you will cease to be this project's freelancer should you become its CTO. Then again, by becoming the CTO immediately you should be able to negotiate a larger share of the company. Granted, my opinions should not be considered legal or financial advice and you should consult a professional before making any decisions.  Ja ja ja  ;)
Several things to consider: I don't see why your friend should pay any tax. It's not his income at all. And I am not sure where your income should be taxed in this scenario. Is he declaring it as his income somehow? The bank won't do it for him, the transfer as such should be transparent. On the other hand, money transiting on his account could in principle look suspicious, although €300 is unlikely to raise alarm. What I do know is that if you do pay taxes, 20% is not particularly high as such. There are four brackets of income tax (and tax-like contributions to the pension system) in the Netherlands, between 36.55% and 52%. Rates for personal taxes in the Netherlands are simply way higher than what you might be used to in Eastern Europe or what has been mentioned in comments.  In fact, if anything, 20% seems too low. I am at a loss guessing what it could correspond to, you could ask your friend how he came to that number. There various tax discounts (kortingen) and deductions (aftreken) that apply to freelance work (and some that apply to all incomes). €3000 yearly is quite low and would probably not be taxed at all if you were recently registered as freelance (zzp'er) in the Netherlands and had no other sources of income. But on the other hand, if your money is treated as being part of your friend's income, these wouldn't apply, as he is probably already benefiting from them. There are special rules for copyright fees. Not sure this is necessarily 100% kosher but I have met people who got paid that way for articles they wrote in trade publications. Accenture has several levels of partner. I'd be really surprised if it topped out at 250k because that's not very much even for a public company and also doesn't fit with the lifestyle of a few partners. I googled around a bit and there was an AMA on (of all places) reddit about a year back from somebody claiming to be a partner at Accenture, who reported 300k for a new partner, up to 1M+ for more senior ones (excluding equity) which actually sounds more reasonable to me.   Second observation: higher partner compensation does not systematically imply higher bill rates. Private companies doesn't pay dividends, for example, and partner compensation is not the only expense. Bankers in public banks can make that much and none of them are partners - viz. UBS &amp; co. (performance-based bonus at Accenture for non-partners - and Senior Executives are not necessarily partners - can reach 20k, no problem. Hell, a consultant might make almost that) My brokerage account (E-Trade) automatically spreads cash balances that exceed the FDIC insured amount into several partner banks, so just about any amount gets insured. "You can be a great CEO without knowing anything about technology.  However, right now, there are a lot of businesses going through Schumpeter level creative destruction due to technology. In those contexts, you *need* the technological expertise *as well as* the leadership.  You wouldn't seriously suggest ""a CEO doesn't need to know anything about finance, because that's what their CFO is for"". In this context, technology is just as vital.  The strength of the team will definitely fill in for missing skill sets. If what it was just about understanding how technology works or even understanding statistics, I think you can totally rely on the team to fill that in.  However, CEO's do need to understand their business. In this context, it is a need thing, not a want thing. If the business weren't transforming in some massive fashion, they could lean on understanding the past of the business and use it to extrapolate about the present &amp; the future. That isn't the case here. Certainly, I wouldn't expect the CEO to match their CTO for technical understanding/skills (if you can't lead people who are more competent then you, you've got no business with the job). It's about the understanding of the business." There is no requirement to open a company. You can work as freelancer. You need to report income and file returns. If your income is more than exempt limit, pay taxes. Apply for a PAN number if you don't have one yet. But there's a difference freelancing for your craft and managing people to so similar tasks.  Sometimes you just want the flexibility of working for yourself and you enjoy mastering the craft.   Not everyone's end game is more money.   If marketing and sales are not your strengths, yet you still have a steady stream of future clients, or can pick some up when you need to...why over complicate things?  When I first started out many moons ago, there was a contract programmer working at one of my first jobs.  He worked 6-9 months a year, and then traveled and relaxed the rest.  The summer I met him he was going to complete visiting every National Park in the US; sounds like a nice goal to me :) These new block chain coins with their smart contracts seem to be heading in that direction but I'd like someone to walk me through how two or more people with varying amounts of contributions to the organization can keep it all organized.  One partner contributes money while the other contributes time and assets. How do you determine a value of each persons contribution?  Do you convert each persons contributions to shares or coins? Last I checked, software authoring was pretty lucrative. Are you specifically looking to do some non-software work? The two things you mention are among the unskilled work o go after, but with some effort you might be able to use your skills to pick up other work. As a blogger, I've needed help with PHP and the blogging tools, the rate for help was $50/hr. Snow is too seasonal, but the walking surely doesn't pay that much, or does it?