Tim,

If it is as you state a friend, who is doing a good job (not a friend that's only there because he's a friend), you should come to some mutual agreement. I think you'll have a lot of talking to do (with your friend). Make sure that he feels that he earns what he is entitled to, without you (or your other partner) thinking that he is earning more than he should.

Second point to consider is:
Does your friend want some financial security, or would he settle for the gains (or lossses) of profit-sharing? Much will depend on your friends situation and his needs. Only your friend can tell.

There have been a number of suggestions in the posts. Consider these and the ones you have in mind. Write them down, and review them with your other partner. Select the ones you both consider OK, and then start the discussion with you third partner (friend) and try to come to a consensus on what should be ok for all parties.



Human relations are really complex to solve .And all the management fundamentals fails against long term true friendship ...
Ha, and you thought microcontrollers were difficult :-)

I don't think management fundamentals should fail against friendship. Just make sure that you can separate businness from private. "Friend" is private, "associate" is businness.

My EUR .02

regards
Patrick