FairSoftware tries to kill the handshake deal for iPhone app developers

It’s the classic story. Someone has a great idea, they decide to work with their friends, then there’s real money owed or earned, and they don’t have a written agreement to settle their differences — cue the tears. A startup called FairSoftware wants to help you avoid such disasters by creating a business and legal framework for early-stage projects. And this week, it added iPhone applications into the mix.

The Mountain View, Calif., company’s underlying idea is the same across platforms, whether you’re building software, writing a multi-author blog, or, now, building an iPhone app. In each case, if you’ve got a great idea, you can come to the FairSoftware site to find team members. To convince people to work with you, you give them “virtual stock” in the company, and that stock pays off in a share of the revenue when the money starts rolling in (hopefully).

Basically, this heads off the problem that during the early days of a cool project, there usually isn’t a legal structure — that comes later, once the project has transformed into an incorporated company. With FairSoftware, the legal protections are there from the very beginning, they’re what help you build a team and a project. And by offering virtual stock instead of money as a payment, a prospective entrepreneur doesn’t need as much capital to get going.

Behind the scenes, FairSoftware is the one handling the product distribution and the revenue, which it then divvies up among the team members according to the virtual stock. In the case of software and blogs, the company is already taking a 4 percent cut of revenue; chief executive Alain Raynaud says he isn’t doing this with iPhone apps yet, but is definitely looking at ways to make money from that channel too.

In the best case scenario, your project will become a serious business, and you’ll want to break free from FairSoftware’s system. Raynaud says FairSoftware offers a legal process that making it easy for teams to “graduate” into an incorporated company. That process has protections in place if there has been a falling out within the team, or if there have been other disputes or departures. For example, if a developer left the project, then FairSoftware’s contracts say the code still belongs to the team, but that developer still keeps his or her shares in the company. And if a company incorporates, those shares turn into real company ownership.

Reynaud isn’t saying too much about user or project numbers (FairSoftware launched at the TechCrunch50 conference last fall), except that the early reception to the iPhone program is positive, and that he’s been surprised by how many FairSoftware users want to start blogs focused on specific countries.

FairSoftware is self-funded.