How many people founded Apple?
If you’re like me, you confidently answered two. Steve Jobs and Steve Wozniak. In 1996.
But, there was a third founder.
He worked with Steve Jobs previously at Atari. He received a 10% equity stake for designing the original Apple logo, writing the Apple I manual, drafting the original partnership agreement, and the important task of mediating disputes between Job and Wozniak.
Weeks later, he sold his stake in Apple for $800. One year later, he received $1,500 to relinquish any claims against Apple.
Why the cold feet?
Apple was originally structured as a partnership. Legally, all partners in a partnership are responsible for the corporate liabilities of any other partner. Unlike Jobs and Wozniak, respectively aged 21 and 25 at the time, Wayne had personal assets that a potential creditor could seize. That risk was more than academic to him. He founded a slot machine company 5 years before joining Apple. That company failed. And he received an education on the downside of a company structured as a partnership.
Before being too critical, remember that Apple was a struggling start-up in 1976. First year sales were $174,000.
But by 1980, sales had reached $117 million. Two years later it passed the $1 billion sales threshold. Today, the company is the most valuable U.S. company on the market.
That’s not the end of the story, though.
In the 1990s, Wayne sold the original Apple company agreement, signed by the 3 founders, for $500. In 2011, that same agreement sold at auction for $1.6 million.
In looking back, Wayne said his decision to leave Apple was reasonable given what he knew of the risks at the time he made his decision. He said he had no regrets about his departure.
He did, however, express regret that sold the historic partnership agreement for pennies on the dollar.
Wayne is now 82 years old. He retired to a Pahrump, Nevada mobile home park where he sells stamps and rare coins.
In retrospect, Apple could have been structured differently. An S-Corp, a C-Corp. (LLCs were not really around in 1976. In 1977, Wyoming passed the first state legislation enabling creation of limited liability corporations.)
Thinking about liability before there’s a problem makes sense. The solution to partially addressing risk resides in properly structuring your entities. Make sure you have reasonable amount of insurance.
Our US liability system partly explains Ronald Wayne’s trajectory.
It does not explain why Pete Best left the Beatles before Ringo joined and they became superstars.