Ethics are not involved in this. There is nothing ethical or unethical about this deal from either perspective. Basically, the investor is making your friend his employee - it is up to your friend to decide if the deal is good enough or if he wants to counter (me, I would not give up complete ownership; maybe a 51/49 split my way).

He will never be more than an employee. He will have no say. He will work required hours.

He will be paid only what the owner is willing to pay. Will there be any benefits. Any insurance?

Any vacations? Will he be the only employee?

Who in his right mind would agree to this?

There are no ethics about a situation like this, its a business decision.

What's the point of starting a company that someone else owns? However hard your friend works and whatever success he achieves he will own nothing and someone else will reap the benefits.

It isn't ethical or unethical. It's just the way it is.

If the "investor" owns 100% of the company that means your friend owns 0%. If your friend wants to be an employee...so be it.

If the company has good prospects it's a crap deal for your friend even though there's nothing illegal about it.

I guess your friend would be an employee then.

If he is ok with it, than what does it matter to you?

My friend is planning to start up a company, however he does not have any money to put in it. There is an investor who is willing to invest in what the start up company needs, however he wants to own 100% of the firm. It is ethical for my friend to agree to these terms, even though he is not putting any money into the company?