How did you come to the $10K number? Based on revenue? Each of your contributions? Tough to answer this without understanding if the app is on the upswing or on decline etc.

So...

Does he want 5% equity of the app or 5% residual royalties? My guess is that he wants to participate in the revenue. If that is the case, I would structure an X-year sliding deal that eventually worked him out of the app. It could be something like Year 1: 5% of PROFIT share. Year 2 3% of PROFIT share. Year 3 1% of PROFIT. Year 4? Nothing. It has to be based on PROFIT not REVENUE.

Structuring a company and then issuing "shares" in an app is insane to me given the likely lifespan of an app. Too much hassle.