If you do not plan to raise capital setting up an LLC is super simple.
There are plenty of templates for operating agreements.
The most important aspect of your operating agreement is to clearly define who is responsible for what.
If you plan to raise capital then you will want to form an Inc. There are many states where the laws are advantageous such as Delaware. These are a little more complicated but if you need any help give me a ping and I can get you on the right path.

P.S. He’s lucky to get any investment back, 90% of software companies fail.

Stick to the contract. It doesn’t matter what was said it only matters what was agreed. He entered into the agreement in good faith now he should honor the agreement. If he didn’t consult a lawyer then it’s not your fault that his interests were not managed properly, it’s his.

The market decides what it wants to pay for the product. If you can get more for your product and position it as a premium product, position it that way. If your wife is wrong then the market will correct her.