So I've been looking around online for help with this, but I haven't really found any clear-cut answers. Me and one of my best friends started collaborating on a fictional world several years ago just for fun and it really turned into a strong setting. We came up with the details, an outline of the "main" plot, and all that jazz. It was a playground for us and our collaboration made it that much stronger. My friend and I each wrote stories in this setting for practice and that was fine for us. But we let many people over the years read our work and they asked why we hadn't tried publishing these things.
Fast forward to now. I've finished a new novel based in the setting, edited it, reedited it, and have polished it as much as I could over the last 2 years in an attempt to actually get something published. My friend is also penning another novel in the same setting--but not a direct sequel to mine. Certain side characters are in both stories, as are locations and such. It's worth noting that we edit each other's work and have a say in things that happen, so we both have a hand in everything.
I've made a nice, short query for my manuscript (after much anguish), but here's my question: how do I approach labeling us both in terms of querying agents and moving forward? Is it OK to just list us as co-authors with everything we do in this setting, even though only one of us is actually doing the writing on a particular novel? Does that even matter?
Yes it matters!
You need to sort this out NOW, before the stakes get any higher. The last thing you want to do is try to come to agreement when a wheelbarrow full of money is staring you in the face.
Most likely you need form a company that owns all the content you and your best friend create in this world. The company receives the income, and you can agree on a case by case basis how to divide it up. You get 80% on books you write, he gets 80% on material he writes. You divide the proceeds from film options 50/50. Those are just suggestions, not some sort of standard.
You absolutely can NOT query this or sell this as a single author. You do not own the work yourself because your best friend also had a hand in creating some of it.
This is the same problem that writers of fanfic run into. Because they did not create the world or the characters they're using, they don't own the material free and clear.
You'd do well to consult a publishing attorney to help you set up a company and get the details done right.
This isn't the kind of thing an agent will see and think Later Gator. It will help if you can tell her the details are sorted out already.