Table of Contents
Summary
- Rule 1) Try to split as equaly and fairly as possible.
- Rule 2) Don’t take on more than 2 co-founders.
- Rule 3) Your co-founders should complement your competencies, not copy them.
- Rule 4) Use vesting.
- Rule 5) Keep 10\% of the company for the most important employees.
When a startup is initially formed, it will usually authorize 10,000,000 shares of common stock. The initial allocation of this equity will be broken down into three groups: Founders will be allocated 8,000,000. These shares will be distributed based on each founder’s ownership percentage.
How do you divide up equity among founders?
Calculate Your Co-Founder Equity Split Check the boxes of each founder who contributed to the effort mentioned in each question. If two or more founders contributed, rate each founder’s contribution on a scale of 1-5; 1 being the lowest contribution and 5 being the highest contribution.
Is co-founder a shareholder?
A founder has exactly the same rights as a shareholder (if they hold the same class of shares). To govern the relationship between the founders and shareholders of a company (e.g. restrictions on transfer of shares or consents required for decision-making), you need a Shareholders’ Agreement or a Founders’ Agreement.
Founders shares are low-priced common stock issued when a startup company is incorporated. The shares are typically spread among initial parties, proportionate to their role or investment in the company. The shares are allocated at this point, but do not become vested, or owned, until a later time.
How can I give my co-founder 50\% of my company?
For example, if you own 100 shares in a company (let’s say those are the only shares), and would now like to give your co-founder 50\% of the business. So, rather than transferring 50 of your shares, it’s easier to issue 100 new shares to them.
What is the difference between a co-founder and a startup founder?
By contrast, a co-founder does not have a monthly salary but owns a part of your company’s shares due to the equity agreement startup offers to sign. This person plays an active role in decision making and demonstrates high commitment.
Should you split equity among startup co-founders?
Since at the early stages startups sometimes don’t even have enough revenue to pay salaries, one of the most common ways to inspire and support co-founders is a startup equity split. Why Allocate Equity among Startup Co-founders?