Question: My two friends and I have been working on a new venture for almost a year. Our site is in beta and we actually have a few customers (it’s a subscription-based model). We’ve spoken to a lawyer about incorporating, but we don’t know how to split-up the stock. Should everyone just get one-third?
Answer: Not necessarily… The splitting of equity is a significant business decision, which must be negotiated among the founders based upon their respective contributions to date and their expectations going forward. Simply dividing the shares equally among the three of you may sound fair on its face, but it’s usually not the correct decision.
Factors you need to consider include:
- Whether any of the founders contributed cash and/or intellectual property to the venture – which would warrant a higher percentage for that founder.
- Whether any of the founders will be working part-time or less than the other founders going forward – which would warrant a lower percentage for that founder.
- Whether any of the founders put in more time prior to the incorporation (or actually started the venture) – which would warrant a higher percentage for that founder.
- Whether any of the founders will have greater responsibility or will be adding more value going forward than the other founders – which would warrant a higher percentage for that founder.
To read the full, original article click on this link: Ask the attorney: What’s the best way to split equity? | VentureBeat
Author: Scott Edward Walker
