Many Texas startup owners worry about how they will divide up the equity in their company. There are several factors to consider regarding this issue.
Parties must consider the importance of roles in the company when they decide to form an entity. Top-level executives, such as CEOs, have more influence than co-founders who serve primarily as consultants.
Overall contributions must be kept in mind, as it is not uncommon for one co-founder to contribute more than the other. It is also normal for the co-founder who originally came up with the idea to have a greater equity stake.
Sacrifices are a major part of any business startup, but some co-founders may feel as though they made a greater sacrifice than others. For example, a co-founder who gave up a high-paying job might have a greater equity stake than a co-founder who was previously unemployed. All of these factors are important considerations in company ownership.
Equity share is one of the top business startup issues. Even though many feel as though making the determination is simple, it often involves several issues to take into account. Consulting an attorney is a good way to help determine how to divide the equity when it might otherwise be difficult. An advantage of seeking legal advice in a joint venture is that the attorney can help to avoid any conflicts that may arise during the company’s life. Many do not think of the impact that a dispute between co-founders could lead to. With business equity at stake, minimizing damage is crucial.
Source: Inc., “CoFounder Problems: How To Resolve Equity Issues,” John Rampton, Sept. 29, 2014