how do I split up equity in my start up?
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how do I split up equity in my start up?
I am the founding partner in this startup. My partner is bringing in
all the money and has a financial background. I will be the one
working full time, 20 years of industry expertise, CEO, Operations, I
am bringing in talent, and Customers. My partner will be there around
50 of the time. How do we split this start up. By the way hew will be
bringing in around 150-180,000.
Asked on March 9, 2018 under Business Law, Utah
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
However you like, if you have an LLC (the recommended structure): with an LLC, ownership interest is assigned by the "members" (the owners) and can be anything they agree to--the law does not impose a structure or split. Whatever you and your partner agree to is acceptable. For example: I had a publishing LLC. I contributed $15k and worked full time as president; partner 1 contributed no money and worked part-time in editorial direction; partner 2 did not work, but contributed $150k cash. We agreed to a split where I owned 55% (so as the full-time member, I could control the business decisions), the investor partner received 25% ownership, and the part-time, non-investing partner received 20%. It was what seemed "right" to the three of us.
With a corporation, including sub-chapter S, unless you get fancy about having multiple classes of stock with different voting rights, ownership (and hence power over the company) is generally asigned on a "cash basis": the more share you buy, the more you own.
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