As a founder with 2 co-founders, what is the best way to split equity?
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As a founder with 2 co-founders, what is the best way to split equity?
I’m the founder and CEO. I have a COO and CTO as my co-founders and the CTO wants to get paid in order to do more than 3-5 hours a week. I have been working on this project for about two years and she is helping it come to life and doing quality control on the web development. She says that once she gets paid, she’ll do development and other tasks and make it a full-time commitment, but until then, she only wants to put 3-5 hours a week. On the other hand, I’m putting full time work into it. The COO is also on a part-time basis. What would be the best way to equity split? I want to maintain majority vote and we’ll still need to get funding, so some equity would need to be
reserved for that as far as I know.
Asked on January 31, 2018 under Business Law, Colorado
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
If you need to keep control, you have to reserve 50.1% or more for yourself. Then figure out what you might need for investors (20%? 25%?). Then split the rest between the two founders. If they are working and have been working part time, a reasonable split might be 51% for you; 19-24% for a future investor; and 12.5% to 15% for each cofounder.
Note that you can separate ownership from pay: you can pay them a larger salary than you, for example, while retaining much more equity for yourself for both control purposes and so you will make you money on the back end, when the company starts throwing off profit or when you sell it to someone.
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