Startup Compensation

One thing you need to do is stop computing with percentages. The only way to keep your numbers straight is to think strictly in terms of how many shares exist and how many you have, period.

Of course it's great to compute percentages afterwards as a guide, but if you try to use them to figure things out you'll just confuse yourself.

Finally, understand that each change to the cap table happens serially. That makes it easier to compute: Show what the company looked like (shares & totals only!) before you arrived, then modify exactly for you.

For example, did they issue new shares for your investment or did someone give you some of his shares? Once answered, it's easy to put those numbers in a spreadsheet.

You have many questions here -- all good ones -- you might want to split them up into different questions on the site so you can get deeper answers to each.

I have not been in this situation and looks like a real mess. Consider dropping startup 1. If you are prepared to drop startup 1 then you have negotiating power if you need that $20 an hour then your just consulting at that rate and view the loss as water under the bridge and lesson learned.

Always negotiate your terms upfront. Always have an attorney review and make suggestions. In general do not put money into something you’re going to do the work in unless a substantial level of ownership in something you believe in is provided in an agreement. Have everything in writing and make sure you have the info that shows who the officers are of the company. Also whenever possible work with people you already know when being a founder so a level of trust exists up front. Always have an attorney review the agreement prior to starting significant work.

When investing in a company normally new shares are issued from the company unless you are buying from the other owner. So total value of equity invested in your above example is 122K and you are 2/122 ownership unless something else is negotiated for your investment. Also don't do the agreement in email. You can discuss terms and such to negotiate over email but final agreements should be in writing, notarized (US) and reviewed prior by an attorney and sometimes also a CPA.

Difference between stock option and stock is that an option is an agreement to get a stock at a certain price while the stock itself describes an equity position in a company. So stock is ownership while a stock option is the right to get ownership (if exercised). When issued from a company this gives you the right to buy stock of the agreed type at the agreed terms within the agreed time frame. Sometimes you have the right to sell the stock option and someone else can exercise this. At this stage though relatively valueless.

Overall in my mind you’re doing some risky behavior with your money and time and should seek professional council from an accountant and attorney prior to any more of these commitments. I suspect you'll make a great entrepreneur after you get a better understanding of how to rate risks and returns. Best of luck.

As Jason pointed out, you have two quite different questions here. In the future, create two different threads for each question since they're unrelated.

Startup 1:

Currently no tentative contract agreement. Compenation has been less than statisfying, $20/hr flat contract rate since 2008. Originated all patent designs and ideas, yet no co-inventor. No company stoct or employee stock options. (Q1)-Looking for advice on how to approach employer to set up contract compentation increase and/or stock incentives. Need some type of motivation to continue 50-60 hrs/wk contributions.

It's always best to approach these things from a position of strength. If you can afford to not work for 6 months and can easily find a different job, you'll go in there feelling much more comfortable than if you need the job to put food on your family's table. My philosophy is that any contractor should ASAP put the equivalent of 6 months of living expenses in the bank. Once you've got this covered, you talk to the employer, explain your issues, and walk away if they're not addressed.

Startup 2:

Emails stating following agreement: 3 inventors/partners, with different contributions. Inventor A: Holds all company stock via total investment of $120,000. Total company stock is at 56,000 shares giving stock price of $2.14. Each hour invested by all 3 inventors/parnters equals $25 or 11.6822 shares. Investor B & C caped to 17.5%.

Inventor B (me): Learned lesson in startup 1, awaiting offical contract agreements. But recently invested $2000 into company to show commitment. (Q2)-Does this result to 1.666% of company stock?? (Q3)-or does total company stock increase as investor ABC works/invests?? Meaning new company stock is 56000+934.579 (2000/2.14) = 56934.579 after investment. Returning 1.6415% of company.

This sounds like a mess, and depending on the country, these agreements might be invalid. In the US, for instance, you can't take $2000 from someone who's not an accredited investor to invest in a startup. It's also easy to create these kinds of agreements in ways that will create problems down the line. What happens if a partner walks away, isn't performing, etc. You say on one hand that there are 3 partners and on the other hand one person holds all the company's stock. You need to either consult with a lawyer, or a least an acquaintance that has business experience.