How to divide equity based on bringing in new partners?

Question

i'm currently in the initial phases of a start up and i'm teaming up with 3 partners. 2 of them are coders who are also married and one is a business guy, who will help with financing and other business related topics. i've been developing the initial idea for about a year. i've put together the wireframes, the name of the site, and even hired a team to code it, which i and the 'business guy' have paid. basically i've pushed the site/idea to its current stage now. the 2 new partners/coders have more experience in start-ups than the both of us, me and business guy, but i think we're just as valuable. they haven't started coding yet. the concern that's coming up right now is dividing the shares accordingly. since i came up with the idea and brought along the others to join i feel that i deserve to control the majority of the shares. their idea is to earn equity based on how much work they do. i realize that the 2 coders will put in more time into this, but i'm scared to lose control of the site and the idea/execution.

i was told that you earn 5% equity for coming up with the initial idea. is this true? if so how much for the title of the domain name?

based on what i wrote, how would you divide the shares right now?

thank you

Matthew Dorian · Answer 1 · 2010-11-13 19:27:35Z

up vote 1 down vote

It sounds like this is "your" company. If you want to maintain ownership and the bottom line decision, you should ensure you keep at least 51%. If you're dirong everything, I would start with giving others minimal ownership and putting them on a salary instead. You can get creative if you have no cash flow and ask them to accept IOU's that will get paid out as you become profitable.

If you want it to be a true partnership, then divide it equally. Either way, I would stongly suggest you decide on percentages before work is started and get it in writing.

answered Nov 13 '10 at 19:27

Matthew Dorian
29216

	the problem is that i won't be doing everything. the 2 coders will essentially be doing a lot of the programming and help with the strategy because they have more experience with start-ups. should i still retain 51% or divide it 40/30/30? thoughts? – Bobby Nov 14 '10 at 4:11
	they will essentially be co-founders as well. they also plan to recode the entire site and be the ones responsible for keeping it going in terms of programming. – Bobby Nov 14 '10 at 4:27
	Unfortunately, I can't answer this one for you, you'll need to answer it for yourself. I think a good questiont to aks if what will you be doing then? There's A LOT more to be to most websites than just the coding (marketing, sales, strategy, etc...). Also, once they're "done", what will they be doing? – Matthew Dorian Nov 14 '10 at 18:10
	It sounds to me like you and the business guy should have majority and the coders should have a much smaller percentage, but again, it's really your call. – Matthew Dorian Nov 14 '10 at 18:10

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How to divide equity based on bringing in new partners?

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