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I am forming a partnership with several individuals. Right now we don't want to form a corporation because of the additional costs that would entail. I believe there is a website or a tool that lets partners assign percentage of a venture to each other without registering it as a new entity. If anyone can point me to such a site or to an earlier post where this question was discussed I would be much obliged.

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That site was fairsoftware (now foundrs.com/home ?) but they no longer do that kind of thing - though I can't be sure. Take a look at venture hacks. – TimJ♦ Jan 14 '11 at 14:39
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foundrs.com still does exactly what the poster asks for. What was dropped is revenue sharing, because it was too complex for users. – Alain Raynaud Mar 16 '11 at 2:53

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You have a couple different things mixed in together, and that's making it seem more complicated.

First: ownership split -- unless you're all best friends, you have to either agree to something or realize that the answer is going to be an even split among you (e.g., four people => 25% each).

Second: entity formation -- the choice of entity is different from the ownership split. You can see my post comparing ownership forms here http://rickcolosimo.com/2009/10/five-minute-general-counsel-compare-ownership-structures/. A group of people that doesn't form a specific entity but carries on business is usually deemed to have formed a general partnership.

Third: Forming an entity isn't necessarily expensive, unless you don't do it when you should. Then it is going to be very expensive. I regularly refer clients who are not ready for my services to get the books from nolo.com and try to solve the problem themselves. The books are well-written and helpful.

Bonus point: people can agree to an ownership split that isn't pro rata in an oral partnership agreement. It's not recommended, and it's something that should be memorialized on paper soon, but it's technically valid.

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There's a great section about this topic during this interview with Jessica Livingston (the author of Founders at Work) about assigning ownership percentages here: http://mixergy.com/y-combinator-jessica-livingston-interview

You might need to create an account on mixergy.

The summary of it is that you should spend time working on your product and talking to your customers, instead of worrying about percentage ownership. The entire interview is really great - you should check it out.

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I disagree. You must settle the equity split before you do too much work. Otherwise, you will put it off until there is a major crisis, and then the team will disintegrate. I have seen it so many times. Do not make that mistake. I know it's "dirty" to talk equity split with your friends/partners, but it must be dealt with. – Alain Raynaud Mar 16 '11 at 2:54

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