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I have finished developing my product. Website, domain is all setup. Billing system is in place.

I have yet to incorporate.

I am planning on incorporating by myself as the founder.

Then I am thinking of getting maximum 2 other partners to lend me a hand with the business.

What percentage equity should be given to the partners? Could I give them an incrementally growing equity? For example, start with 5% and then as things mature, raise their share?

I don't want to straight off promise 25% right off the bat.

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Why do you need a partner? It seems like you've got everything in place. Why not just fire it off live and see what happens. If you get overwhelmed then hire employees. Why would you want to give away a piece of your empire if you don't have to? – Sean Feb 1 '11 at 18:36
Why did you form your INC after getting ready to launch? This may cause trouble when you have to get a new EIN, and make changes to your merchant account. As for partners, AVOID THEM. Employees are a lot better than partners. – Frank Feb 1 '11 at 19:49
I have not incorporated yet. Should I incorporate first before launching? – Kim Jong Woo Feb 1 '11 at 20:03
Yes. When you go to get a bank account (you're going to make money, right) and pay for services, assuming you're in the US, you're going to need an EIN/Tax Id. Go ahead and incorporate and get your EIN so you can be ready to go. – Sean Feb 1 '11 at 21:12

3 Answers

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As others have said you may or may not need partners right now. (I'm not sure if you mean financial partners or "sweat equity" type partners - if it's financial this is usually different.)

I want to address how you compensate a "sweat equity" style partner. Whatever percentage you can both agree upon definitely have a vesting schedule. A typical schedule is 4 years with a 1 year cliff. What this means is this: say they are getting 480,000 shares. They start with 0. After 1 year they vest 120,000 shares (25% of their shares) - that's the "cliff". If they quit before 1 year, they get nothing. After that first year, they then vest 10,000 shares every month (the remaining 360,000 shares / 36 months).

This protects you from giving out equity and having the person quit on you and taking their equity with them. They have to stay and work for 4 years to get that equity. This is something that you probably want a lawyer to draft up.

Exactly how much to give them really depends on where the business is at, what they bring to the table, etc. You're going to have to go off of whatever the two of you both think is fair.

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I agree with others.. since most of the work is done, you dont need partners IMHO. Go ahead and launch and if it gets to a point where you need more help, then hire someone. If its an enterprise product, hire a sales person if its a consumer product you will probably need help with support so depending upon your domain and technology hire a mid level dev for support.

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Put your business on http://angel.co/ (just an example) and apply for an intro to the investors. Get real feedback first then decide about the percentage.

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