I am doing contract work for a start-up company and the founder is thinking of hiring me as an employee (actually as the first employee). I am also willing to work for this start-up company, however the details of such employment are very important.
For me, the most important thing is mentally becoming part of the start-up. That means, there should be a strong correlation between the company's success and my success.
My question is, how can this mental motivation be reflected at the financial side of things? After reading various questions here, the option seems to be having equity in the company. I will probably ask for a combination of certain percentage of equity (less than %15 most probably) and some yearly salary. Regarding the equity:
Does having equity mean that I will share the profits of the company (let's say on a yearly basis)? Or, does equity only help me in case the start-up is acquired by another company? I would really prefer sharing the profit because that really aligns company's goals with mine. [Logically, if the profit is shared, shouldn't the costs be shared as well? But, that sounds like a partner relationship to me; it is not very clear to me the difference between partners & having equity.]
If I leave the company, do I also lose the equity? Or, is this something that is negotiable? Assuming that I don't lose the equity and equity means profit sharing, it means that I would have some stable income from this company even though I start working somewhere else. This sounds too good to be true though.
Any general guidance on becoming a part of start-up company is high appreciated as well.