how do I split up equity in my start up?

UPDATED: Oct 1, 2022

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

UPDATED: Oct 1, 2022Fact Checked

Get Legal Help Today

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

how do I split up equity in my start up?

I am the founding partner in this startup. My partner is bringing in
all the money and has a financial background. I will be the one
working full time, 20 years of industry expertise, CEO, Operations, I
am bringing in talent, and Customers. My partner will be there around
50 of the time. How do we split this start up. By the way hew will be
bringing in around 150-180,000.

Asked on March 9, 2018 under Business Law, Utah


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

However you like, if you have an LLC (the recommended structure): with an LLC, ownership interest is assigned by the "members" (the owners) and can be anything they agree to--the law does not impose a structure or split. Whatever you and your partner agree to is acceptable. For example: I had a publishing LLC. I contributed $15k and worked full time as president; partner 1 contributed no money and worked part-time in editorial direction; partner 2 did not work, but contributed $150k cash. We agreed to a split where I owned 55% (so as the full-time member, I could control the business decisions), the investor partner received 25% ownership, and the part-time, non-investing partner received 20%. It was what seemed "right" to the three of us.
With a corporation, including sub-chapter S, unless you get fancy about having multiple classes of stock with different voting rights, ownership (and hence power over the company) is generally asigned on a "cash basis": the more share you buy, the more you own.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption