Questions

I had a not so positive experience where my potential co-founder wanted a similar amount of equity, but didn't care that much about control. We ended up going separate ways due to major differences of opinion and I am sure that if we had continued down the same path he would have used his share to block any important decisions, whereas if the deal was only about percentage and not votes from the start, my position would be much more protected. I have been working and investing on my startup for the past 2,5 years, and would hate to see my company destroyed due to founder fighting. Thanks!!!

Short answer: Yes
Long answer: maybe

The legal ramifications of this are highly dependent on the jurisdiction, legal documents, etc.

However, you might consider making yourself a director, and not allowing him a board seat. Typically, Directors have more control over the business than minority shareholders. Again, this is not true for every situation.

If another person has 50%, or holds a majority share in the company, they can do things like call a quorum (which actually can be done with less shares).

Potential downside might be that you are complicating things rather early. Perhaps better to vest his shares over time, and handle this when you have serious cashflow, investment.

You could create a separate class of stock for them, but what is the point? In all likelyhood you will still control the business.

Control over a business involves more than just % of shareholding. Who controls the company includes things like bank signatory control, IP, even webdomains or hosting accounts.

Once you take on venture capital, all of this should be properly assigned to the company (if the VC's know what they are doing, this will all be covered by legally binding paperwork).


Answered 6 years ago

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