Questions

1. I am a veteran in a particular sector. 2. I was working for someone, but, an opportunity has come my way to do it on my own. 3. Some savvy business leaders want me to work with them as partners and keep doing what I have done all these years. 4. Question is: (4a) If I set up everything, give my time, effort and trade secrets: how much equity within the company should I ask for without looking too greedy or entitled? (There are currently 3 other people involved) (4b) Currently, the startup (an LLC) has just been formed and only has one owner - the Agent who registered the company. Should I ask for shares upfront before committing or sharing any trade secrets? What risks remain if no shares are issued to me right now? (4c) My previous boss may not appreciate me going off on my own. How do I leave without angering him too much?

Unfortunately, the answer is it depends. There are no fixed rules for assigning equity between you your 3 team mates.

You haven't said whether you will be working full time on this from the start, same for your colleagues and the roles each person will be doing so I will assume you are in my ranser.

Assuming they will be your cofounders each supporting with a key part of the business, taking the same risk by joining at the same time and sharing the load equitably then the answer is sharing 4 ways might make the most sense.

Split equity evenly and be done with it.

However, this isn’t the approach most startups use, because generally each founder/cofounder will contribute a different amount of money and/or time.

More than 50% of the time founders end up calling upon the law when it comes to equity distribution issues if things haven't been set-up fairly from the start.

The main cause behind these disputes is interpersonal conflicts because of questions about fairness. But it doesn't have to be this way.

If a 4-way split isn't the right option you may want to consider a method called the “dynamic split”or “slicing the pie” (https://slicingpie.com/) where instead of focusing on the unknown future, you determine your split based on what each co-founder is willing to invest now.

Good luck!


Answered 3 months ago

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