website, business-registration, co-founder, founder, sharesWe are a team of two, and right now our website is in development stage.
Soon, we will move to form a company, and the main question pops up.
Who should own what % of the company.
I want to be fair to him, at the same time don’t want any problems due to this in future.
We aim to bring in investors, so share dilution is also a case I need to handle.
Now the % allocation is to be on these factors:
I am looking to be the CEO of the company, with majority voting power.
So, I want to know what % would be reasonable.
EDIT: More points to add:
You haven’t quantified the amount of money you are putting in and the value of the infrastructure and work space. I’m going to guess this is minimal (less than $10k). People here can give a better answer if you provide an approximate value of your contributions. I’m also assuming that no one is being paid a salary.
If you want to have majority control, I’d suggest a 51%-49% split. You are both in this from the beginning, and you don’t seem to bring that much more to the table than he does. With a bigger difference in ownership, you are sending the message that you are more valuable than he is, which doesn’t send a great message and may discourage him.
I’m also assuming you will have a vesting schedule…
I advocate for 50/50 splits when it comes to founding. There are a number of answers on this board which discuss it in detail.
https://startups.stackexchange.com/search?q=50%2F50+split
(I think it’s referred to as the Solomon agreement)
I think a company structure based on voting power is often flawed as one person can ‘out vote’ the other person based on shares even if it is not their realm of knowledge. The percentage shares that someone owns should not necessarily dictate the control they have over the company. The company structure does that. The jobs, roles and responsibilities are what you are held accountable against.
Many CEOs of tech companies have minority shares, high salary and majority influence because that is their role. They have a seat on the board, are held accountable to the chairperson and execute on the plans or take responsibility when their team do not achieve the goals.
Othwer roles in the business are accountable to the CEO, as the CEO will take the flack in the boardroom if that person has not done their job. However freedom to do that job is devolved down to that person as they are the most technically capable.
I have been in businesses with my business partner now for over 10 years. We have always split 50/50 and simply acknowledge or defer to the other persons judgement in their areas of experience. If we cannot decide then we discuss the issue in further depth to reason out the problem and understand why one person or the other does not agree with the solution until we both agree, or we understand enough of the issue to accept the other persons knowledge.
For balance, here is the opposing argument against a 50/50 split:
https://startups.stackexchange.com/questions/6060/how-to-distribute-equity-in-team-in-web-based-startup/6062#6062
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