startup-costs, investorsI coined a Idea for a startup. I am operating that Full time.
For investment I may find 2 to 3 people. How should we divide the share / profit?
Is Share calculation every month or annually or when they close the contract with me?
Normally, profits are not distributed to shareholders every month especially in startups. For the first few years it is normal for a startup to reinvest the money it is making back into the operations in order to grow. When the company wants to distribute dividends (distributing profits to the shareholders) it would determine how much of the profits it is going to distribute, then the money would be allocated to each shareholder by the percent that shareholder owns.
For instance if there are three shareholders two shareholders has 25% and the other has 50%. If the profit to be distributed is $1000 the first two shareholders would get $250 each and the third shareholder would get $500.
Some small established companies do actually distribute profits on a monthly basis. In that case the distribution would be the same as above. Determine how much you are going to distribute (it is a good idea to leave some amount of the profits in the company) and then divide it by the ownership percentage.
To make the contract with the investors, you need to determine the present or future value of the company and then calculate the percentage ownership they are going to have based on the investment they are making in the company. If the company is currently valued at $100 and they are investing $50 dollars then they would have 33% of the company. When you divide profits, that investor would get 33% of the amount that the owners (shareholders) agreed to have distributed as dividends.
Sometimes things do not go so objectively. For example, an investor can say that he would invest only if you give him 50% and you have to make a decision based on that. You can try negotiating to lower the percent or increase the investment. If you feel the investment he is making is significant and having him on board is going to be beneficent to the enterprise then you may agree.
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