How many shares do we offer?

We are founders, no investment, but considering giving a new person shares to provide support for the business. We will not be able to pay them. What would be an acceptable amount of shares to offer?

  • depends on their role, experience and what they can offer to the team. Be sure to have shareholder agreements in place before they create any IP

  • Equity as compensation deals seldom go well. Usually one party ends up getting a raw deal.

    Basically put a present value on your company. $100K? $1M? 100M? Then put a value on their work. Then discount their value of work by X% because your shares would be worth Z in the future. Then divide the number of outstanding shares (shares given out so far) according to the discounted value and you’ve got the number of shares.

    Alternatively, just give them a small slice (less than 1%) and defer the compensation (and maybe promise a multiplier should the company achieve some goals).

  • I would give them a percentage of the company as a function of how much they can contribute. For example, is the person another you? Give them 25%, why not 50%? Because two-headed businesses don’t work. Why not 49%? Because they did not dare to start the company. Any other smaller contributions will go below 25%.

  • it’s illegal to pay them nothing unless they are founders. they can come back and sue you at any time. it will be a factor in due diligence. DO NOT DO IT.

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