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Rationalize the split between founders

I signed up a business partner last year. At the time of his joining the company, the product was built and we had 2 enterprise customers. For the first 6 months, he did not contribute much. He said making some contributions in the last months, however I feel that he does not have the spirit of working in a startup.

Our equity split is like this:
him: 15%
Option pool: 12%
me: 73%

I would like to lower this equity. What should be the rational equity for him? If he wants to leave, I will be okay for that.

  • There is no concept of “lowering” after the fact other than having some sort of vesting. If you want him out buy him out.

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  • Equity is absolute ownership in the company. He will continue to own 15% even if he never contributes anything to the startup ever again. If you want to get the equity back you’ll have to make him a good offer.

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  • You may be able to issue additional shares for the company, signing them to yourself and the pool; as your bring on additional investment or somehow show the value of the company has grown, effectively diluting him.

    Might want to consult an attorney regarding the legalities of that though.

    You can also refile in a different state with the same name and not let him have a part of the new one, dissolving the old company; wherein your customers will not know of the change.

    Again, this may be something to consult with an attorney.

    Then again, you can have a straightforward talk with him; explaining that hes not meeting expectations and must improve his performance. He obviously is not capable of working autonomously, so you must designate specific tasks for him to complete, with weekly progress reports; if he still is not performing, he faces termination, without severance.

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