What should founders consider?
Founder equity is emotional because it sits at the intersection of ownership, status, control, and future money. The legal documents matter, but the real work is deciding what the split is supposed to reward.
Before issuing shares, founders should discuss who brought the idea, who is full-time, who is taking salary risk, who owns key IP, who can raise money, who can build product, and who will still be there when the first version does not work. Startups are not famous for linear journeys.
Key legal pieces
- Stock purchase agreements: Document the actual share issuance and purchase price.
- Vesting: Protects the company if a founder leaves early.
- Repurchase rights: Let the company buy back unvested shares after departure.
- IP assignments: Move founder-created technology and business assets into the company.
- Board approvals: Keep the corporate record clean.
- 83(b) elections: Usually critical when restricted founder stock is subject to vesting.
Common mistakes
The classics: issuing equity with no vesting, failing to file 83(b) elections, leaving pre-formation IP in a founder's personal Dropbox kingdom, and giving a meaningful stake to someone who is only "helping on nights and weekends" indefinitely. Nights and weekends can be heroic. They can also be a cap table liability.
Before you issue founder stock
Nebo Legal helps founders structure equity, vesting, IP assignments, and approvals so the cap table tells a clean story.
Book a callFAQ
Should co-founders split equity equally?
Sometimes. Equal splits work best when contribution, commitment, and risk are genuinely equal.
Can we change the split later?
Sometimes, but it can trigger tax, corporate, and relationship issues. Better to be thoughtful early.
Alex Ravski is the founder of Nebo Legal, P.C., a former Foley & Lardner attorney advising startups on formation, financing, and cross-border deals.