#RVABizLaw Tip of the Day: A Dilemma Every Multi-Owner Startup Business Faces

A dilemma facing every startup business with more than one owner—how to divide up initial ownership equity?  Bottom line is that there’s no simple answer.  Every situation should be addressed on its own facts and circumstances, but here are five factors that co-founders should consider when dividing up initial ownership:

1. Who has already contributed cash or other assets to the new venture?
2. How much time and attention is each person realistically able to commit to the new venture?
3. What has each person contributed to the startup efforts up to this point?
4. What is the relative necessity of each person’s skill set, experience, and personality over the long term (i.e., not just for the initial few weeks or months)?
5. What is the relative opportunity cost each person is giving up to pursue this new venture?

Remember, the average business relationship has a life span of less than five years, so plan carefully and memorialize the agreement among your partners in writing as soon as possible.