Equity · Equity distribution

How would 2 Co-Founders split equity if one brings capital and advisory and one brings sweat equity (Full time work)?

Guy Idan Entrepreneur

June 9th, 2021

Hey. How would 2 Co-Founders split equity if one brings capital and advisory and one brings sweat equity (Full time work)?

Joe Bonavita

June 10th, 2021

The simplest way to accomplish this is to create a virtual salary and give each person the equivalent in equity based on their contribution.

For example:


Lets say you allocate 200,000 shares (or units if it's a LLC), @ $1.00 per share.

If person A puts in $100,000, they get 100,000 shares.


If person B has a virtual salary for $100,000, after person B has contributed a year's worth of time (or whatever metrics you come up with), they get 100,000. In this case though, the shares should be prorated on a monthly or weekly basis.


If person A contributes $50,000, then they would be expected to put in another $50,000 worth of sweat equity.


I hope this makes sense.