We registered a partnership firm 4 months back and now after a small amount of funding in hand we are incorporating a company but my CA who was ready to work on stakes has demanded 12% equity in the company. What shall we do?
Contract my friend, contract is the answer. Did you agree anything in written? If no, this is going to be a lesson, and hope that you still have time to correct it.
You should bring him to the negotiation. Than offer his monthly/daily compensation for the work delivered so far. He, legally has no claim beyond it.
After this is sorted out- sign a written agreement with whatever you can offer and afford. Though, in India CAs can be hired as freelancer and the whole work can be outsourced to thousands of those accountant firm. Send me a message I can try to look.
Sorry to say this is going to be typical behavior from many who become associated with your startup. There will be a lot of people with their hand out. It's a good idea to have a conversation with your cofounders about exactly how much equity to put aside for (future) employees and who qualifies as important enough to the company to get an equity stake.
Everyone else should be told, "I'm sorry, but we do not give equity for that role."
In the US we would just get a different accountant. Is that not practical in India?
In a startup with limited funding role for the CA is limited. If you were to pay him/her for the work does, it shouldn't be much . Unless the CA is adding some other key role , you wouldn't want to give any stake to somebody who is not part of the business or investor.
Of-course yes, but what I wanted to know is how much stake is feasible to give to any CA if we want to have a CA on an equity basis.
Thanks for the insights everyone.