Decision making · Equity distribution

What are best methods to break a tie in a 2-person startup?

Jeff Ullman Personalized Health Innovator

February 20th, 2018

If both partners have 50% equity, and important issues require familiarity with the company's operations, market, business model, etc., what are fair recommendations?

Steve Willson Questioner, Collaborator, Believer in Customer Understanding, Facilitation and Planning

February 20th, 2018

My answer is "it depends".

As a partner in a two-person firm we started by identifying which of us had ultimate responsibility for what areas of the business. So if it's clearly in the one person's area, you trust them to make the right call. If it's an area you haven't discussed before, then you can try talking it out. Focus on facts, not opinions, and see if there's a consensus. If it's still an issue, try using an independent third party.

One additional thought...don't you have advisors? Or A Board? That's why you need good, independent outside advisors.

Chris Harrises 30 years of developing great products and companies

February 21st, 2018

Consider putting together a Board of Advisors. They don't dictate decisions like a Board of Directors but they do offer some objectivity. Sometimes hearing from a third party is a good way for owners with strong personalities to see things from a different point of view and reach a reasonable conclusion.

Marvin Schuldiner Problem Solver at Sanns, LLC

February 21st, 2018

If you are partners with someone else, it really doesn't matter what your exact equity split is. If you can't agree, and you can't figure a way to work out your disagreements, you probably don't have long-term viability as a partnership. You should work out areas of responsibilities.


Also, bring in a mediator to help you through the disagreements. Impasses are often a result of poor communications and positional bargaining. A mediator can help.

Cody Heisinger Co-Founder BPG Werks

February 20th, 2018

A 50/50 split can be damaging. If you want equal equity, try putting some stock in company treasury. This prevents a stalemate situation.

Jonathan Leaders Knows 25 computer languages. Top 9% writer on StackOverflow.com, 3.5m views on technical writings

Last updated on February 21st, 2018

A friend of mine once told me, who suffered from a lawsuit due to that exact situation, NEVER do a 50-50 startup. Always pick ONE person to have final veto, so if that means 49-51, always have some way to have someone end a tie. I think this is important.

Thomas Walker Lynch Primary Co-Founder at Reasoning Technology

February 21st, 2018

1) Redraw the partnership agreement and give power for breaking ties to an advisory board. 2) It is time to incorporate. Have a real board for which you are two members, and there are three others, and .. 3) assign executive roles, CEO, CMO, etc. give each partner a dominate tie breaking say within their own domain with the possibility of appeal to the board. 4) give the tie breaking vote to the soon to be despised corporate lawyer - doubt he/she will do it though .. 4) this solution permanently solves the problem: Have a pistol-dual at ten steps. Contact me I'll be happy to be the second. ;-)

Aji Abraham Proven Tech Cofounder, open to new ventures

February 22nd, 2018

To put bluntly, 50-50 partnership is a lazy agreement. There is no way the contribution and value from two partners are exactly the same. Now you have the option of redrawing the agreement. It is not going to to be easy. Whoever is going to the CEO should have more control in a two people company. If you rather not to do it, find mediator/adviser both you trust and respect. Give him/her 1% equity. That will make it a 3 person company.

Anonymous

February 22nd, 2018

What do I do to make my cofounder active,he's all along a stay at home boss, I do all the work by myself.he's got 60% of shares and mine is 40%, I'm the initiator of business,I don't see him anyway.