There are countless things to consider when getting your startup off the ground, and one that many don't consider early on is the allocation of stock to founders. This is a critical step that is important to handle very early in launching your company.
When a company incorporates, there will be a specific number of common stock shares that are authorized. Founders must decide how many of those shares they will allocate to themselves and how they will divide up those shares equitably.
Founders typically receive a large portion of stock because of the significant role in launching and operating the company. That number usually comes in somewhere around 80-90% of the total outstanding stock.
When there are multiple founders, they must decide on the division of that stock among the founders. Stock can be divided equally among the founders; however, that can sometimes lead to issues down the road and reallocation later on as roles and contribution level changes.
To better divide the stock from the outset, a variety of considerations should be made.
These are some of the points that should be considered to allocate the stock fairly and to help to avoid disputes in the future. Of course, no one can predict the future, and roles will change as time goes on, as will the level of contribution by founders. But attempting to work out allocation from the beginning based on the information available is an important part of starting any business. The end goal is to balance allocating equity among co-founders, leaving enough available to sustain hiring and growth. Be strategic.