Not all businesses are started with just one person. Oftentimes, a group of friends or colleagues will start a business together, with each person bringing together something valuable. Having multiple founders can help to distribute risk while also leveraging the unique skills and talents of each founder.
When a company is started with multiple founders, it is important to make sure that proper ownership documentation is prepared to ensure that every founder is in agreement with how equity is allocated.
Particularly, each co-founder should have a good idea about what their partners are bringing to the table and how their contribution is assessed in terms of equity ownership in the company. This important issue needs to be dealt with and addressed as early as possible when a company is formed. Transparency early on can prevent future disputes from arising. Frequently entrepreneurs will think that disputes over ownership will one day resolve themselves. They rarely do.
Even if you start a business with family members and close friends, you all will be well served if you document the nature of your agreement and distribute equity in a manner that will ensure that there are options in case one individual does not hold their own weight.
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