View Single Post
Old 11-29-2007, 04:24 PM
bobman0330 bobman0330 is offline
Senior Member
Join Date: Aug 2004
Location: Billion-dollar CIA Art
Posts: 5,061
Default Re: How does equity work in a new company?

For tax reasons and for fairness, you would usually set up the company so that, e.g., the money guy gets preferred stock worth $75 and pays $25 for 20 shares of common. The other two pay $50 each for 40 shares. If that was the structure, Scenario 1 gives all the money to MP, Scenario 2 returns what they put in, and Scenario 3 gives 140 to MP and 130 to the others. (Unless the shares have vesting requirements, which would also be common.)
Reply With Quote