

Only one founder taking salary -- should it impact equity? - taupemachine

I'm a co-founder in a two-person startup. We each have equity (60/40). We both work full-time on the startup. The other founder has worked on the project longer (thus the additional equity).<p>We have started positive cash flow and I need to start drawing a survival salary. The other founder does not.<p>To be fair, should I give back some of my equity in exchange for the salary that I draw out of the company? Should the exchange be dollar for dollar, based on some estimated valuation and percentage calculation?
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trevelyan
The equity question really only matters if you are 50/50 and it would be an
issue of control. You're already a minority holder. Is there a big difference
between 40% and 39.5% ownership?

You should have a talk with your cofounder about at what point it makes sense
for both of you to draw something. Trading equity for cash isn't a bad idea in
the sense it forces you to come up with a valuation for the business. But it
also forces your partner to carry more risk and encourages you to approach the
business as an ATM instead of an investment. It may be fairer to split what
you would consider a "survival salary" two ways.

If you have revenue and growth, these problems will seem quaint in a couple of
months or a year.

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baremetal
This is a tricky one. If you need a salary and he doesn't, it isn't fair to
you as you are in a position of need and he/she isn't. I would be reluctant to
give any equity back, try to negotiate with your partner. Perhaps you should
both take a salary? Your co-founder needs to be empathetic to your needs,
regardless of his or her own lack of need. This is a good test of your
relationship.

Obviously if the other founder doesn't need money then they are either
financially well off (you should get paid) or they don't have any overhead or
personal expenses, as in they live at home with parents (you should get paid).

