I'm doing (2). 2 is actually good.

1 = good only if you trust that person with your life. You don't want the other guy giving up and dragging the rest of the company with him.

2 = Most fair option. It is same as 1 except makes sure ppl work for their shit.

3 = bad. an hr of work != shit got done.

4 = bad. expectation may be unreasonable hard to prove in court.

5. Gota own some of the company