> Otherwise your co-founder is going to quit after three weeks and show up, 7 years later, claiming he owns 25% of the company.
Or half the company for a $1000 investment.
Or half the company for a $1000 investment.
The investor who puts in $1000 for x% is an investor, not a founder. They have already completed _all_ their obligations.
The founders are "earning equity in return for work". Their obligation is to work for a period of time.
Incidentally int he case you're referring to, his shares would have been diluted in proportion to the "other 50%" - so his 50% then does not equal 50% now.
There are tax implications with this description. This equity could be called compensation and taxed at the income tax rate instead of the capital gains rate, in the US. This could be the difference between 15% and 35% tax rates.
I prefer to think of it as "earning the right to have restrictions lifted from the equity they own". At the same time, their work is causing that equity to have more value (if they're doing it right!)
I am not a tax expert, or a lawyer, but this exact thing has been an issue for me personally for this tax season.