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Comment by anonforthis1233 | Hacker News Reader

Not wishing to be indelicate but ....

Another problem you might face is any relatives of Greg. With no corporates structure - or even one that just says 50:50 you may see wives/parents/cousins convinced that all startups are going to be ebay looking for their billions. Remember the saying: you only choose a spouse - you don't get to choose their family.

You may find you spend another few years working on your own to make this idea a success and then lose it all to the legal fees defending against multiple claims of who owns the other half.

It might be a good idea to make a break and restart the idea with just you.

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It might be a good idea to make a break and restart the idea with just you.

That's not ethical. Whatever equity Greg had belongs to his estate.

This is a very very hard problem. The fact is that in a startup you own 50% because you are there working. Once one founder is no longer present it's very hard to claim the 50% is still valid.

This is why it is so important to have vesting of founders shares. Then when they are no longer participating in the company there is an equitable manner for how many shares you end up with.

In my first company we arranged vesting over 4 years, 1/4 each year. Some people might prefer 3. Many investors will also insist on this as well.

This is how I've always handled it as well. There really is no better approach. To keep the legal stuff simple and the costs of acquiring the equity low, I hand out the equity when the founder joins (usually you can do this at a penny a share or whatever your corp allows that early in the game) and the shares have "reverse vesting" stipulations attached.

Once one founder is no longer present it's very hard to claim the 50% is still valid.

True. But as cmos responded, this is why you vest equity. Ultimately, as macabre as it is, death is just an instance of the general case of a founder no longer contributing to the business.

It's hard, but necessary. My cofounder and I just hammered out our Operating Agreement, which contains special language for exactly this scenario. Amid such tragedy, it's best to have the legal framework 'on rails' so that you don't really have to think about it. Anybody dealing with the death of a friend and business partner has enough on their plate already.

Here's our solution, in case other people are interested:

In event of the death of a member (we're an LLC), that member's economic interests revert to their estate, but the inheritors lose all power to vote or make decisions.

Within 180 days, the surviving member can elect to buy out the deceased member's interest at a reasonable valuation. There's some legalese in determining "reasonable valuation", but the upshot is that the surviving members may take complete control of the company so long as the inheritors of the deceased are properly compensated.

If a buyout doesn't occur, then the inheritors of the estate become silent partners unless there's a mutual agreement to instate them as a full partner.

Despite what some people say, vesting is not always the answer. A lot of vesting mechanisms leave the door open for somebody to get screwed out of their rightful share. Personally, I'd rather see someone undeserving get rewarded, rather than see a deserving person get shafted.

One more thing: To Rex (the OP), my sincerest condolences. Losing a business partner is hard, losing a close friend is orders of magnitude harder. I think I can speak for the whole HN community in saying that you have our sympathy and understanding.

First to Rex, my condolences.

I just wanted to add a suggestion over the reasonable evaluation and the option to buy. In our startup, the company has taken life insurance on both founders and half of the insurance amount almost match a valuation we as founder agree on at the start of each year. This is mostly for the first year(s) where the company is not getting that much revenues.

So what happens if one of us dies is that their family will get half of the life insurance for their equity. The other half is to help the company cope with the fact one of us is gone. This may sound expensive, but in fact for guys in their thirties and in good shape it is quite cheap.

That depends on what stage you were at. If you both had an idea to 'do search' and had only got as far as picking a name. Then after another 10years of work by you alone you are ready to take on Google, does your late partner's partner get half?

If you need to bring in investment or new people and give them options who has to agree to that dilution?

If in a few years there is a row in the family about who owns your late partner's share - are you ready to spend time and money to defend in court what you said to who at the funeral?

Again my condolences for the OP's loss. BUT Startup founders need to consider that today they are co-owners with their best friend - tomorrow they may be working with their friend's newly divorced and bitter wife, their useless kids or a slimey lawyer who is preying on their grieving parents.

That depends on what stage you were at.

No it doesn't. If a person owns property (in this case, equity), that property passes to his estate when he dies.

If you both had an idea to 'do search' and had only got as far as picking a name. Then after another 10years of work by you alone you are ready to take on Google, does your late partner's partner get half?

And if someone has written most or all of the code for a startup and then he dies, do you think it's ethical to restart the company and act as if the guy never existed?

I think a restart is usually ethical provided you don't use any assets from the previous company (besides perhaps your personal expertise).

In the former situation (just a name picked), after a restart you need a new name.

In your situation (dead guy wrote lots of code), after a restart you have to throw away the code.

yeah that's a very good point, if he continues and succeeds, he'll end up being in court all the time fighting claims that the site would have been a huge failure without the other code.

hell you'll most likely be blamed for the death during the trial. ex: you tinkered with the car in order to kill him, to get him out of the company

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