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