Founder equity splits and vesting

General information as of October 10, 2026. It is not legal or tax advice, and it describes United States sources only. A lawyer and a tax professional can say what applies to a particular company and a particular grant.

Few conversations between co-founders carry as much feeling as the one about who owns what. This article does not settle that conversation, and no primary source could. It describes what the law says about how shares are issued, what vesting is and how a condition on shares is attached, so that the conversation, and the questions you bring to counsel afterward, rest on how the instruments work. It gives no recommended split and no recommended schedule.

A split is a decision; issuing shares is a legal act

How a founding team divides ownership is a decision for the founders. Making that decision effective is a separate legal act, and for a corporation the law says who performs it. Delaware’s corporation statute provides that the consideration for stock is paid in the form and manner the board of directors determines. It allows stock to be issued for cash, for any tangible or intangible property, or for any benefit to the corporation, in the numbers and at the times set by a resolution of the board.

Two practical points follow from those words, both framed as questions for counsel:

• Founders can contribute different things: money, time, code, a brand, a customer relationship. The statute’s reference to intangible property and to any benefit to the corporation is the legal hook for treating such contributions as consideration. Ask counsel how each contribution would be documented and valued in your state.
• Because the board determines the terms, ask counsel who is on the board when the first shares are issued and how that decision is recorded.

If the company is an LLC, the vocabulary below changes; the article on choosing an entity describes that difference.

What vesting is

Vesting is the word for the point at which a person’s rights in shares stop being subject to a condition. The next paragraph gives the terms the tax law uses for it.

Section 83 of the Internal Revenue Code speaks of rights that are conditioned upon the future performance of substantial services by any individual. The IRS’s list of when property is substantially vested includes that it isn’t subject to a substantial risk of forfeiture.

The IRS gives an example in its guidance on restricted property. In that example, the stock holder must resell the stock to the corporation at $100 a share if they leave their job for any reason. The IRS treats the holder’s rights to the stock as subject to a substantial risk of forfeiture. The numbers in that example are illustrations from the IRS, not a norm for founders.

The example shows one shape an arrangement can take, without making it a template: a condition tied to continued service, and a right of the company to take the shares back if the condition fails.

How the condition is attached

A condition like that is a contract term. Delaware’s statute on restrictions on transfer says a written restriction on the transfer of a company’s securities may be imposed by the certificate of incorporation, by the bylaws or by an agreement among any number of security holders or among such holders and the corporation. It says a restriction is permitted if, among other things, it obliges the holder to offer the securities to the corporation, or obliges the corporation or a holder to purchase them. It also provides that a restriction must be noted conspicuously on the certificate or certificates representing the securities so restricted, and that otherwise it is ineffective except against a person with actual knowledge of it.

Taken together, those passages show how the pieces fit. The shares come from the board’s act; the condition comes from a written agreement; and the way the condition is communicated affects whether it can be enforced against someone who did not sign. Whether a particular agreement does what the founders intend is a question for counsel.

Terms an agreement may address

Founder stock agreements are private documents, and the sources above do not standardize them. These are the terms people ask about, listed as questions to settle with counsel before signing:

• Schedule. Over what period do the shares vest, and from what start date? Is the start date the date of the agreement or an earlier date for work already done?
• Initial period. Does any portion vest only after a minimum period of service? Counsel can explain what happens to the portion not yet vested if a founder leaves before that period ends.
• Repurchase. What price applies if the company buys back unvested shares, and who decides to exercise the right?
• Departure. What does leaving mean in the document: resignation, removal, a change of role? Does the reason for leaving change the result?
• Acceleration. Does any event, such as a sale of the company, cause some or all unvested shares to vest early? If the agreement uses that word, ask counsel what it covers.
• Transfer. What may a holder do with unvested shares, and what restrictions apply to vested shares?

Vesting and tax

Vesting is not only a legal event; the IRS says it can be a tax event. In its guidance on restricted property, the IRS says you don’t include the value of the property in your income until it becomes substantially vested. It also describes an election to include the value in income in the year of transfer instead. That election has a deadline, and the companion article on the 83(b) election describes it. Whether any of this applies to a given grant is a question for a tax professional, not for the founders alone.

Records

A split and a vesting schedule are decisions, and a decision leaves a record. The record can sit in several places: the board resolution that issued the shares, the stock agreement for each founder, any signed assignment of intellectual property and the company’s ownership table. The glossary entry for a cap table describes the last of these, and the seed data room checklist shows where such records are filed for a later review. The article on IP, contracts and access diligence explains why a reviewer reads these documents together.

Questions to bring to counsel

1. Is the company a corporation or an LLC, and how is ownership written in that form?
2. Who approved the issuance, and where is the resolution kept?
3. What conditions, if any, attach to each founder’s shares, and where are they written?
4. How is each founder’s contribution recorded, including work done before the company existed?
5. What happens to unvested shares on departure, and at what price?
6. How are the restrictions communicated, so that they bind the holder and any later transferee?
7. Which tax elections or filings are connected to the grant, and by what date?

What this article cannot tell you

It does not say what a fair split is, how much to give any founder, how long a schedule should run or what any investor will expect. The sources read for this article give no such number.

It describes Delaware’s corporation statute and United States federal tax guidance only. State corporation laws differ, other countries treat share restrictions and tax events differently, and an LLC works differently from a corporation. It does not cover state securities law, employment law or the rules for stock options and equity plans.

It does not cover how a company is valued when shares are issued, which affects tax and is a subject for professionals. The IRS example described above shows how the rule works in a case with stated numbers, not what your numbers should be.

The sources were read on October 10, 2026. Statutes and guidance change, so a decision should rest on the current text and on advice from a lawyer and a tax professional who have the founders’ actual documents.

In the data

These figures describe U.S. businesses in general, not WE’s results. Each one names its source.

• 20.4% closed in year 1
• 29.4% closed in years 2 to 5
• 15.5% closed in years 6 to 10
• 34.7% still open at year 10

Each square is one in every hundred establishments that opened in 2015. Squares are rounded so they add to 100; the exact figures are in the table.

Show the data as a table

Of 100 establishments that opened in 2015, how many were still open at year 10

Group	Exact figure	Squares (of 100)
closed in year 1	20.4%	20
closed in years 2 to 5	29.4%	29
closed in years 6 to 10	15.5%	16
still open at year 10	34.7%	35

Source: U.S. Bureau of Labor Statistics, Business Employment Dynamics, Table 7 , Data through March 2025

Retrieved 2026-10-15. Each share is a difference between two published survival rates (all private industries); the squares are rounded to add to 100.

Sources

1. General Corporation Law, Subchapter V: Stock; Dividends, Delaware General Assembly . Accessed October 10, 2026.
2. General Corporation Law, Subchapter VI: Stock Transfers, Delaware General Assembly . Accessed October 10, 2026.
3. 26 U.S. Code section 83: Property transferred in connection with performance of services, Legal Information Institute, Cornell Law School . Accessed October 10, 2026.
4. Publication 525 (2025): Taxable and Nontaxable Income, Restricted Property, Internal Revenue Service . Accessed October 10, 2026.

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