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A Fairer Share Founder stock is one of the trickier matters for new businesses. Here's how to get it right.

By Asheesh Advani

Opinions expressed by Entrepreneur contributors are their own.

As the credit crunch drags on, startups are relying on investors more than ever. And one result, especially for first-time entrepreneurs, is often a struggle over founder stock.

In simple terms, founder stock is issued early in the life of a startup to the founder and co-founders. It determines how the ownership is divided up and it is typically based on each founder's contribution to the key assets of the company. Unlike stock that is acquired as the business grows, founder stock is primarily granted for sweat equity--so it's difficult to distribute fairly if there are multiple founders with different roles and levels of commitment. Lawyers who specialize in business startups can help you allocate founder stock, and the list of resources with this column includes blogs and advisors that specialize in the subject.

But once the allocations are settled, many first-time entrepreneurial teams don't take the next step and create a vesting schedule, which requires founders to earn their stock in monthly installments, usually over a three- to four-year period. Since business partners often don't maintain the same level of commitment or contributions to the company over the years, vesting prevents founders from diluting the company (or their co-founders) by earning stock when they are not contributing.

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