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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.

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This story appears in the February 2010 issue of Entrepreneur. Subscribe »

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 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.

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