How should co-founders split equity? (2026)

A co-founder prenup is a structured conversation, held before you sign anything, about equity, roles, money, decisions and what happens if someone leaves. Each founder answers the same questions privately, and then you compare answers. What you agree becomes the basis of your founders' agreement, which is the binding document.

Split founder shares by what each founder will contribute over the next three to four years: time, responsibility, hard-to-hire skills, and sales and fundraising, with a smaller credit for work already done and risk taken. Put every founder on vesting, usually four years with a one-year cliff, and keep money put in outside the founder split. If your contributions come out roughly equal, an equal split is fine, as long as you agree a tie-breaker.

Not by itself. The risk is deadlock: with equal votes and no tie-breaker, one disagreement can freeze the company, and a serious dispute can end up before the National Company Law Tribunal. If you split 50:50, agree a tie-breaker in writing, such as a casting vote for the chairperson on operating matters and a named mentor for strategic ones.

Vesting means founders earn their shares over time. In India, founders usually receive all their shares at incorporation, and the founders' agreement gives the other founders the right to buy back the unearned part at face value if someone leaves early. To bind the company and every shareholder, the same terms should also go into the Articles of Association.

It depends on what you agree. A common approach: a founder who leaves before the one-year cliff keeps nothing; after it, they keep the shares they have earned and the rest can be bought back at face value. Good leavers, who leave for health, family or because the team asks them to step aside without wrongdoing, keep their earned shares or sell them at fair value. A bad leaver, after fraud or a serious breach, may have to sell earned shares back for less.

Not through the founder split. Founder shares are usually issued at face value, often ₹10 each, so cash put in at the same price can swamp the split you agreed. Treat founder money as a director's loan, as money that converts into shares at your first investor's price, or as shares priced on a valuation.

Yes. A shareholders' agreement usually arrives with your first priced funding round, which can be a year or more away, and it mainly protects investors. A founders' agreement covers the founders now: the split, vesting, roles, IP and what happens if one of you leaves. Many of its terms carry over into the shareholders' agreement later.

The split and how the shares are held; vesting with the cliff, and what happens to unvested shares when someone leaves; good and bad leaver terms and the buy-back price; each founder's role, time commitment and outside work; who decides what, with a tie-breaker; assignment of all IP to the company; how founder money is treated; limits on selling shares, such as a right of first refusal; confidentiality and non-solicitation; and how disputes are settled. The report's term sheet lists each of these, marked agreed or to decide.

It needs stamping under the Stamp Act of the State where it is signed, on stamp paper or by e-stamping, on or before the day it is signed; for an agreement of this kind the duty is usually a small fixed amount. It does not need to be registered. An unstamped agreement is not void, but a court will not act on it until the duty and a penalty are paid. The share terms in it also need to be in the Articles to bind the company.

As early as you can: before or straight after incorporation, and before anyone puts in money, hires or takes outside investment. Every month you wait adds work done and promises made that the split has to account for, which makes the conversation harder. Investors at the first priced round will expect vesting and IP assignment to be in place already.

Usually not. Under Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014, promoters, and directors holding more than 10% of the shares, generally cannot receive stock options. DPIIT-recognised startups are exempt for their first 10 years, but founders normally hold shares with vesting rather than options.

Yes, but check their employment contract first. Many contracts give the employer rights over anything created during employment, and Section 17 of the Copyright Act makes the employer the first owner of work made in the course of employment. Build on personal devices and personal time, and start that founder's vesting on the day they go full-time.

Yes. Shares issued to a person living outside India count as foreign investment: the price cannot be below fair value under FEMA rules, and the company files Form FC-GPR within 30 days of allotment. At least one director must stay in India for 182 days or more in each financial year. A co-founder who is a citizen of a country that shares a land border with India usually needs government approval before getting shares.

The prenup shows each founder's answers to the others only when every founder has finished; then all the founders see everything. Each private link opens one founder's answers, and the founder who sets up the prenup receives every link to pass on, so send each link straight to that co-founder. We contact you only if you ask us to or tick the box that allows it. Everything is deleted 90 days after the prenup is set up. The founder who set it up can delete it sooner, and each co-founder can delete their own answers at any time. Anonymous statistics, without names or contact details, are kept only if every founder opts in.

No. It is a starting point built from your own answers, using the method explained on this page. Use it to have the conversation, then get your founders' agreement drafted and reviewed before anyone signs.