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Contract Management: How can I structure a contract to bring on a co-founder to help my business when I can't pay them?
WM
WM
Will Murphy, Entrepreneur answered:

Without knowing more details, here are some things to think about:

Equity: What you have to offer is partial ownership in the business. Unless she will work for free as an intern (the value of working for you is getting experience).

You would want to form a business (LLC or C-Corp for example - are common).

Give her some equity. You said she wants to "help". How much she's helping wold drive how much equity to give.

I highly recommend vesting schedules. She has to earn into equity over time. For example, a couple ways I have done this:

1) Is she a co-founder? Meaning, will she contribute substantially to the idea, launch, and growth of the business?
Then you could offer 2% to 50% depending on how far along you already are and her contribution. For example if you have sold nothing then that's an argument for giving her more equity. Vesting for this in the startup world is standard - 4 year with 1 year cliff (google that).

2) Is she more of an employee?
Then I would consider a smaller % ownership with a shorter vesting schedule (For example .5% - 5% ownership, all vesting monthly over 1 year for example) In the time the ownership is vesting, you should be executing on a plan to make money so she can get a salary.

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