If 1 founder and 4 cofounders create an app, what percentage of the company or business should those 5 own, considering the founder is also the chairman?

Determining an equity split among founder partners can be one of the most difficult and challenging aspects of starting a business, so you are right to be giving this a lot of thought.

From your question, it is unclear whether you have actually founded the company yet or are planning to start one up. If you have already created the app and are allocating ownership percentages, my first question would be what agreement or understanding did the founding partners have in place when they started doing business together? If you all agreed to be equal owners, then each partner would get 20% ownership and the additional efforts associated with specific roles, such as being the chairman, would be acknowledged through other forms of compensation.

If you have not founded the app yet or there was no agreement, there are a number of considerations that come into play:

  • what are the various financial contributions of the founders?
  • what are the various sweat equity/service contributions of the founders?
  • what other intangible value are founders bringing to the table?
  • what anticipated role will each founder serve going forward?
  • whose original idea was the app (if it was spear-headed by one person)?

Taking these into account, the five of you should be able to come to a set of percentage allocations that you can agree on. It is important to remember that once ownership is granted it can be difficult to get back, so you want to be sure that allocations are fair, but not premature for work that may not ultimately be performed. There are other options, such as stock options and vesting periods that can also be factored into the equation.

An attorney knowledgeable on tech start-ups would be able to assist you in exploring the various structures available to your team to ensure that everyone is receiving equitable compensation. LawTrades can connect you with an experienced and vetted attorney for a free 20 minute consultation to discuss how they can assist your growing company. If you choose to work with them, all work is done on an affordable and transparent flat-rate.