There are some assumptions in here we have to take apart. First, if you're not a corporation, there isn't "really" equity. LLCs have ownership, but it's not s

There are some assumptions in here we have to take apart. First, if you're not a corporation, there isn't "really" equity. LLCs have ownership, but it's not stock like it is in a C corp, it's just whatever you define it to be. If you're an LLC which will eventually reorganize into C corp, or just a bunch of people puttering around together in your spare time, there's no legal structure or contract which could guarantee that the final incorporated form of your startup will preserve the equity arrangements you've discussed. It is entirely possible, perhaps even likely, that someone will get screwed, when incorporation time comes. As such, I don't really see a point in formally defining equity for a non-C corp. Either everyone trusts each other or they don't, but paperwork isn't going to fix that. Someone will sputter, "but you could just put it in a contract!" Yes, but if you can't afford to sue me over the terms of the contract when I form a new C corp without you, then what's the point? (I assume that's why you're not incorporated yet, that you don't want to spend a few thousand dollars for paperwork, and that your co-founders probably won't, either.) The other problem you have by not incorporating is there's no independent entity which owns all the IP. When your co-founders write code, who owns it? Where is that defined? How is ownership transferred from them to the startup? If this is their side project, do their employment contracts allow them to have side projects, or do their employers own everything they do? Are they using their work computers to work on anything for your startup? Etc. So, in a sense, it doesn't matter what percentage you say they have, nor how you validate it, because those arrangements aren't worth the paper they're printed on. That said, my fourth startup attempt went the unincorporated route. We had a gentleman's agreement around IP and ownership. We used Joel Spolsky's equity plans, most recently discussed here: https://news.ycombinator.com/item?id=7610781 https://news.ycombinator.com/item?id=7610781 All the original founders were the first tier, sharing 50% ownership. We were all equally side-project-ing it; there were no full-time founders. Additional rounds of founders would have been in one of the subsequent 10% tiers. If we had any full-time founders, I'm not sure what we would have done; perhaps full-timers in one 30% tier, and part-timers in a shared 20% tier, to keep the 50% bracket for original founders. For IP, we agreed to each retain ownership of our own code, and non-exclusively license it to each other person, for the purposes of working on a group project. We had a shared private code repository; anything in there was understood to be licensed as such, and only the things in there. Everyone understood that all of this was effectively non-binding, but we all trusted each other, and the expectation was, come time to launch the app we were working on, we'd incorporate at that point, and formally define all of this.