# How Should Co-Founders Split Equity? - URL: https://girisimcikafasi.com/en/blog/how-should-co-founders-split-equity/ - Published: 2026-10-01 - Updated: 2026-10-01 - Category: Starting and growing a business - Publisher: Girişimci Kafası London, 1879. The writer W. S. Gilbert, the composer Arthur Sullivan and the producer Richard D’Oyly Carte decided to set up a company together. Each put in £1,000. The deal was simple: after the costs of the shows were deducted, the profits would be split three ways. The partnership flourished. Carte built the Savoy Theatre for their operas. The Gondoliers, which opened on 7 December 1889, was a triumph. Its plot was telling, too: two Venetian gondoliers rule a kingdom jointly until it becomes clear which of them is the real king, sharing every task on the principle of "republican equality" and complaining about having to split a single plate in two. While the song of equality was being sung on stage, things were getting messy backstage. On 22 April 1890, Gilbert noticed that the theatre’s maintenance costs had been charged to the partnership. One of the items was a new £500 carpet laid in the front lobby. In Gilbert’s view this was the expense of Carte, the building’s owner. Carte refused to reopen the accounts. In a letter to Sullivan, Gilbert said he had told Carte it was a mistake "to kick down the ladder by which he had risen" and walked out. He took legal action and won. But Sullivan had sided with Carte, and the trust between them was never repaired. As Gilbert’s biographer Andrew Crowther stresses, the real issue was not the price of the carpet. It was who kept the joint accounts, and under what rules. In a letter to Sullivan dated 28 May 1891, Gilbert reports that Carte had admitted an "unintentional" overcharge of nearly £1,000 on the electric lighting bills alone. The music publisher Tom Chappell acted as mediator and the pair made up. In Alfred Bryan’s 1893 cartoon, the three partners stand side by side again, with a caption underneath warning that this is more profitable than pulling in different directions. Even so, the next two operas could not bring back the old days. After 1896, Gilbert and Sullivan never worked together again. ## The carpet in your company Most co-founder relationships crack in the same place. At the start everyone is excited, the shares are settled with a handshake and the rules go undiscussed. The problem does not arrive as a big crisis but as a small carpet: one person feels they are working harder, the other that they are taking more risk. Failory’s guide to splitting equity among co-founders suggests a few clear principles for sealing that crack from the outset. ## How should co-founders split equity? ### Talk early and put it in writing Discuss the split before the company grows, while there is no value yet to divide. The longer you wait, the harder the negotiation gets. Write down what you agree in a founders’ agreement, and always have a lawyer look at it before you sign. ### The default answer: equal shares As Failory reports, Michael Seibel of Y Combinator says an unequal split declares one founder more valuable than the other, and that this damages productivity. If you have chosen someone as your co-founder, you are weighing their work on the same scales as your own. ### Avoid the wrong reasons Having had the idea first, starting a few months earlier, your age, your experience or the first money you put in from your own pocket are not, on their own, enough to justify a bigger share. On a journey that could last ten years, these are small advantages. Job titles are not a measure either: being CEO does not automatically mean more equity. ### If inequality is needed, name the reason In some cases a different split can make sense. If one partner is full-time and the other part-time, something like 60/40 can be discussed. Those worried that a 50/50 split could deadlock decisions opt for 51/49. What matters is to write down the reason for the difference clearly and revisit it when circumstances change. ### Spread vesting over time Rather than handing over all the shares on day one, the common pattern is four-year vesting, with nothing earned until the end of the first year. That waiting period is called the "cliff". That way, a co-founder who leaves in month six does not walk away with a quarter of the company. ### Don’t forget to write down the carpet too How the joint accounts are kept matters as much as the split itself. Which expenses belong to the company and which to the individual? Who approves them, and who can see them? What drove Gilbert and Carte apart was not the profit share but the fact that these questions were never asked. ## Equity and "hisse": fairness and a lesson learned The English word for a stake in a company, "equity", comes from the Latin "aequitas". Its root, "aequus", means both equal and fair. For Roman jurists, aequitas was the fairness that softened the rigidity of written law. According to Etymonline, in Latin the word also described a calm, balanced state of mind. "Equities" in the sense of company shares only appears in the record in 1904. The Turkish word for share, "hisse", comes from the Arabic "ḥiṣṣa". According to the Nişanyan Dictionary, its first meaning is portion and its second is lesson or moral. That is what Turks mean by the saying "kıssadan hisse", the moral of the story. The same word describes both the share in your hands and the lesson you draw from it. ## A final word Discussing fairness in distribution in Book Five of the Nicomachean Ethics, Aristotle writes: > "This is the origin of quarrels and complaints: when equals have and are awarded unequal shares, or unequals equal shares." When you and your co-founder settled your shares, did you talk about equality or about fairness? And could there be a carpet laid in your company’s lobby that nobody has noticed yet? *This piece draws on Failory’s article [How To Split Equity Among Co-Founders](https://www.failory.com/blog/how-to-split-equity). If you are curious about what separates a startup from any other company, have a look at [What Is a Startup?](https://girisimcikafasi.com/en/blog/what-is-a-startup-and-which-companies-count/)*