If you are starting a company with a partner or looking to add partners or investors to the business you already have, you have to think about dividing that equity. It’s important to divide equity in a fair way, so that all partners and investors are happy with their share. But many factors go into dividing equity, so here are a few that you need to be thinking about.

Understand Shareholder Rights 

Before you start dividing business equity, you need to know how it is done legally. This means that you need to get to know shareholder rights. For one, shareholders have voting rights, so they will be included when you make decisions for the company. Also, if you are giving out dividends based on your earnings, you have to make sure to give them to all shareholders. You can choose not to give dividends in years with lower profits, but in that case you cannot give out dividends to anyone.

Your Business Structure

The structure of your business will also impact how you want to divide equity in your business. Structures have specific requirements for each element of your business, so it is important that you pick the right structure for what you need to do. Structuring your business properly specifically matters for tax planning and selling equity. Choosing the right structure at the beginning will save you a great deal of trouble when you do decide to sell equity or add a partner.

Roles in the Company 

Depending on the role each person has in your company you will want to give them different amounts of equity. The more important the role, the more equity they should get. You also want to take into account who is being paid for their time and who should be paid with a stake in the company. When you do that, it will help to guide your decision making and make sure things are done in the fairest way possible.

Dividing equity in your business is an important part of starting and running a business, so if you haven’t started thinking about it much now is the time. The decisions can be a bit complicated, but as long as you’re following best practices and working diplomatically with others, you should be fine. In fact, you’ll be able to rest easy knowing that everyone is getting what they deserve for the work they are doing.

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