Distributing Equity News Today

Leadership position. >> reporter: the spirit of the increase was right in line with soapboxs philosophy. >> i would rather be in a company of people who want more of the pie and are willing to work for that. >> reporter: when stephanie decided to leave the company, the owners bought her shares back. at what value? well, again, since they didnt formally value the company, they arbitrarily valued each share, something david cautions other entrepreneurs not to do. the most dramatic equity change wa...

>> as we just saw, dividing up equity is complicated. there are legal issues, taxish you autos, there are emotional issues. so we brought in an sbert to help sort it all out. brad schwartz is founding partner of strategic law partners. he is also an adviser to the company that i founded. brad, its great to talk to you. >> good morning, j.j. >> okay. so i want to just concentrate on founders equity, the first people. in a different segment well talk about giving equity to your employees. how do y...

>> reporter: entrepreneur david simnick understands the power of equity. >> it is ownership. >> reporter: dan dahl who co-owns with david agrees. >> when theres no physical currency given, theres no other way to value someones time and effort. thats the only currency that you have. >> reporter: but how to value a company and how to distribute equity are tough decisions with lots of layers. the owners of the alexandria, virginia, based company had mastered making soap, and they had a social missi...

But if i leave after one year, then i give back 40% of that. >> yeah. thats right. and eric was very reasonable in how he went about approaching things. but not everybody is. and its very important for founders to address that kind of situation where someone is putting in less time or just completely leaves to have the contractual right to adjust their equity and take back some of the invested equity. >> i started this with my partner, she leaves after one year and she still owns 50% of the comp...

>> reporter: not knowing the intricacies of distributing equity, they didnt exactly do it right. once again, they didnt value the company, but they believed it still wasnt worth much. >> equity didnt have a concrete meaning for me. so signing the paper was like oh, im officially on the team. >> reporter: and they didnt dilute the current owners proportionally. they each gave up 1 percentage point to stephanie which hurt dan who owned less. >> at the time it felt right, reflecting back, i probabl...

Pair needed help. thats where dan enters the story. in lieu of a salary which they couldnt afford to pay, they gave him a stake in the company. >> he was doing a lot of work for us, but we felt the pressure to be protective of our equity. >> reporter: but they decided his work was worth more than just 10%. and that motivating him with ownership was more important than retaining equity themselves. so they gave him 20%. they didnt value the company at the time, which they should have, but looking ...

Msnbc. hi there, everyone. im j.j. ramberg, and welcome to "your business." today i want to start out the show by dealing with a tricky topic, equity. how do you divide it up amongst owners? when should you give it to your employees, and how much should you give away? to kick off the conversation, we turn to a young, fast-growing company who counts whole foods, vitamin shop and hundreds of small retailers among its clients. in the spirit of learning a thing or two about distributing equity, th...

Hi there, everyone. im j.j. ramberg and welcome to "your business." today, i want to start off the show by dealing with a tricky topic. equity. how do you divide it up amongst owners? when should you give it to your employees? and how much should you give away? to kick off the conversation, we turn to a young, fast-growing company, who count whole foods, vitamin shops and hundreds of small retailers among its clients. in the spirit of learning a thing or two about distributing equity the company...