This article will read really differently in four or five years once they've either made some good money or gotten funded, or both, and one of the partners wants to leave for a 'different opportunity.'<p>It misses: voting control vs ownership of financial benefits, the absolute preference of capital over labor in how funders and the government think about businesses, LLC vs corporation issues, dead-weight partner problems, title-related compensation issues,governance and a few other things I can think of.<p>I tend to think of a simple best-practices setup in a situation like this to be:<p>a) 50-50 voting control e.g. Class A Stock for the partners.
b) if one was deemed to get '60%' by the article's method, that owner would get the remainder in Class B non-voting stock.<p>c) If a corporation: a valuation should be chosen upfront, and all non-labor soft or hard contributions should be recorded as giving additional non-voting stock, or (a bit easier with a partnership), as paid-in-capital.<p>1) if an LLC, paid-in-capital gets returned first, always, no exceptions (until they're funded)<p>d) Lock salaries until the two owners are a non-majority on the board. All additional money can come out via distributions.<p>e) If either partner leaves, company can buy out at fair valuation, with some sort of note, or can convert up to 100% of leaving partner's stock to non-voting.<p>That's a start at a workable situation in my opinion, I'd be interested to hear people poke holes in it..