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What does my equity amount mean?

Long Beach, CA |
Filed under: Business

Hello
I am joining a start-up without putting money but in exchange for my work I am offered salary and 200,000 equity. I have no clue what that amount means as for equity. Let's say if I want to sell this stock later, what would this mean for me? Thank you in advance.

Attorney Answers 4


  1. Equity would be ownership in the company. Depending on what type of business entity it is (LLC, corporation, etc), this would be shares of stock, a profit interest, or other type of equity interest.

    Consult with a corporate attorney.


  2. Hire a business attorney to advise on the tax issues and draft the agreement or you may wind up nothing of value. Good luck.

    This answer is for informational purposes only and is not legal advice regarding your question and does not establish an attorney-client relationship.


  3. You will need an attorney to look over your proposed shareholder agreement and whatever documents the company has that delineates what class of shares you're getting. It is entirely possible that the share classes will define profit at certain milestones, preclude or provide for voting, or have substantial limitations on their disposition. One thing about a start-up is that if you are offered stock you also want something in place that gets the company to buy it back from you, perhaps based on a formula based on revenues, profits, etc. Unless there is a market elsewhere outside the company for the stock, you could be finding yourself on the short end of the stick.

    The foregoing is not legal advice nor is it in any manner whatsoever meant to create or impute an attorney/client relationship.


  4. Equity is an ownership interest in the company you are working for. 200,000 shares doesn't mean anything until it is compared to the total amount of shares outstanding. If there are only 200,000 shares outstanding, you would own the entire company. If there are 2 million shares outstanding, you would own 10% of the company. I suggest contacting a business attorney to help you negotiate your agreement with the company. They will make sure that you are being properly compensated for your work and that you are protected as an employee and owner of the company.

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