Founders stock / founders equity
Initial ownership stakes received by founders at LLC formation.
Definition
Founders stock (in corporations) or founders equity (in LLCs) is the initial ownership received by founders at formation. Typically subject to vesting to prevent walking away with the equity if a founder leaves early.
Context
LLC equivalent of corporate founders stock is the initial membership interest, with vesting via Operating Agreement.
Example
Three co-founders form a Delaware LLC. Each receives 33.33% membership interest subject to 4-year vesting with 1-year cliff. If one leaves at month 18, they keep 18/48 of their stake.
Common pitfalls
- Vesting must be in Operating Agreement; default rules do not impose it.
- 83(b) election for vesting equity (US persons only).