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How much equity should a co-founder who joins later get?

EquityCo-foundersVesting

A co-founder who joins later usually gets meaningfully less than the people who started the company, vests it from the day they join rather than from formation, and receives it as newly issued shares that dilute everyone already on the cap table. There is no formula. The number comes from four things: how far along the company was when they arrived, what they will actually do, what cash they are putting in, and what the existing founders gave up to get here, meaning salary not taken and money spent while the company was an idea and nothing else.

Why later means less

Someone who joins after a product exists, or after the first customers or the first check, is buying into a company that already has value, and the founders who built that value paid for it in time and risk. The common shape is a stake that is real, large enough that the founder title means something, and still well below an equal share.

New shares, not a slice of yours

The company issues new shares to the new founder. The existing founders do not hand over their own. A new issuance dilutes every holder by the same proportion, which is the fair result, because the whole company is paying for the new person rather than one founder. A transfer between founders is possible, but it is a sale or a gift with its own tax questions, and it leaves one founder paying for something that benefits everyone.

Vesting and the 83(b) clock

The new grant vests on its own schedule from the new founder's start date, usually with a one-year cliff, and the original founders' schedules keep running untouched. The grant is a new transfer of property, so it carries its own 83(b) election, due at the IRS within 30 days of the transfer. The elections the original founders filed at formation do nothing for the new shares.

The split that feels fair on day one is not always the one that holds up at an exit. Run the outcomes before anyone agrees to a number.

Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.