Deciding who counts as a founder, and how much equity each founder should receive are two of the hardest decisions faced by Start-ups. When first launching a business, an entrepreneur with a great idea rightly views themselves as the only "Founder" and the most important person in the new business. As soon as the work of building the business expands beyond what the initial founder can handle, the single founder model is challenged.
Adding people to a Start-up's team means deciding if the new people are employees or partners. The first trap for may businesses is not understanding that giving someone a small equity interest, does not alleviate the obligation to pay minimum wage, or provide unemployment and workers compensation insurance coverage. State and Federal regulators will use a multi- factor test to determine if someone is an employee and
Investors look at founder equity split as a cue on how the CEO values his/her co-founders. If you only give a co-founder 10% or 1%, others will either think they aren’t very good or aren’t going to be very impactful in your business. The quality of the team is often one of the top reasons why an investor will or won’t invest. Why communicate to investors that you have a team that you don’t highly value?
https://blog.ycombinator.com/splitting-equity-among-founders/
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