Equity to Consultant

directrpepdirectrpep Posts: 2subscriber
edited January 2008 in Business Planning
Hi everyone,
I have a question.
I am starting a company.
I was inititially going to have a partner with me start this, but she
decided to not be a partner anymore back in November.  She said she would instead like to simply be a consultant so she could consult with other companies.  So, since November I have
moved forward and done everything to set it up and now I am at a point
with clients and going to start business in February. 
She is
an engineer and and the company could benefit  from her knowledge.  Although I would prefer to have her Full Time so she can be involved in the day to day operations, she will not be so instead she will only be able to assist when she is available and also as needed. 
We know eachother from working previously at another job.  We work well together and I wish she chose to be a part of the company rather than a consultant, but that is her decision.
The problem is, is that she is asking for equity in the company as a
Consultant. And as a consultant she would only be available for about
20 hours a week or less because she would like to work at other places as well. 
From all my conversations with people, they have told me that this is not normal and that a consultant does not receive equity in the company and if so, then it is at less than 1%.  But I value her work and would like to work together, but again, I want to make sure that I am making good business choices since this is a legitimate business and not a personal decision.
I would just like to know if this is something common or has happened before.
thanks. directrpep1/16/2008 12:18 AM

Comments

  • robertjrobertj Tampa Bay, FloridaPosts: 0subscriber Member
    directrpep,
    I am against paying service providers with stock because:

     It commits you to using that provider well into the future.
    It`s difficult to get a fair exchange of value
    You have a owner/investor/partner forever (or the life of the business)
    Conflicts may arise over the lack of liquidity in the compensation

    If you are committed to having this person as a "partner/owner" and prepared to pay them in "sweat equity" - by all means set up a vesting plan based upon contributions, milestones or length of time.
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