Protecting your startup founder's stock shares

Part of the incorporation process is the creation of a few stock shares (ten million is a common starting point), known initially as Founder's shares. You sell a portion of these, meaning a portion of your equity ownership, to investors when and if they provide funding, and you may give a portion to partners and key employees as part of their compensation and commitment to your startup. Try to keep at least 51 percent for yourself to retain control of your company.

In reality, so-called "founder's" shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. However, that's only the beginning of the story.

These shares are allocated and committed, but not really issued and owned (vested) until later. Typically, vesting in startups occurs monthly over 4 years, starting with the first 25 percent of such shares...