✍️ Essay
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Why we picked it
Dharmesh Shah (HubSpot co-founder) makes the exact separation your question needs: salary pays for work, equity is ownership, and the two are separate matters. He says plainly that whether a founder puts in cash or takes less pay should not change their salary, and that if you cannot pay full salary now you should book the gap as a deferred expense item the company owes, not convert it into extra shares. That is the cleanest argument that a modestly-paid co-founder can still hold equal equity.
From
OnStartups
by Dharmesh Shah
10 min read
- Salary compensates the role you play today; equity reflects company creation and long-term contribution, so there should be no mechanical link between the two.
- Deferred pay belongs on the books as a company liability (a deferred expense item), where it can be settled at the next financing, not swapped for cap-table shares.
- Whether a co-founder invests cash or draws a smaller salary is a separate question from how much equity is fair, judge equity on contribution.
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📄 Article
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Why we picked it
A startup lawyer names the specific trap in your answer: founders who let unpaid salary pile up as owed salary on the books, then expect investors to honor it at the seed round. His line, I have seen founders accrue owed salary and investors will not pay it, is the concrete warning that deferred pay is a payable to track carefully and keep off the cap table, never a claim on equity. Practical staging of founder pay across rounds, not theory.
From
Flux Law
by Ryan Howell
9 min read
- Early on your equity is your compensation, treat modest cash pay and ownership as answering two different questions.
- Do not rack up informal deferred salary; large owed balances create a messy cap-table conversation and investors often will not honor them.
- If you defer, document it as a deferred expense or founder loan so it stays a clean liability, negotiable at financing rather than a phantom equity claim.
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📄 Article
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India
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Why we picked it
The India-specific piece your set needs. It spells out exactly how a founder-director who defers salary in the early years should record it: a board resolution setting the terms, waiver or deferral noted in the minutes, and the amount reflected in the financial statements (AOC-4). It also flags that deferred salary stays deductible when finally paid if it is reasonable and tied to real work, with Section 40A(2) risk on disproportionate amounts. This is the CA-level mechanics for keeping deferred pay a clean liability on Indian books.
From
IncorpX
by IncorpX
12 min read
- Private companies face no Section 197 remuneration ceiling, so founder pay is set by the board and articles, giving room to run a modest salary while equity stays split on contribution.
- A deferred or waived founder salary must be documented in board minutes and shown in the financial statements (AOC-4, MGT-7), i.e. tracked as a company payable, not a cap-table entry.
- Deferred salary remains tax-deductible when eventually paid if reasonable and tied to services rendered; disproportionate amounts can be disallowed under Section 40A(2).
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incorpx.io →