Book · 30 min read

Co-Founder Equity Splits and Vesting (The Founder's Guide to Startup Funding: Protecting Your Interests in the Indian Ecosystem)

Swimming With Sharks · Swimming With Sharks (Indian founder funding guide) Free Intermediate India

Most equity-split writing is American and ignores that India has no 83(b) election and its own sweat-equity rules. This chapter tells you to buy your founder shares at incorporation when face value is 10 rupees and FMV is nominal, because waiting means a higher FMV and a higher tax hit, which is the concrete Indian reason to split before you raise.

  • Split and issue founder shares at incorporation when FMV is nominal (10 rupee face value); delay raises FMV and your immediate tax.
  • India has no 83(b) equivalent, so timing and paperwork matter differently than in US-centric advice.
  • Section 54 sweat-equity shares carry heavy compliance (special resolution, valuation report, lock-in), so founders usually just take regular equity and keep cash separate.
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The question it answers

  1. Should co-founder equity be split before or after we have raised any money, and does it matter that one of us is putting in cash?

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