How should co-founders split equity in a UK startup?
By SuLe · Updated 27 May 2026
There is no legal formula: UK co-founders can split equity however they agree, and the split becomes real through the shares each founder subscribes for at incorporation. What matters is that the number is a deliberate decision — weighing contribution, capital, commitment and risk — and that it is protected by vesting and a shareholders' agreement, because unwinding a bad split later is slow and expensive.
Key facts
- The register of members — not a pitch deck, spreadsheet or promise — is the legal record of who owns what.
- Equal splits are common, but they should be a deliberate decision after discussing contribution, capital and full-time status — not a default.
- Founder shares typically vest over 4 years with a 1-year cliff, so a leaver's unvested shares can be bought back at nominal value.
- Rebalancing later means a share transfer (0.5% stamp duty where the price exceeds £1,000) or a new allotment (SH01 filed within one month).
- Shares issued to founders or directors are employment-related securities, reportable to HMRC on the annual ERS return by 6 July.
What should actually drive the split?
The split should price what each founder brings from today forward — not just who had the idea first. Ideas are cheap to have and expensive to build, so weight the next four years of execution most heavily.
The factors that genuinely move the number are time commitment, cash invested, pre-founding work, opportunity cost and how hard each founder would be to replace. Talk through each one explicitly before anyone anchors on a figure.
| Factor | Questions to ask each other | Typically favours |
|---|---|---|
| Time commitment | Full-time from day one, or keeping a salary elsewhere for now? | The founder who is all-in first |
| Cash invested | Who is funding the company before revenue or investment? | The founder writing cheques |
| Pre-founding work | Is there already a prototype, brand or research one of you built? | The originating founder |
| Opportunity cost | Who is walking away from the larger salary or career? | The bigger sacrifice |
| Replaceability | Whose skills would the company struggle most to hire in? | The harder-to-replace founder |
Is a 50/50 split a mistake?
Not automatically — equal splits are common and can be exactly right where contributions genuinely match. They become a problem when chosen to dodge an awkward conversation rather than as a deliberate decision.
There is also a practical wrinkle: a 50/50 company with two directors and no tie-breaker can deadlock completely, with neither side able to pass anything. If you go equal, pair it with a deadlock-resolution mechanism in the shareholders' agreement.
On the "right" number, the honest answer is that no formula exists. What separates good splits from bad ones is the quality of the conversation behind them.
How do we make the split legally real?
Equity exists through shares, and shares exist through the machinery of the Companies Act 2006: each founder subscribes for a set number of shares at incorporation, the holdings are entered in the register of members, and the statement of capital sits on the public record at Companies House.
Changing the split later takes real steps. Moving existing shares means a stock transfer form, with stamp duty at 0.5% of the price — rounded up to the nearest £5 — where the consideration exceeds £1,000; allotting new shares means board approval, possible pre-emption waivers and an SH01 filed within one month, and it dilutes everyone.
One more UK wrinkle: shares issued to founders and directors count as employment-related securities. Report the acquisitions to HMRC on the annual ERS return by 6 July following the tax year — a company filing founders routinely discover late.
How does vesting protect whichever split we choose?
Vesting makes each founder's stake conditional on staying to build it. In the UK it works as reverse vesting: every founder legally owns their shares from day one, but unvested shares can be bought back at nominal value — the face value of the share, often a fraction of a penny — if that founder leaves.
The typical pattern is 4-year vesting with a 1-year cliff, written into the shareholders' agreement or articles. Without it, the split you agonised over is unprotected: a founder who leaves in month six keeps their full slice while everyone else works for years to make it valuable.
Worked example
Freya and Idris are incorporating an agritech startup selling crop-monitoring sensors to fruit growers. Freya spent a year building the prototype unpaid and goes full-time from day one; Idris joins at incorporation, also full-time, and lends the company £20,000 of working capital.
They work through contribution, capital and replaceability and land on 55/45 rather than 50/50, reflecting Freya's year of unpaid work and the working prototype. The company incorporates with 100,000 ordinary shares of £0.001 each: 55,000 to Freya, 45,000 to Idris, both recorded in the register of members.
Idris's £20,000 is documented as a director's loan rather than priced into the split, so it can simply be repaid later. Both stakes vest over four years with a one-year cliff under the shareholders' agreement.
Where founders go wrong
Defaulting to 50/50 to avoid the conversation.
The awkward discussion does not disappear — it returns years later with lawyers attached. Have it before incorporation.Pricing the past instead of the future.
The idea and early work matter, but the next four years of execution matter more; weight them accordingly.Skipping vesting because you trust each other.
Every founder dispute started with trust. Vesting is what keeps the split fair when circumstances change.Leaving the deal in a WhatsApp thread.
If the register of members and shareholders' agreement do not match what you agreed, what you agreed barely matters.
Related questions
Should co-founders always split equity equally?
No. Equal splits are common and can be right, but they should be a deliberate decision after discussing contribution, capital and full-time status — not a default chosen to avoid an awkward conversation. A 50/50 company with no deadlock mechanism can also stall completely if the founders fall out. [More: What is shareholder deadlock and how do I avoid it?]
How much equity should a technical co-founder get?
A genuine co-founder CTO commonly holds 10–50%, depending on stage, cash contribution and how central the technology is. A salaried first engineer who joins once the company is funded is different — typically 0.5–5% in options. The dividing line is founder risk: joining before money, product or salary existed. [More: How much equity should a startup CTO get?]
Can we change the equity split after incorporation?
Yes, but it takes real legal steps, not an edit to a spreadsheet. Either existing shares are transferred — stamp duty of 0.5% applies where the price exceeds £1,000 — or new shares are allotted, with an SH01 filed at Companies House within one month. Getting closer to right at the start is far cheaper. [More: How do I add a new co-founder after incorporation?]
Can a co-founder take equity instead of a salary?
Only with care. Anyone working under an employment or worker contract must be paid at least the National Minimum Wage in money — equity cannot count towards it. Genuine directors and shareholders without such a contract sit outside those rules, so how the relationship is documented matters enormously. [More: Can a co-founder work for equity only, without a salary?]
Do we need a shareholders' agreement to make the split stick?
The split exists as soon as the shares are issued, but everything that protects it — vesting, leaver provisions, transfer controls, deadlock resolution — lives in a shareholders' agreement or the articles. Without those, a founder who walks out after six months keeps every share they were given. [More: What should a shareholders' agreement include for a UK startup?]
Your equity split is the one legal decision you cannot easily undo — transfers, stamp duty and tax all stand between you and a do-over. A SuLe solicitor can pressure-test the split, vesting and shareholders' agreement before anything is signed. Get your founder documents reviewed — book a free consultation and put the awkward conversation on paper properly.
Keep reading: What is founder vesting and how does it work in the UK? · What is a founders' agreement and do we need one? · Founders' agreement vs shareholders' agreement — what's the difference? · What happens to a co-founder's shares if they leave? · What is a cap table and how do I keep it clean? · How many shares should I issue when incorporating a UK startup?
Primary sources: Companies Act 2006 · GOV.UK — Running a limited company
