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Equity Split Agreement Template for United States

An Equity Split Agreement is a legally binding document that outlines how ownership in a company is divided among various stakeholders, including founders, investors, and key employees. Under U.S. law, this agreement establishes the terms of equity distribution, including vesting schedules, transfer restrictions, and shareholder rights. It serves as a crucial document for startups and established companies alike, ensuring clear documentation of ownership structure while complying with federal and state securities regulations.

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What is a Equity Split Agreement?

The Equity Split Agreement is essential when establishing or restructuring company ownership, particularly in startup environments or when bringing in new partners. This document outlines precise ownership percentages, vesting conditions, and transfer restrictions while ensuring compliance with U.S. securities laws. Common scenarios for implementing an Equity Split Agreement include company formation, adding co-founders, compensating early employees with equity, or bringing in new investors. The agreement helps prevent future disputes by clearly documenting ownership terms and conditions.

What sections should be included in a Equity Split Agreement?

1. Parties: Identification of all parties involved in the equity split arrangement

2. Background/Recitals: Context of the agreement and reasons for the equity split

3. Definitions: Key terms used throughout the agreement

4. Equity Allocation: Specific details of how equity will be divided among parties

5. Vesting Schedule: Timeline and conditions for equity vesting

6. Transfer Restrictions: Limitations on selling or transferring equity

7. Representations and Warranties: Statements of fact by all parties

8. Governing Law: Jurisdiction and applicable laws

What sections are optional to include in a Equity Split Agreement?

1. Tag-Along Rights: Rights of minority shareholders to join in sale of majority shares. Include when protecting minority shareholders

2. Drag-Along Rights: Rights of majority shareholders to force minority to join in sale. Include when majority shareholders need exit flexibility

3. Right of First Refusal: Priority rights to purchase shares before third parties. Include when controlling ownership transfers is important

4. Anti-Dilution Provisions: Protection against ownership dilution. Include when future funding rounds are anticipated

What schedules should be included in a Equity Split Agreement?

1. Schedule A - Cap Table: Detailed breakdown of ownership percentages and share numbers

2. Schedule B - Vesting Schedule: Detailed timeline of vesting milestones and conditions

3. Schedule C - Valuation Details: Company valuation methodology and results

4. Appendix A - Shareholders' Rights: Detailed description of various shareholder rights

5. Appendix B - Transfer Procedures: Detailed procedures for share transfers

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

United States

Publisher

Ƶ

Document Type

Equity Agreement

Cost

Free to use

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