How to issue equity to a co-founder, an employee or an advisor

The short answer

Before you can give anyone equity, three things have to already be true. Your board has to approve this specific grant. If you are giving options rather than stock, you need an option plan the board has adopted, and a current 409A valuation — the independent appraisal that sets the price your employee will pay, good for twelve months. Founders Form AI will not draft the grant until all of them are in place, and does whichever is missing first.

The chain is the same whether it is a late co-founder, your first engineer, or an advisor. Only the documents change. And your cap table updates from the signed versions, so nobody has to type it in afterwards.

See what your equity is missing What it costs

Three situations, one chain

Founders usually meet these in this order, and each one leaves the record the next one runs on.

Situation 01

A late co-founder

Stock rather than options, with vesting. Plus an IP assignment covering anything they built before the company existed, and an 83(b) election within 30 days of the stock being issued.

Situation 02

Your first employee

Options, which means a board-approved plan and a current 409A have to exist before the grant can be drafted at all.

Situation 03

An advisor

Usually a small option grant on a standard advisor agreement — same plan, same valuation, same consent requirement.

What a valid issuance actually takes, in order

1
An option plan your board and shareholders have approved, with the size of the pool set — needed for options, not for stock
2
A 409A valuation less than twelve months old, or newer than your last funding round — this is what makes the strike price defensible
3
A board consent — a signed document where your directors approve this grant, to this person, at this number
4
The agreement itself — grant agreement, or stock purchase agreement for restricted stock
5
An IP assignment, if the person built anything before there was a company to own it
6
An 83(b) election within 30 days of transfer, for restricted stock

The steps founders skip

The 409A, and the co-founder IP assignment. An out-of-date valuation means the price your employee pays cannot be justified to the IRS, which turns a reward into a tax bill for them. A missing IP assignment means the company does not own part of its own product, and that one surfaces in the first diligence request rather than at the time.

And then it stays right

Issuing equity is the easy half. The hard half is keeping it accurate for three years — through a pool increase, someone leaving, someone exercising, and two rounds of dilution.

Your cap table is built from the signed documents, not typed in. So it always matches what you actually signed, and it updates itself when you sign something new. You do not need separate cap table software. Seeing yours costs nothing.

You stop being the one who remembers. The 83(b) deadline, the 409A expiry, how much pool is left — we read all three out of the documents.

See what your equity is missing before you promise anyone anything

Upload what you have signed and Founders Form AI reads every grant, consent and agreement in it, then tells you what is missing and what it invalidates. Most founders find at least one thing here they did not know to look for.

Whether your plan is board-approved and how much pool is actually left
Whether your 409A is current, and which grants were made after it expired
Which grants are missing a board consent, and which are missing an 83(b)
Who has equity but never signed an IP assignment

See what your equity is missing What it costs

Free, and it is the whole diagnosis rather than a sample. If something needs fixing, you see the price before you order it.

What it costs

Traditional startup firm

$300–$1,200/hr

Billed hourly unless scoped in advance. Plan adoption alone is commonly quoted at $2,500 to $7,500.

Founders Form AI

$500 flat

The whole workflow with a licensed attorney's review and signature, back in about two hours. Four documents and three signers is still one $500.

Cap table maintenance and the health check are free. Unlimited unreviewed workflows on the $625 monthly plan. Ranges from published startup legal fee guides accessed 2026-08-20.

Common questions

Do I need a board consent to issue equity?

Yes, for every issuance — co-founder stock, employee options, advisor grants. Board authorization is required for the issuance to be valid, and equity issued without it is one of the most common problems found during investor diligence. Founders Form AI generates the consent, routes it to your directors, and will not issue the equity until it comes back executed.

How do I bring on a co-founder after the company already exists?

A late co-founder needs a stock purchase agreement, board authorization for the issuance, a vesting schedule, an IP assignment covering anything they built before joining, and an 83(b) election within 30 days of the transfer. The IP assignment is the one founders forget, and it is the one that matters most if that person built part of the product before there was a company.

How long is a 409A valuation good for?

Twelve months, or until a material event such as a financing round, whichever comes first. Granting options against a stale valuation means the strike price is not defensible, which becomes a tax problem for the person you were trying to reward. Founders Form AI checks the date before drafting anything.

What usually comes next

Solution

Grants already made

If equity went out without the consent behind it, that is fixable — and cheaper now than at diligence.