[BDC-2010] Team's equity distribution (pie calculator)

[Dan Heller]

Everyone -- this email recently came in. See my reply:

So the team has agreed and signed a ledger stating that in the event of
> winning, ... the prize money will be put into a team account to be
> used solely for the production of [the product].
>

no matter what you do to avoid coming up with a distribution ratio, the
subject will raise its ugly head. And the longer you put it off, the worse
the battle becomes. Many startups fail when the founders put off this
unsettling challenge.

Also keep in mind that if the winning team wish to incorporate, the Startup
Lab will do this for you, saving you thousands in legal fees. We will also
open a bank account, and deposit the money in it. This will save you (and/or
your parents) several thousand in income tax that you'll have to pay if you
decide to take cash. (The tax consequences of "winnings" means that you have
to pay the tax, or your parents do, depending on whether you file
independently, or your parents still count you as a deduction.)

the income tax on a $10K award can range from $1500 to $3600, depending on
the tax-payer's tax bracket. (It could be zero if you are very, very
clever... in which case, you probably are too smart to be in this
competition in the first place.)

Whether you use it or not, you are all required to use the pie-calculator
and agree as a team on whatever you all decide together.

I know it's hard. But it can also be fun if you do it while making stupid
faces at each other.

-- 
Dan Heller
Executive Director
UCSC Center for Entrepreneurship
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