A sweat equity agreement is a formal arrangement that outlines the contributions and compensation of individuals who invest their time and effort (rather than money) into a business or project.

Sweat equity agreements are common in startups and small businesses where founders or early employees work for little or no pay in exchange for ownership stakes or future financial rewards.

A sweat equity agreement will typically cover the following matters:

• Contributions: Detailed description of the work, time, skills, or resources each party will provide.
• Equity Allocation: The percentage of ownership or shares that will be given in return for the sweat equity contributions.
• Vesting Schedule: Terms outlining when and how the equity will be earned over time. This often includes a vesting period and conditions for forfeiture if certain milestones or time commitments are not met.
• Responsibilities and Expectations: Specific duties, tasks, and performance expectations for each party.
• Termination Conditions: Terms under which the agreement can be terminated, including the consequences for equity if someone leaves the project early.

By formalising these terms in a written agreement, all parties have a clear understanding of their commitments and the benefits they will receive, reducing the potential for conflicts and misunderstandings.

Book a free consultation.

Check current pricing.