First, we cannot give you an answer. At best we can give you some source of understanding. Hopefully that can lead you to an answer.
So, currently you've all been investing quite a lot personally into this shared thing, and you're finally hitting the point where some money can start coming out. You're not sure how to distribute the money, and there's conflict between the individuals involved. So let's look at what matters.
The first thing that matters is that you need the company to survive in the short term. You've all invested a huge amount of personal resources into this thing, and it's just starting to pay off now... and from the sounds of things you're still not at the "can afford to pay a decent salary for hours worked" level. You need to keep everyone (including yourself) bought into the idea of the company and not feeling bitter about mistreatment. Good luck.
It is a very natural human instinct in situations like this to crave advantage. You need to fight that. Giving yourself a fair deal as you give everyone else a fair deal is important. You're going to be naturally inclined to see reason why your deal should be more fair, however... and if you follow through on that, that's going to lead to resentment, which can very easily poison the company from the inside. Even if it doesn't lead to someone outright leaving, it can do bad, bad things to the company culture, to overall morale, and to the emotional experience of being involved in the whole thing.
The second thing that matters is that you need a long-term solution, rather than a short-term solution. Seriously, you should have had something like this worked out years before - before it mattered, and thus before the pressure was on. You certainly don't want to have to re-fight that fight every time things improve. You need to figure out an answer (ownership percentages, ways of figuring out pay, and so forth) that's going to work for everyone both now and in the future... and you need to listen. This is not the point to be playing for dominance. It doesn't matter whose idea gets picked as long as it's an idea that all three of you can be reasonably happy with.
Beyond that... I think you're trying to optimize on the wrong things right now. Everyone is already working 35-40 hours per week on this thing, with no pay. You don't need to offer further incentives than that. Also, it's not nearly as much income as any of you could get anywhere else working the same number of hours for pay. Incentives of this variety can come later. For now, you need to worry about "we're starting to distribute pay, and we didn't figure it out in advance, and I'm worried it will break the company". That's a much bigger deal here. You want to distribute money because you want to make life a bit easier for the three of you, and because having a company-based income stream will let you start to save time from your other income sources, but it's a matter of enabling, rather than giving incentives. It's pretty clear that everyone involved is motivated enough already.
Finally... what people are doing outside of work for the company? Doesn't matter. What you need here is fairness, and fairness needs to start with what you're each contributing to the company itself, not what you could be getting elsewhere. That's going to be a matter of hours spent, of productivity in those hours, and of unique skills and abilities that you bring to the company. "What you could make playing Poker" doesn't really matter unless those poker skills are somehow directly applicable. The burnout argument is a valid one in this case, but I'll invite you to consider whether or not it's one that's worth making. Is person C really contributing meaningfully less value than A or B?
Really, the entire point of this process is getting to where the company itself can sustain all of you, and make lots of money. You need to have a shared idea of what that is going to look like in terms of who gets paid what. Once you've done that, then the real issue is in getting there, with everyone reasonably happy about the path that you've taken.
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...but that's not really addressing what your actual issue is. I really didn't understand your "proposed solution" at all the first few times I read it, but I think I get it now. It looks like what's really going on is that A and B are trying to pressure C into getting rid of or at least seriously curtailing their external employment, under the theory that this will result in them being more productive at work. Barring that, A and B want to set up a system where they are advantaged in comparison to C in order to punish C for investing so much time elsewhere. I'll tell you straight up, that's a bad approach to take. C will resent it, and they'll be correct to do so. You're essentially setting things up so that A and B get paid while C does not. There's no way to make that right.
Ideally, the pay would be based on actual productivity, but it's really hard to measure that. In general, though, you want to split the pay up by fractional contribution, however it is that you can figure that out. I guarantee that C is providing more than 0% of the work-value that goes into the company in any given month.
