I think an answer to the following simplified question should help me. If you would like to help me with my more specific scenario, then you can read the detailed question at the end. Thanks.
If Person-A is the sole owner of a limited liability private company. Then one day he gets an investor, Person-B, and sells him 20% of the company for his investment. Then, later, Person-A agrees to sell a further 10% of the company to another investor, Person-C...
Do both Person-A and Person-B proportionally share a loss of their shares when Person-C gets their shares, or are Person-B's shares fixed and secured to him, and therefore only Person-A bears the affects of the transfer to Person-C?
I hope that is clear and succinct enough. Thank you.
My specific scenario question is:
I have recently begun a new startup. It is basically just me and a friend as partners. But we both acknowledge that I should be entitled to a larger portion of the company, so we have agreed to an 80-20 split. His 20% is broken up as: 5% for being a co-founder; another 5% as reward for his ongoing role as an advisor; and 10% which he has bought.
The company is officially only in my name alone. When it comes time to give my partner his share of the profits, the accountant will officially incorporate him then to give him his share. (This is for a tax benefit to all, which we both agreed to.)
We are trying to understand though... If we sell a share of the company to an investor, then do I solely bear the 'loss' of shares, or do we share it proportionally. And if proportionally, then does the friend 'suffer his loss' from all his 20% or just 5%, 10%, or 15%?