Starting a Business with a Co-Founder: Economics and Control

This ad-hoc, 50%/50% split of expenses amounts to both founders contributing equal amounts of cash to the nascent company. One permutation of such a liquidation preference could be if the company makes any distributions of cash, that cash might be split 100%/0% until Founder 1’s initial contribution is totally paid back. If both founders think they’re done with the business, it’s easy: just split the assets of the company at the profit split 50%/50% (subject to any liquidation preference if someone put in more cash than the other).

Source: khanna.cc