Answer 12 questions to get an A–F grade on your equity-for-services deal, plus specific negotiation recommendations.
How the Scoring Works
Each of the 12 questions evaluates a critical dimension of equity-for-services deals. Scores range from 1 (poor/risky) to 3 (strong/protective), for a maximum of 36 points.
- A (30–36): Well-structured deal with strong protections
- B (24–29): Solid deal with minor gaps to address
- C (18–23): Average — several areas need negotiation
- D (12–17): Below average — significant risks present
- F (Below 12): Dangerous — do not sign without major revisions
The four categories — Vesting & Ownership, Control & Governance, Economics & Exit, and IP/Tax/Legal — each contribute up to 9 points. The radar chart visualizes where your deal is strongest and weakest.
Frequently Asked Questions
What types of equity deals does this scorecard cover?
This scorecard evaluates any equity-for-services arrangement including LLC membership units, incentive units (profits interests), restricted stock, stock options, and phantom equity. It focuses on the structural protections in your agreement regardless of entity type.
What's the most important category to score well in?
Economics & Exit is often the most overlooked category. Many service providers focus on ownership percentage without understanding distribution thresholds, liquidation preferences, or drag-along provisions that can dramatically reduce their actual payout. A high ownership percentage means nothing if the waterfall structure ensures you never see distributions.
I scored a C or D — should I walk away?
Not necessarily. A mediocre score means there are negotiable items, not that the deal is inherently bad. Use the red flags and recommendations to draft specific revision requests. Many founders will agree to reasonable protective provisions if presented professionally. If they refuse all protective measures, that itself is a red flag.
Does this replace attorney review?
No. This scorecard identifies common structural issues but cannot evaluate jurisdiction-specific rules, tax implications of your specific structure, or nuances in agreement language. An attorney review ($575 flat fee) catches issues like ambiguous vesting triggers, missing 83(b) election language, or unfavorable governing law provisions.
How often should I re-evaluate my equity deal?
Re-score whenever there's a material change: new funding round, change in management, amendment to the operating agreement, or if your role/contribution level changes significantly. Also re-evaluate if the company's financial trajectory changes materially from what was projected when you accepted the equity.