How does equity payout work?

Question

If someone has 5% equity in a company, how will they ever actually get paid?

In: Economics

Answer 1

There are few ways:

– they get a % of profits paid out annually
– the company goes public and they have shares they can sell on the public market
– if private company, they may be able to sell to other owners/investors at either pre-determined price or at mutually agreed upon valuation at time of sale