Dumb question: what is the status of the un-owned (un-vested) portion of shares in the first years?<p>Suppose two people, A and B, are equal partners each vesting towards 50% ownership in 3 years. After the first year, they both have vested ownership of 16.6%, what is the status of the other 66% of the company? Does the corporation as an entity own 66% of itself? Do they both really own 50% of the company, with an agreement that new shares will be created in a year and distributed to them? It seems to me like this scenario would mean they both own 50% of shares outstanding, and each year new shares are created which dilute their original holding's equity, but the shares then go to them (so they initially hold ie 10,000 shares of 20,000, then later hold 20,000 of 40,000).