Originally when first talking about the company myself, and the 2 other cofounders.. at the time decided to do a split on equity.
Now, we're about a 1.5-2 months in and the other two cofounders think we shouldn't assign any formal 'titles' yet or any 'equity' as far as the three of us stand because they see it as just a 'project', which in all honesty it still is until we can get funding.
Their reasoning: since we're just a project saying "oh you get xx% and you get xx% and you get xx%" is pointless if we 1) dont even have investing yet and 2) are just beginning development of this product.
is this the right way to go about this or is it better to have in a formal, signed contract exactly how much equity we each get? The one cofounder who I work day and day out with says he promises when the product is built atleast at a beta stage and we get investing that "i'll get taken care of, financially"(I'm the developer).
Is this risky on my part and should I have something formal?
Well said by Tom. Also, "founder vesting" of say 4 years I've been told is also important. What this means is that, the partners only get their full share of the equity if they stay committed to the project. It's important to align equity and incentives.
This can be done, I believe, on a sliding scale. Say you and a partner agree to 50% each. If the partner quits in year 1, he or she gets 10%, year 2 = 20%, year 3 = 30%, year 4 = 40%, year 5 = 50%. Does that make sense?
Mark Suster and Fred Wilson have each written a blog in the last 6 months that shines a lot of light on this issue. So it may be worth googling their names, and searching "founder equity" on their blogs. Mark would tell you he's seen more than one entrepreneur who's partner quit but still owns 50% of the company. Also, Mark would encourage you, when appropriate, to consider taking more equity than your partners if you are driving the effort.
I think it's a must to define specifically what each person founding gets. Besides the possible legal protection, I think it helps people to commit - you mentioned your cofounders are still treating the startup as a project and you'll see that once everyone signs a piece of paper, it's different.
To have each founder's signature on an agreed upon document reflects commitment from each one and really takes things further. However, I'd like to press the point that you don't need (IMHO) a legal term sheet or even to start the process of incorporating. A FriendDA -style equity split document works wonders.
It'll help the startup if everyone thinks seriously whether they want to be in (and in which amount of effort) the startup or not. I guess what I'm saying is: make everyone accountable - to the others and to themselves.
Hope that helps.