One of my partners, in an online service startup, is going to put the software design as his investment and share on equity. The rest of us are putting in time and money.
But now came up a question that I cannot answer exactly. Should I take into account his investment, in software design, as sunk cost?
Sunk costs have nothing to do with this.
You need to exchange something tangible for the equity. It's called consideration.
Emphatically, just exchange money for equity. Everyone at the table should want to do this, it keeps the legal considerations simple. The initial purchase price of the stock is often absurdly cheap for this reason.
If you're not organized as a corporation, you need to get legal assistance now and do so. There's also web services that can set you up with prepackaged documents for a small fee. If you are investing amounts of money disproportionate to your share of the company, you're going to want to get a lawyer involved.
An investment is not a cost... (unless it turns out to be useless)
From logical (and also accountant) point of view, it remains a contribution to the company's capital. If you bring money, computer, car, clients (goodwill) or know-how, it still remains an investment.