Let's try a marriage analogy for giggles. My girlfriend is divorced, and she has a lot of bills from the former marriage. She wants us to get married and pay off her bills because that marriage was similar to what this one would be. She doesn't know much about men and the previous marriage was a learning lesson.

Cofounders should be figuring out what the other person wants and needs, not what they can get. Treating the startup as a finite pie just doesn't make sense.

If it must be addressed for the sake of fairness, any sort of previous IP should be handled as a loan from the new company with terms highly favorable to the new company's growth, e.g. a note payable in four years with a low interest rate because if the idea has significant value the payoff from the new company's value will be significantly greater than the loan amount, and if it has little value, then the company will probably be defunct when the note comes due.

With two of you, it should be 50-50 with a vesting schedule or walk away.

If the first venture was truly a company, as in a corporation, then frankly any vendors/bills related to that can be left hanging without making him personally responsible. I know this isn't the "ideal" thing, but it happens frequently.

If he personally guaranteed any debt for that company, then that is is personal problem and has no bearing on your new company (which I hope for multiple reasons is being properly incorporated).

I don't see where it makes much sense to handicap the new venture to cover his personal issues, that is what is usually chalked up to "learning experience" and is, if anything, part of the value he brings to this new venture vs. a person with no experience. Or, to put it another way, if it were not for that experience he might have zero value in the current case, in which he would have the same debt obligations, but no potential income to cover them...

For example, if you two started out as 50-50 partners and wanted to buy this knowledge from someone else, how much would you pay for it? Divide that cost by two, and that's how much you should "pay" your cofounder, whether in equity or cash.

The common wisdom is 50-50 no matter what, and it's a good rule of thumb; you don't want to feel like you have more or less at stake than he does and vice versa. If you're going to compensate him for his previous work, issue debt from your new company or pay upfront; I'd avoid changing the 50-50 split as much as possible.

And, of course, as other posters have mentioned, it could be that your current negotiating position indicates something negative about your cofounder, which is possible, but I don't think that's necessarily true.

Best of luck.