How do we earn real world cash from equity?

This question is about how does an owner of company who own n% equity of company as a technical co founder makes real world cash. This is not about regular share holder who buys share to make money. This is about company founders.

This is regarding a company which will be registered as per Indian Laws and which is a private limited company. That means only 3 founder + investing organization. No other shareholders. It is not a public limited company. We are not going to public to raise funding. We will not be listing ourselves in share market or stock market.

When we get equity in a company that means we get n% ownership of that company.
But how do I earn the actual real world 'cash' out of this equity?

Assuming that I own n% of the company,

1. I will get n% of total income of company per month paid at the end of each month? Do I have to manually write this in agreement? or this is default accepted? OR
2. I will get n% of total income of company per year paid at the end of each year? Do I have to manually write this in agreement? or this is default accepted? OR
3. I will get equity converted to cash only when I will sale the equity to someone in future? OR
4. I will get a mutually agreed salary for the life time of company? How to calculate the salary?

In case of salary who will decide my salary before getting funding, after funding and once we become profitable?

Assuming you own N percent of the company you will be default get ... nothing from your ownership. Nothing.

Ownership most commonly results in money being paid out in case of:

• A decision to pay Dividends of profits.
• A Liquidity event - which requires a willing buyer.

(If you don't recognize those words, then follow the above links.)

About dividends:

• They're generally primarily used by older, well established companies which are profitable.
• There are many kinds of 'tricks' which a majority shareholder - or a group of majority shareholders - can play with dividends. For example, a majority shareholder can hire himself as a CEO in the company at a very very high salary, and then pay out less in dividends - effectively keeping more money to himself. You need good company bylaws or a Shareholders Agreement to protect against that.

• In many cases, the national Laws provide some protection of minority shareholders in the event of a sale to another company or Initial Public Offering (IPO). (Typically by ensuring that minority shareholders get the same per-share price as large shareholders.) You need to investigate this for your own country.
• If you are using vesting (follow link), then look at trigger events.

In addition it's common that founders or investors work in the company -- say, as CEO / CTO / advisor. For this they're often given a normal salary matching the fair market price for an employee with the required qualifications. One important exception is that institutional investors (VCs) will often want startup founders to have next-to-no salary in the early stages.

Additionally, in some cases where there are very few shareholders, tax planning may be important. Often dividends are taxed lower than salary, so structuring the payouts can reduce taxes for the recipients.