Category: Incorporation & Formation
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Dual Class Common Stock Structure for Founders
A startup founder’s desire to hold equity better than plain vanilla common stock is not new. Several years ago, Series FF stock for founders was a popular approach for founder liquidity in subsequent financing rounds. We implemented Series FF for a handful of clients back then, but we have not done so recently. In the…
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Why Your Current Employer Invention Assignment is Key
Due primarily to financial constraints, many founders keep a separate job (a “day job”) during the early stages of a startup. This is common whether or not the startup is incorporated, and it is often how co-founders self-fund or reduce risk prior to a seed round. What many founders overlook is that a document from…
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If I Launched a Startup in 2014
I thought I would expand upon and update my “If I Launched a Startup” post from 2010 to include recent issues such as incubators and crowdfunding. So in 2014, here’s what I’d do in the beginning: Startup Incorporation (1) When: As soon as I was serious about making my startup a business, but after I…
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How Many Shares Should be Issued to Founders at Incorporation?
TL;DR: A clean, common starting point is issuing about 50% to 80% of your authorized shares of common stock to the founders at incorporation. The rest stays authorized but unissued so you have room for an option pool, future founders, and other equity grants without immediately paying to amend your charter. The baseline: issue 50%…
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Delaware Franchise Taxes
If you haven’t already received your Delaware franchise tax statement in the mail, then it’s probably on the way. You have to give credit to Delaware — they make paying your corporation’s franchise taxes “thrilling.” For example, if you authorized 10,000,000 shares of common stock in your certificate of incorporation, you will receive a franchise…
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November Rain
Axl Rose started working on “November Rain” in 1983, about eight years before Guns N’ Roses released it. Early on, he had a piano-only version. By 1991, the final track was a full-scale power ballad that fit the moment and the band’s sound. What worked as a concept in 1983 still worked in 1991, but…
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Filing a Charter Is Not a Startup Incorporation
I’ve noticed a lot of recent articles promoting that a startup can “skip the lawyer” and incorporate via an online service. These sites typically list about 20 incorporation tasks they’ll do for your startup for around $250 plus the applicable state filing fees. Sounds like a great deal, but there is more to a proper…
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The When to Incorporate Decision-Matrix
In a recent post, I detailed some incorporation-related points of interest if I launched my own startup. The post presumed I made the decision to push forward with the incorporation of my startup. But how do you know when the time is right to incorporate your startup? Advice Varies There’s a wide range of counsel…
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If I Launched a Startup
Here’s what I’d do in the beginning if i launched a startup: Startup Incorporation (1) Entity Choice: Corporation or Corporation(2) State of Incorporation: Delaware(3) Authorized Shares in Charter: 10,000,000 Shares(4) Type of Shares: Common Stock(5) Par Value of Common: $0.0001(6) Initial Founders Issuance: 8,000,000 Shares(7) Founders Equity Split: Depends on the Team, But Quickly and…
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It Is Not Your Baby Anymore
Many entrepreneurs treat their startup like their baby. And rightfully so. The entrepreneur has likely shed blood, sweat, tears, and some cash on the startup, therefore the entrepreneur wants to keep the startup in its grasp and control at all times. But once you issue equity in exchange for services or investment, your startup isn’t…