Category: Incorporation
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Accountants Heart LLCs
I’ve never had a client’s accountant recommend any legal form besides the LLC for a new startup. Even though I heart corporations, I still believe the LLC can be an appropriate legal entity for some companies and ventures. But when it comes to a startup looking to (i) raise capital, and/or (ii) issue incentive equity…
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How to Split the Startup Founder Equity Pie
Founders frequently ask me to provide guidance on how their startup should split equity between co-founders. My answer is always: (1) It Depends, and (2) Quickly. (1) IT DEPENDS If you’ve ever hired a lawyer, you will (unfortunately) hear the phrase “it depends” several times. In this situation, the “it depends” hinges on the respective…
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Is Your Startup’s Name Available in Delaware?
Delaware has a pretty sweet Name Availability Search Tool via their Division of Corporations. If your desired entity name isn’t available to reserve, then that name isn’t available for a new corporate entity filing in Delaware. If your startup name is available, you can reserve the name online for $75. Finding out whether you can…
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Don’t Create an “Issuance Pool”
“We want to have 30% of the startup company at exit.” -Anonymous Startup Founders Occasionally, founders will plan out their startup’s lifespan to the point of pre-determining their final equity figure after all hires and investments have been made. Usually, a set of founders want to end up with a final equity percentage in the…
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Startup Docs from TheFunded.com
TheFunded.com has just released a “Complete Set of Founder Friendly Legal Docs” via its website. (Hat tip to @bradleyjoyce at the Fort Worth Startup Blog) The sample startup documents, located at docstoc.com, include: – Bylaws – Certificate of Incorporation – Initial Stockholder Consent – Invention Assignment Agreement – Restricted Stock Purchase Agreement – Indemnification Agreement…
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You Can’t Spell Corporation Without “IP”
I watch “Shark Tank” on ABC. I hope one day they get pre-money and post-money right. A segment on Sunday’s episode did manage to highlight a key point for startups: TRANSFER THE INTELLECTUAL PROPERTY TO YOUR STARTUP COMPANY In the episode, Coverplay Inc., was looking to raise about 350k from the show’s angel investors. A…
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What is a Registered Agent?
A registered agent is someone, either a company or an individual, that a corporation appoints to receive service of process and other official notices such as state franchise tax notices. Service of process is how a third party gives your company notice of a pending legal matter, which allows your company to respond accordingly. A…
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The 83(b) Election For Startup Founders
If founders stock is issued subject to a vesting period, each founder should make a Section 83(b) election with the IRS within 30 days of purchasing the restricted stock. If a founder fails to make a 83(b) election, each vesting milestone will be a taxable event for the founder. “Income” will be calculated as the…
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The Funded Founder Institute Posts “Class F” Startup Documents
I got a tip from @Pietari that another set of startup documents were released today. The Funded Founder Institute just released a very founder-favorable set of startup documents centered around “Class F Common Stock.” The Class F Common offers founders various protective provisions such as: -2 to 1 Board votes per founder relative to non-founder…
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Why LegalZoom Fails Startups
Thinking of saving some cash and using LegalZoom to incorporate your startup? Think again. While incorporating with LegalZoom is a viable option for some new businesses, LegalZoom comes up way short for startups. LegalZoom just doesn’t offer the documents a typical startup needs: Shareholders Agreement? Nope. Stock Purchase Agreements? No. Tech transfer agreements? Nada. What…