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Legal Tips for Startups

From: Peter C.
Sent on: Saturday, September 10, 2011 6:27 PM

 

Legal Tips for Startups

 

Our speaker of Thursday 01 Sept was Claire Kalia, an Attorney who has her own practice – helping Startups & Small Businesses. She talked about “Legal Tips & Tricks for Starting a Biz”.

 

Compiled by Peter/Organizer

CXO, 5 Star Startup Services

 

A. Why do Legal Planning?

1) Position your company for Funding, Acquisition or Profitability.

2) Prepare for Growth (ie, hiring employees, territory expansion)

3) Safeguard your company’s valuable assets (ie, Intellectual Property, Patents)

4) Take advantage of Legal Protections in disputes, lawsuits and avoid penalties.

 

B. Create a Founder’s Agreement (in writing) to set forth all significant issues.

1)      Purpose & Goals of Company

2)      Each Partner’s Contribution

3)      Compensation & Equity Share

4)      Plan for Financial Contribution & Funding

5)      Exit Strategy & procedure for removal of Founder Partner/s

 

C. Ways to Split Equity.  Allocate in proportion to each person’s contribution.

1) Who provided the basic idea?

2) How much Time contributed – both past & expected future

3) Cash or Asset Contribution

4) Industry Expertise

5) Business Contacts

6) Technical Knowledge

7) Startup Experience

 

D. Choosing your Business Form

 

Aspect

Corp

LLC

Operations & Management

Very Structured

Very Flexible

Funding & issuing Equity

Very Easy

Awkward

Taxes, Federal & State

Double Taxation [Income & Share-holder Distrib]

Flow Thru [on Income only]

 

Sole Proprietorships are easier to set up, but - in the eyes of the law - you & the business are the same – so you have no protection of your personal assets.  Easiest to set up.

 

Registering your Company:  serious investors prefer Delaware for it’s limited Liability & Pro Business Laws, but there are additional costs to Calif.

 

E. Vesting your Equity  What is it ?  Earning the right to a percent of Equity thru continuous service.

1) used for Incentive & Control of Partners

2) Typical Time is 4 years, 1 yr Cliff.  25% of the equity vests after 1 year and the remaining equity vests 1/36 monthly, so all is vested after 4 years.
3) all Founder Shares should include Vesting

 

F. Work Agreements:  on Employment or Consulting, clarify arrangement – terms & conditions

1) Compensation, Title, Responsibilities & Authorities

2) Equity, Vesting, Acceleration.  terms of equity share, vesting schedule & any special vesting acceleration

3) Intellectual Property protections: confidentiality, non-solicit, & assignment

4) Independent Contractor Agreement – terms

 

G. Guarding yur Intellectual Property [IP]

1) Assign all IP & Inventions to company

2) Check past Employment & Confidentially agreements to ensure you and your colleagues are not prohibited from creating an identical product or service.

3) Immediately Register all Copyrights, Trademarks & Patents.

                                               

Final words: a little legal planning will go a long way towards your company’s success

 

For further info, contact [address removed]  [masked]

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