If I Launched a Startup
thestartuplawyer.com
If I Launched a Startup
1–10 of 39 posts
Re: If I Launched a Startup
#2I don't see the point of authorizing that many shares. I've always authorized 1,000 and initially issued 100 to the founders. 1,000 is enough to get the % breakdowns you need and you aren't charged for having that many shares: http://www.corp.delaware.gov/frtaxcalc.shtml
Re: If I Launched a Startup
#3Thanks for the link - bookmarked for further reading, I wish I'd read this a lot earlier. This is why I love the internet - information empowers us all.
Re: If I Launched a Startup
#4"Asking a VC to sign a NDA is tantamount to splitting 10’s at the blackjack table" - Funny.
Re: If I Launched a Startup
#5I'm surprised to see the recommendation to incorporate in Delaware.
Downsides to incorporating in Delaware:
1) You still pay full taxes in the state you are operating in (you don't get to avoid taxes by incorporating somewhere else).
2) If someone sues you, they can choose to sue you either in Delaware (forcing you to travel to Delaware to defend yourself), or your local jurisdiction. The Delaware courts can be friendly to business, simply because they are often not jury based, but since you're not operating there, they don't have to sue you in those courts. And, the person suing you gets to choose the place they are most likely to win in.
3) Many states will require you to register as a "foreign corporation", possibly for more money than just incorporating there.
Yes, you can structure your company more flexibly, but are you really using some complicated structure that is only allowable in Delaware?
Edit: Just in case I'm misinterpreted, I do think this is a valuable post as a whole.
Re: If I Launched a Startup
#6Pretty good articles. The blog is really nicely designed, too.
Re: If I Launched a Startup
#7I don't see the point of authorizing that many shares. I've always authorized 1,000 and initially issued 100 to the founders. 1,000 is enough to get the % breakdowns you need and you aren't charged for having that many shares: http://www.corp.delaware.gov/frtaxcalc.shtml
His list implies he's raising money and issuing options.
Although only the percentage ownership should matter, many employees react very differently to getting a tiny number of options at a relatively high strike price vs. a big whopping number of options at a miniscule strike price.
Re: If I Launched a Startup
#8I don't see the point of authorizing that many shares. I've always authorized 1,000 and initially issued 100 to the founders. 1,000 is enough to get the % breakdowns you need and you aren't charged for having that many shares: http://www.corp.delaware.gov/frtaxcalc.shtml
His list implies he's raising money and issuing options. Although only the percentage ownership should matter, many employees react very differently to getting a tiny number of options at a relatively high strike price vs. a big whopping number of options at a miniscule strike price.
A 2 min conversation should fix that.
Re: If I Launched a Startup
#9I'm surprised to see the recommendation to incorporate in Delaware. Downsides to incorporating in Delaware: 1) You still pay full taxes in the state you are operating in (you don't get to avoid taxes by incorporating somewhere else). 2) If someone sues you, they can choose to sue you either in Delaware (forcing you to travel to Delaware to defend yourself), or your local jurisdiction. The Delaware courts can be frien…
He's assuming you're going to raise money.
VCs and their lawyers prefer Delaware incorporations because everything's business-friendly, there's well-established case law, and therefore things like financings are easier to do.
Re: If I Launched a Startup
#10I'm surprised to see the recommendation to incorporate in Delaware. Downsides to incorporating in Delaware: 1) You still pay full taxes in the state you are operating in (you don't get to avoid taxes by incorporating somewhere else). 2) If someone sues you, they can choose to sue you either in Delaware (forcing you to travel to Delaware to defend yourself), or your local jurisdiction. The Delaware courts can be frien…
My recommendation is always home state OR Delaware--the post is what I would personally do. I'd rather deal with the administrative issues early than reincorporate later.
Also, in true hacker tradition, it's probably easier to hack the available free startup legal document sets if you are a Delaware corporation. Most if not all the docs assume the startup entity is a Delaware corporation.