Startup Lawyer

Ryan Roberts (http://startuplawyer.com) is based in Dallas but would still be a great option for you.

How many very early startups have you joined? The language you use to describe option grants suggests you haven't. A startup does not "sell shares" "ridiculously cheaply". They grant options and the valuation is what it is at the moment. Here's an article that might help: https://startuplawyer.com/incorporation/par-value-for-a-startup-compan… Note this quote: "I typically recommend that a startup corporation’s Common Stock par value be set at $0.00001 and no higher than $0.0001 per share."

I am not directly answering your question but this could be useful: http://startuplawyer.com/

Most people can't just invest in startups. You need to be an accredited investor, which rules out most people who haven't had a liquidity event or are independently wealthy. The restrictions on what your net worth needs to be are here: http://startuplawyer.com/startup-law-glossary/accredited-investor

I'm not recommending this site or principle but he does do great job of explaining the intricacies of startup legal issues and investing. http://startuplawyer.com/category/convertible-notes

Can anybody recommend a good US CPA and an accountant with experience in working with tech startups? If you are looking for a lawyer I received good recommendations for: - Ryan Roberts @ http://startuplawyer.com/contact - Scott Edward Walker @ http://walkercorporatelaw.com/ - Grellas Shah LLP @ http://www.grellas.com/

Check out http://www.startuplawyer.com, there is some good info there. Also, read through Quora, as there are others who have asked the same question. IANAL, but I'm fairly sure that a 5 year non-compete is not enforceable in most part of the United States. That seems a bit much if you ask me, so definitely reach out to a lawyer. What part of the world are you in?

Get in touch with one of the startup lawyers from SF, which usually give you a first overview on the phone for free. You should definitely spend a bit of money to work with on one of them on a simple incorporation. I've personally had very good experiences with George Grellas. A few of the often mentioned tech startup lawyers include George Grellas (http://grellas.com), Scott Edward Walker (http://walkercorporatelaw.com), Ryan Roberts (http://startuplawyer.com).

All sorts of problems can crop up if you don't resolve the equity situation up front. Its good you're trying to resolve it as soon as possible. Depending on how much thought leadership he's provided and how much direction he's given you, it should range from 50/50 in the very best case for you to 80/20 in the worst case (assuming you if you're the #2). That split also depends on whether he is paying you or not to do the work, and whether you really want to loop in with him long-term on the startup. Are you guys incorporated? Regardless, make sure that the terms are in paper. When making equity decisions with my co-founder, I found these posts pretty valuable: http://startuplawyer.com/incorporation/how-to-split-the-startup-founde… http://startuplawyer.com/startup-issues/keep-your-startup-co-founder-c… Hope that helps.

> ... and anything goes wrong resulting in legal action > against them... Such as? Without properly weighing the risk of a lawsuit, there's no way that we can conclude whether the risk is reasonable. So, who might be out to sue you? To summarize an article from nolo.com [1]: * An employee * A landlord * A supplier * A customer To mitigate these risks: * Don't hire anyone * Don't lease an office * Don't buy goods on credit. Buy high quality goods when you can't afford to have a problem with them. * Have an "as is" end-user license agreement. Be very cautious about making service quality guarantees. Don't sell software that can cause damage or personal injury. If you have to do any of the above, it's time to incorporate. (For another take on when it's time to incorporate, read "The When to Incorporate Decision-Matrix" by Ryan Roberts, J.D. [2]) [1] http://www.nolo.com/legal-encyclopedia/liability-concerns-sole-proprie… [2] http://startuplawyer.com/incorporation/the-when-to-incorporate-decisio… (edit: And a nice quote from HN favorite patio11: > Incorporation? Incorporate when you have a good > reason to. (I still don’t, but I might do it after I > go full-time, largely for purposes of dealing with > Immigration.) If you’re selling B2C software, your > number one defense against getting sued is promptly > refunding any customer who complains, and that pretty > decisively moots the…

Congratulations and happy trails! I do have some cautionary advice, though... I say everything here without knowing you, your wife or your idea. First off, make sure that you read this article and follow it unless you have a good reason not to: http://startuplawyer.com/startup-issues/if-i-launched-a-startup Specifically, both you and your wife should have vesting shares. After all, there's a reason that most people do not start up with their loved ones - they say that the best family business is a sole proprietorship. This isn't a corner store and you and your wife might find your marriage taxed by this radical twist on your relationship. Would you start up with your wife if you weren't married? If not, then my polite suggestion is that you hire your wife and give her lots of equity for her contributions. Taking on a business partner is an incredibly important decision, and if you wouldn't hire her otherwise then it's a potentially questionable decision now. I wouldn't belabour this point but you didn't explain her background. The other thing is that it pays to startup with a good idea. I'm a big believer in MVPs and pivoting and trying things until it works... but the fact remains that most ideas are terrible and it's hard to tell when one of your ideas is terrible. Most people around you are inclined to tell you how great an idea it is, because they can see in your eyes that you want them to love it. This is an extremely dangerous confirmation bias because you can…

“…25% of the total number of Founder1’s Shares shall be released from the Repurchase Option on the one-year anniversary of this Agreement, and an additional 1/48th of the total number of Shares shall be released from the Repurchase Option on the corresponding day of each month thereafter, until all of Founder1’s Shares have been released on the fourth anniversary of this Agreement.” http://startuplawyer.com/incorporation/what-is-four-years-with-a-one-y…

Most people are pretty close to the vest with founder dilution numbers. It also tends to be complicated and hard to sum up. Convertible note or priced round? If it's a note, is there a cap, a discount, warrants? Participating preferred shares or no? Liquidation prefs? For a $400k seed round, it'll usually be a convertible note-- nowadays usually with a cap (reading: http://startuplawyer.com/convertible-notes/the-convertible-note-discou… Here's Fred Wilson's take on Founder dilution: http://www.avc.com/a_vc/2009/02/founder-dilution-how-much-is-normal.ht…

Ryan Roberts at http://startuplawyer.com/contact is a popular one

Yes, but it's minimal if you do things right using the Assumed Par Value method. See http://startuplawyer.com/incorporation/the-delaware-freak-out

Indeed, the author notes in another post (http://startuplawyer.com/incorporation/accountants-heart-llcs) that the LLC is a fine choice except in situations when you expect to "(i) raise capital, and/or (ii) issue incentive equity compensation". Most posters here are probably thinking about that kind of start up, but not every new venture needs to worry about raising outside capital.

Here is an interesting case study I found that shows what happens when the CEO demands too big a salary. http://startuplawyer.com/venture-capital/series-a-startup-ceo-salary

Here are some great resources we've been referencing: Founders Agreements: http://www.yourlegalcorner.com/articles.asp?cat=corp&id=15 http://blog.optimalupgrades.ca/2010/01/founders-agreements-2/ http://blog.simeonov.com/2010/02/22/startup-founder-agreements/ Others: http://startuplawyer.com/startup-issues/7-legal-documents-for-your-tec… http://startuplawyer.com/incorporation/the-when-to-incorporate-decisio… http://startuplawyer.com/startup-issues/if-i-launched-a-startup

You'd be surprised. :) I'll post a note term sheet that I raised money on last year once I find it but notice the prepayment clause here: http://startuplawyer.com/convertible-notes/convertible-note-term-sheet… When you're raising on a convertible note, you're essentially taking a loan from the angel. You're promising to "pay them back" at the next financing by converting their money into stock equal to the principal + interest they've accrued on that note. If you really wanted to (and the term sheet doesn't preclude a payback), you could pay them back for only their principal & interest instead of converting them to stock.

The percent split is up to you guys. I think you should choose what the two of you think is fair to both sides. If this were my company and I were bringing someone onboard 1 year later, I would be thinking about the vesting schedule and possibly using cliff vesting. http://startuplawyer.com/incorporation/why-your-startups-founders-stoc…

Some more specifics about Delaware: http://startuplawyer.com/incorporation/top-5-reasons-to-incorporate-in… Most important among them for (larger) corporations: judges decide cases, not juries, making less of a "wildcard" for litigation.

First off: http://startuplawyer.com/startup-issues/if-i-launched-a-startup You aren't even mentioning an S-Corp. Is there some restriction that is keeping you from an S-Corp status? They also avoid double taxation while still giving the benefits of a corporation.

Regarding #2, his second link: "Top 5 Reasons To Incorporate in Delaware": http://startuplawyer.com/incorporation/top-5-reasons-to-incorporate-in… IANAL, but that all sounds like good advice to me. He adds that you shouldn't consider DE to be the default choice, but here's another take from a corporate attorney that was posted on HN: http://www.grellas.com/faq_business_startup_002.html My takeaway from this is to avoid being tempted to skip deep and prolonged consideration of Step #2.

Hi guys, slightly off topic, but please help: Two months ago I incorporated a C-Corp in Delaware, and registered a "virtual office" in the same state, remotely from my country of residence in SE Asia. Mr Ryan Roberts[1] helped with the incorporation, but I still need a US bank account to create an account in Stripe. I need it for my upcoming SaaS. About a week ago I contacted Silicon Valley Bank to open an account (I can't remember who suggested it, I think Mr Ryan as well), and they sent me a questionnaire which I already filled out and sent back. But I haven't heard from them again. Since there's a story about Stripe in the front page[3], I'm wondering if someone can give me suggestion as how to proceed (e.g. maybe go to another bank). I've never been to US, and I hope I don't have to go there just to open a bank account. In case you're wondering, I was inspired by a blog post from Freshdesk[3]. [1] http://startuplawyer.com/about [2] https://news.ycombinator.com/item?id=6319512 [3] http://blog.freshdesk.com/how-to-incorporate-a-us-corporation-from-out…

It's normal in my experience. A cliff of some kind has been part of every incorporation agreement I've seen or signed. http://startuplawyer.com/incorporation/why-your-startups-founders-stoc… http://www.startupcompanylawyer.com/2007/07/19/what-should-the-vesting… Moreover, if I were working with a co-founder, I would (and have) insist we vest on that schedule, and certainly not monthly from day 1. There are a few reasons: 1. I don't want my co-founder leave before a year and having a chunk of the company. Likewise, I want to do right by my co-founder. If I leave before a year is up, it wouldn't be right for me to own a chunk of the company. 2. It's inequitable for the founders to have different vesting schedules than employees. What happens if someone joins the team pre-financing? If they get the same terms as the founders, then what about an early employee vs. a later employee? It makes for a weird, political situation. 3. It makes it easier to raise money. If you're vesting on the same terms as your investors they have no basis to negotiate over that term; they'll just check the box and move on. It passes the "blink test." These are just my experiences, so YMMV.

Also easy to keep an argument going by saying "my point is understood to be correct" Citations: On NDAs an etc. .... Why a VC Will Take a Lighter to Your NDA - Wilson Sonsini http://startuplawyer.com/venture-capital/why-a-vc-will-take-a-lighter-… Why Most VC’s Don’t Sign NDA - Foundry Group http://www.feld.com/wp/archives/2006/02/why-most-vcs-dont-sign-ndas.ht… One More Time: No NDAs - Anil Dash http://dashes.com/anil/2010/05/one-more-time-no-ndas.html From PG: YC Library http://ycombinator.com/lib.html The Cult of the NDA. tl;dr "Cases where trade secrets and/or patents are both protectable and essential are rare." http://www.frozennorth.org/C509291565/E1939404619/index.html ....... Lots of communication happens in confidence, but not under NDA for various reasons.