Form your Delaware C-Corp in record time with the proper structure to allocate ownership among co-founders, conduct corporate governance, and raise investment from early backers and venture capital assisted by expert legal counsel.
After forming a company, these are three of the most common next legal steps companies need to take.
Delaware C-Corporations are the most common entity type for high growth companies as they provide flexibility in ownership allocation via stock classes, the ability to issue vesting rights to employees and facilitates easy fundraising from venture capitalists, while operating in a business-friendly state.
$159 for the expedited corporate filing and $125/yr for the registered agent service. Please note that we do not profit from any of these third-party services.
The allocation of equity is a key decision for founders. This typically involves balancing equity for co-founders, employees, consultants, accelerators, etc. Assuming the customary 10,000,000 authorized shares (which can be modified at a later date, if need be), the equity is often split in the following manner:
- 8,000,000 shares distributed among founders
- 1,000,000 shares allocated for a stock plan dedicated to employees and consultants
- 1,000,000 shares set aside in anticipation of accelerators or additional co-founders
Furthermore, equity should be issued subject to vesting rights (conditions upon which the equity is granted). We offer the ability to customize these rights if desired, or otherwise use the common VC-backed startup structure.
Please get in touch if you have further questions.
Convertible notes and SAFE (Simple Agreement for Future Equity) are the two most common instruments used for early-stage investing in high-growth companies, whereas Share Purchase Agreements become the norm at Series A and beyond when the valuation of the company is more clear. Convertible notes are effectively loans that can be converted into equity, typically at the next fundraising round. Similarly SAFE agreements also convert into equity, but do not accumulate interest overtime as convertible notes do.
For founders, the convertible notes can provide a growth target for the company to achieve whereby the loan can be paid back without having to issue any ownership interest to the lender. In contrast, SAFEs provide an easy way to raise capital at an early stage when revenue targets are harder to predict, and avoid ceding too much equity by accumulating interest over time.
A fundraising term sheet is a non-binding document outlining the basic terms and conditions under which an investment will be made. Utilizing term-sheets greatly simplifies the negotiation by keeping the talks in plain language terms that entrepreneurs can understand.
The decision of whether to onboard talent as an employee or startup should be based on federal and state law.
At a high level, this analysis is largely based on the extent to which the company controls the person, how core the service is to the business, and the nature of the financial relationship.
Please reference the Department of Labor and Internal Revenue Service Guidance for the factors that distinguish an employee from a contractor. In addition, please reference the state law in which you intend to hire your future employee or contractor.
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