The legal checklist every startup should reference
By Scott Edward Walker. This post originally appeared in Venture Beat. If your startup need legal services, make sure you check out the Startup America Legal Deals listed below.
I’ve been a corporate lawyer for more than 17 years, and there are certain fundamental legal mistakes that I’ve seen startups repeatedly make (many of which surface when investors are conducting their due-diligence investigation).
Accordingly, I thought it would be helpful to provide a simple checklist for startups that includes links to indepth posts for a more detailed discussion.
1. Form a corporation, not an LLC or a partnership
2. Incorporate in Delaware and qualify the company to do business in the state in which its principal office is located
3. Set-up vesting schedules for the founders and file 83(b) elections with the IRS
4. Button-down IP ownership and assignment issues
5. Split the equity based on prior contributions and expectations going forward, not necessarily equally
6. If you hire any employees, make sure you don’t misclassify them as an independent contractor or fail to pay them at least the minimum wage
7. Only raise funds from “accredited investors” and don’t pay anyone a commission for raising funds for you unless they are a registered broker-dealer
8. Put proper privacy policies in place and make sure you adhere to them
9. Don’t issue stock options unless a proper option plan is in place and a valuation has been done in compliance with Section 409A of the Internal Revenue Code
10. Regarding lawyers, don’t give them equity; don’t use your investors’ lawyers; and there are ways of cutting legal fees in half.
Click here to read the entire post with related links. Scott Edward Walker is the founder and CEO of Walker Corporate Law Group, PLLC, a law firm specializing in the representation of entrepreneurs.
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