Legal Templates For Your Startup
In this series, we will go through a road map of what should take place from legal aspect of our business operation and what documentations you should be prepare or keep. We will provide some templates that we have gathered with the help of attorneys at a very reputable national law firm to help you save on some budget.
Phase I - Formation
Probably the most exciting phase of your startup in our opinion. You are trying to take your idea to the next level by forming an entity to protect it and to grow it. It is also the phase in which mistakes are being made due to resources constraint. If you dont have a lot of startup experience and dont know anyone who can immediately help you, thats when mistakes will be made.
During formation stage, and using California as your home state to illustrate, you will need to do the following:
- Deciding if you want to form a C-corporation, S-corporation, or Partnership/LLC
- Assuming forming a C or S corp, file an Article/Certificate of Incorporation in either the State of Delaware (as most VCs would prefer before investing) or in the State of California.
- Drafting your Bylaws and Organization Resolutions at the minimum. While those doesnt need to be filed with anyone, those documents set out the "rules of the operation" for your company, and who is responsible. Of course, you can always update those details at anytime of the day given that important decisions are made by qualified individuals
- Tax ID - Apply for an EIN at IRS.gov
- Open your bank account using the information you have prepared above
Other important steps to take during this phase of the cycle include deciding how much stocks you want to authorize. We recommend 10M shares at 0.0001 per share when you indicate that on your Certificate of Incorporation.
Phase II - Preparation for Operation
During this phase, you probably have decided who is your co-founders or key employees, and how decisions are going to be made through either one person says all or a balanced voting approach. Typically, you will need the following pieces of information drafted:
- Founders Stock Purchase Agreement - also remember to file 83b if anyone is purchasing or receiving restrictive stocks
- Equity Incentive Plan - if you plan on offering stock options to your employees
- Founder voting agreement (optional),- unless there are more than 1 person who want to make key decisions.
- Board Meeting Minutes - formalize the formation of the Board and to document all of the decisions made so far.