Equity Compensation for Independent Contractors

By: Kat Zhao If you are an early-stage startup with non-founder members on the team, they are most likely working for you as independent contractors. Unlike employees, independent contractors are not covered under federal or state employment laws (e.g., the minimum wage laws). This, however, does not mean that startups can avoid paying independent contractors. […]

How to Split Up Equity Among Co-Founders (and Why You Should Care)

You started a company with a couple of your good friends. Some have put in more money or time than others, but you feel like you can trust each other. That’s why when it’s time to formalize the business and raise money, you all come to the non-confrontational answer of how to split up the […]

Dividends — Who Cares?

When a startup seeks financing, at some point the topic of dividends may come up. It seems everyone has heard of dividends, but who really cares about them? Generally, dividends are not as important as many of the other term sheet provisions, but you may encounter an investor who gets hung up on them (private equity […]

Beware the Cap Table

So you founded your own company, congratulations! You came up with a great idea, built a team, and built a product. You are going to take over the world! But there is one thing standing in your way: money. Startups can live and die by financing. The good news is that there are many different […]

Buy-Sell Agreements: Why Every Business Needs One

A buy-sell agreement is a necessity for any co-owned startup business. Most entrepreneurs don’t spend a lot of time thinking about their eventual departure from their recently formed startup, but a set of rules detailing the terms and procedures of the inevitable parting can obviate countless headaches in the future.   What is a Buy-Sell […]

When Should a Business Incorporate?

Although this is a complex question, thinking about it sooner rather than later may help the startup survive cofounder conflicts such as equity distribution disagreements. The reality is that founders should start to think about incorporating as soon as they have seriously considered starting a business on their own, or have a group of people […]

Re-allocating Equity in Your Startup

We have previously written about considerations for founders in splitting initial equity in their startup.  No matter how thoughtful founders are in dividing their initial equity, it is common for founders to realize after a period of time operating their company that their initial equity allowances do not accurately reflect the actual contributions or value […]

LLC Formation: Why Filing Your Articles is Not Enough

Entrepreneurs are often attracted to organizing as a limited liability company (“LLC”) due to the perceived ease and cost-savings of formation.  In most states, one can (technically) establish an LLC by filing a single document and paying a small filing fee.  For example, in Michigan, one can establish an LLC by filing the Articles of […]

Books for Entrepreneurs and Their Attorneys

We are often asked at the Entrepreneurship Clinic about good books for those starting their own companies and for attorneys aspiring to be better-versed on startup issues.  The following are resources we often recommend. Finding a Repeatable and Scalable Business Model:  One of the most important things for entrepreneurs to understand is the importance of […]

Startup Legal Lessons from the Biography of Steve Jobs (Part 5)

This is part 5 of our series on startup legal lessons presented in Walter Isaacson’s biography of Apple co-founder Steve Jobs.  This post address issues with stock options.  On pp. 365-366, Isaacson describes the haggling between Jobs and Apple over his stock options when he dropped the “interim” from his CEO title in 2000.  The […]