Client Advisories

Founders will normally want to use so-called cheap stock when they capitalize their startup. Below I discuss why this is best for most startups. When you form your startup, you need to contribute cash or other assets to the entity in exchange stock. This is called...

There is always a trade-off to be made between working as an employee for a company and working as a founder for your own venture. Each has its advantages and each its drawbacks. Neither is inherently better than the other. While I argue the case that it is a great...

Which entity is best for your startup? It depends. If you are a solo founder working out of a garage, you normally don’t need an entity at that stage. Save your legal dollars and concentrate on development. What if you are a solo founder out interacting with the...

Here are my suggestions for choice of entity for your startup. Your choice of entity depends on your goals as a founder and on timing. If you are a solo founder working out of a garage, save your legal dollars and hold off on setting up an entity. If you are out...

Restricted stock is stock that is owned but can be forfeited if its holder ceases working for the startup. The startup will typically grant such stock to a founder and retain the right to buy it back at cost if the service relationship between the company and the...

Startup founders are often ill-informed about what an 83(b) election is. This article is aimed at giving a simplified tour through the realm of 83(b) so that founders can have a clear (if general) sense of what the 83(b) election really means. This is a complex tax...

What is a “work made for hire” and why should that concept matter to you as a founder? The work-for-hire idea is a technical legal concept that affects your startup in practical ways. You need to understand enough about it to spot the practical issues and to handle...

Here are (mostly) practical suggestions distilled from over 25 years of working with founders and their startups when it comes to trade-secret and related wrongs. Here are some rules of thumb. 1. If it feels dirty, don’t do it. Trade secret violations are generally...

Introduction How does corporate maintenance work in a startup or small business? Corporate maintenance is ultimately a creature of local law and you need to work with your business lawyer to make sure you comply. If you flub it, you might get your corporate veil...

The Startup Law 101 Series is aimed at educating founders and entrepreneurs about the basics of startup law. The question is – what should every entrepreneur know about the law. Here are my suggestions on this important question. Law is fundamentally a specialty field...

I have worked with thousands of founders and entrepreneurs in Silicon Valley since 1984. Here are a few suggestions I have to those thinking about becoming founders. First, why become a founder? 1. Success as a founder will let you make more than you would otherwise...

Introduction Many entrepreneurs do not understand the basics of how a lawsuit works. Below, I sum this up in a nutshell. I do so from a perspective that should give you a basis for making strategic decisions about the process. Though I write for entrepreneurs, I...

Entrepreneurs often make the mistake of believing that business law can be understood as a series of declarative statements or rules. This is the Strunk & White school of legal interpretation. Everything can be simplified to easily understandable rules....

Securities laws are not to be trifled with. Among other things, if you violate them, your investors can ask for their money back from your company and from those who control the company. Yet founders are sometimes careless in complying with securities laws. Here are...

What does it mean that you own x% of a company? Founders often get mixed up on this issue. Below I describe the problems this creates and how to minimize such problems. When an entity is formed it is capitalized. This means that founders contribute cash or other...

Nothing creates more grief for an early-stage startup than an ill-documented relationship that goes wrong. This is by far the most common mistake founders make when setting up their companies. The problem is a natural one. Things are loose and informal at the start...