7 Legal Landmines for Founders and How To Avoid Them:
Quick Reference Cheat Sheet
As you launch your new company and begin to grow, it is vital to know the landmines that exist for you before you create massive headaches or unnecessary expenses for yourself and your co-founders. We have created this cheat-sheet to give you a list of top issues you must address in order to set off in the right direction as a founder. There is more to say on each topic, but we hope this list will get you thinking about these important topics.
Did you grant too much equity too soon?
It depends, but not understanding the implications of granting equity to your first consultants, contractors or founders can get you in trouble later.
Did you grant equity without vesting requirements?
Not having vesting requirements means your equity-holders have zero skin in the game. That means they have no incentive to help make the company succeed. It is always a mistake to grant equity without carefully thought-out vesting requirements.
Do you really understand the difference between valuing sweat equity vs. cash equity?
Not all equity is created equal! You need to understand the difference between founders who are contributing cash versus founders who are contributing services (and therefore sweat equity) to your company, or you could end up with inadvertent and very costly tax issues.
Have you protected your company’s intellectual property?
This is vital to a proper valuation of your company. Just because you think you created the intellectual property for your company (or your co-founder did) doesn’t mean the company actually owns it or has legal protection for it. This is one of the biggest traps for unsuspecting founders. You cannot afford to skip the guidance of an experienced Intellectual Property lawyer.
Are you keeping proper books and records and signing documents?
Not maintaining the mundane on a daily basis can cause lots of problems down the line, and it will absolutely impact your ability to attract investors. You must have procedures in place from the start to properly document your company books and records, and you must make sure you and your co-founders are signing all documents relating to your launch, relationships and intellectual property.
If you want more information about our Founder Packages, trademark or intellectual property legal services, or fundraising guidance, just reach out!