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Making Technology Law Simple

Business Structuring

Business Structuring Legal Information

Founding a new business can be scary – to do so successfully, one must put in a tremendous amount of time, money and effort. But even after a successful startup, things can still go awry months or even years after the company’s formation. One of the major reasons for company breakdowns is the lack of a solid founding Shareholder Agreement.

We work with the Founders to establish the stock ownership structure, the licenses granted to the new Company and the earn-out terms for receiving additional shares (or Options, Warrants, etc.) for services or cash in the future. We elect a Board (Founding Shareholder Meeting) and elect officers (Board of Directors (or LLC Member) Meeting).

By working with us you will benefit:

  • Allowing a Court to understand the intent of the Founding parties
  • Provide for what happens if people leave the company or cannot continue
  • Provide earn-out agreements
  • Define a Framework for parties working together
  • Define Rules for voting and election of company officers
  • Create “constitution” both in documents and in spirit between the Founders (be it one person or several) and creating the rules for the successful operation of the Company

Are you the founder or owner of a small or medium size technology company?

Would you like someone to talk with that has legal, technology and business background? To talk about:

SHAREHOLDER AGREEMENTS

  • Ownership defined clearly between your founding groups?
  • Between interested new investors and original investors (friends & family)?
  • Buy-back provisions for investors wanting to sell their stock?
  • Types of stock issued (common, preferred, convertible debt, etc.) defined?
  • Buy-Sell Agreements

SUBSCRIPTION AGREEMENTS

  • Need to be able to get investors (in different areas) to agree to invest money?
  • Terms for each investor (must be) the same in each round of investment?
  • Need to understand different types of “rounds” of investment and types of investment, as well as the impact of each of the various types of investment, to know which is right for your business?

FUNDING

  • Where do you find sources for funding?
  • Need someone to help you identify how to put the “deal” together for the investors?
  • Need to understand who you can take money from and the legal and taxation issues around taking that money?

TECHNOLOGY TRANSFER (for $ or Stock?)

  • Protecting the technology while raising venture capital, development and initial sales?
  • Transferring ownership from the Founders to the company?
  • Validating ownership from inception to funding?
  • Ownership “post funding” defined?
  • Possession & Ownership of Software or Technology
    • Consultant vs. employee built?
    • Third-party software?
    • Open source licenses?
    • Source code downloaded (freeware) from the Internet?
  • Forming the company “constitution” rules for the shareholders, rules that must be recognized and obeyed in the future, sets up framework for who gets paid what percentage?
  • Subscription fee allows contingency agreements to be soundly made, allows investors to sign on as long as sufficient results occur?
  • Leverage and binding agreements; when selling a company the conditions can be complicated so having a lawyer for an earn-out, aids in hammering out conditions for down payment and subsequent payments; What is necessary to pay or receive payments?
  • Provide evidence in disputes about how much the company is worth?

Founders, Incorporators and Initial Set-up of the Company (LLC, etc.)

Services deliverable during this stage of company life cycle:

We sit with the founding group or owners/management of existing companies, and work to create shareholder agreements (or Operating Agreements for LLC’s) and related documents to:

  • Allow investors to “subscribe” to fund the Company
  • Voting trust agreements (if desired)
  • Earn-out agreements for management and technologists; and
  • Create the “constitution” for the management of the Company, into the future.