6 ms·

Legal Concepts for Founders

212 points by sarathyweb 6y ago

bavell 6y ago
Good review/intro, nothing groundbreaking but a good resource for anyone interested in how the puzzle pieces all fit together.
tenaciousDaniel 6y ago
I really love the spacing and typography on this site. No bullshit, just clear and concise content. Wish more sites were like this.
- jfindley 6y ago
  I believe this is due to the font it uses[0], which is a really fantastic font for text-heavy websites if you're happy to pay the $1500 asking price. 0: https://commercialtype.com/catalog/graphik https://commercialtype.com/catalog/graphik
- chrismorgan 6y ago
  Just one part that I object to: body { letter-spacing: .02em; } I see people doing this from time to time, and it’s almost always a bad thing: why are you second-guessing the expert that made the font? In this case, the font’s already quite a wide font, and the further bump definitely makes the letter spacing unnatural and slightly hinders reading. I could tell as soon as I opened the page that extra letter-spacing was used. (I also wouldn’t mind the font size being increased from 15px back to 16px.)
vmsp 6y ago
I haven't read it yet but I'm guessing these are only useful for American companies?
- sunbum 6y ago
  Very much looks like it but IANAL
- bobbiechen 6y ago
  Yes (and even more specific), the "Audience" tab https://handbook.clerky.com/audience https://handbook.clerky.com/audience says >Finally, the content in this handbook is only relevant for Delaware C-corporations, as startups (as the term is used here) are typically Delaware C-corporations.
- diggan 6y ago
  The submission title should really be "Legal Concepts for owners of Delaware C-corporations". Bit strange to put those details on page three instead of upfront.
  - renewiltord 6y ago
    No, I think that's not precise enough because you might think Delaware Bay in New Zealand, company number 4234998. Weird that you wouldn't clarify this.
    - diggan 6y ago
      Yeah, should definitely have "US" somewhere in there, but I've lost hope about getting US netizens to specify which country their texts applies to, if it's the US, as usually the world seems to center around them.
spatx 6y ago
Looks like a good high-level intro for a first-time founder. It would be good to have another section on some common legal policies (privacy policy, terms of service, etc.).
caseysoftware 6y ago
Well done on including info on the target audience: https://handbook.clerky.com/audience https://handbook.clerky.com/audience There are too many people who will respond to a thoughtful article with "well, it doesn't apply in this scenario, therefore it's dumb" so by putting the target audience out front the author can say "yes, it's not for you." I started doing the same in my conference presentations a few years back. It's useful to see a few people nodding their heads to know I'm on target before I get into the meat of the content. And if someone realizes it's not a match for them and leaves (quietly), no harm, no foul.
- yellowyacht 6y ago
  Worth noting that it's edited by 22 or 23 (it says 23 in the footer) attorneys is especially well done: https://handbook.clerky.com/editorial-board https://handbook.clerky.com/editorial-board It's hard enough to find a concise post like this that is more than one person's opinion, but finding one that combines >20 is worth bookmarking & reading
  - echelon 6y ago
    > It's hard enough to find a concise post like this that is more than one person's opinion It's not that hard with a collaborative editor like Google Docs or even git. You usually have one or two people spearhead the effort, then a group of peers offer feedback, insight, corrections, etc. Run the process through a few rounds and you have solid docs with wide consensus. The key is having a good owner that fully groks the message they're trying to send and the audience they're targeting.
candiddevmike 6y ago
I'd really like to see more information on when you should become a C-Corp vs LLC, and how big of a pain in the ass it is to change. Right now, a C-Corp seems like a lot of paperwork and taxes without a lot of benefit.
- peter-gust 6y ago
  Disclaimer: I work at Gust. That said, https://gust.com/launch/comparison/delaware-corp-vs-llc https://gust.com/launch/comparison/delaware-corp-vs-llc will give you a good idea of the trade-offs and considerations. Based on the homework we've done, C-Corp is a cost- and paperwork-competitive choice if you want to leverage equity for funding or employee incentives. In terms of changing from LLC to C-Corp, statutory conversion is relatively straightforward especially if you structure your original LLC with future conversion in mind (choose a state that supports statutory conversion, understand how membership interest will convert into shares). I _think_ Stripe Atlas might still offer an LLC with an easy conversion path. Some more info on different ways to manage the change here: https://gust.com/launch/faq/articles/i-already-have-an-llc-do-i-have-to-dissolve-it-to-be-able-to-use-gust-launch https://gust.com/launch/faq/articles/i-already-have-an-llc-d... (some Gust specific info in there, but most is general purpose).
  - jsperx 6y ago
    Yes, at least as of 4 months ago (when I got mine) Atlas was still offering a Delaware LLC with an operating agreement structured to make it easier to convert to a C Corp later.
- deleted 6y ago
  [deleted]
shay_ker 6y ago
Can anyone explain why vesting acceleration is considered "undesirable" by acquirers and VCs? https://handbook.clerky.com/hiring/vesting-acceleration https://handbook.clerky.com/hiring/vesting-acceleration Does it mess with the company valuation or who gets paid out? Isn't this a bit unfriendly to early employees?
- shay_ker 6y ago
  Also why is vesting acceleration given to advisors, rather than employees?
  - swampthing 6y ago
    Co-founder of Clerky here :) It's generally less controversial for advisors because it's unlikely that an acquirer will want to retain the advisers for a company it's acquiring.
    - shay_ker 6y ago
      Must be some valuable advisors then! Makes sense, thanks for answering!
- Nowado 6y ago
  'friendly to owners/unfriendly to employees' is pretty much the main trade off dimension in the whole topic. All that follows seems trivial after we acknowledge that interests of employers and employees don't align, but for the sake of clarity: it creates a 'reward' scenario for employee that isn't a 'reward' scenario for employer (further, compared to vesting taking place at all). Buying party loses asset in a form of trained employee motivated to increase company value, which lowers the value of acquisition. Nobody wants to lose money.
- icedchai 6y ago
  I think it is a more practical concern: You don't want a good chunk of your employees leaving immediately when the company gets acquired. Many early startups, for example, have a bunch of code that is worth very little without the people who know how it works.
staticassertion 6y ago
This is awesome. As the CEO of a startup, holy crap, the legal and financial garbage I have to sit through is godawful. And lawyers are expensive. And it's something you want to "get right". Bookmarking this.
- nmfisher 6y ago
  Even though it was the wrong career choice, I'm grateful for my time as a lawyer before switching back to software (and now running my own business). I've probably saved tens of thousands of dollars just by knowing the basics of incorporation/loans/bookkeeping/etc (and perhaps more importantly, I've probably also saved hundreds of hours by knowing what paperwork can be safely ignored).
DethNinja 6y ago
That was a great resource. Delaware is extremely attractive but I’m still doubtful if it is a good alternative for a bootstrapped Canadian company. Honestly I’m really scared about lawyer and accountant fees in USA but haven’t researched it properly yet.

212 points by sarathyweb 6y ago

Good review/intro, nothing groundbreaking but a good resource for anyone interested in how the puzzle pieces all fit together.

tenaciousDaniel 6y ago

I really love the spacing and typography on this site. No bullshit, just clear and concise content. Wish more sites were like this.

jfindley 6y ago
I believe this is due to the font it uses[0], which is a really fantastic font for text-heavy websites if you're happy to pay the $1500 asking price. 0: https://commercialtype.com/catalog/graphik https://commercialtype.com/catalog/graphik
chrismorgan 6y ago
Just one part that I object to: body { letter-spacing: .02em; } I see people doing this from time to time, and it’s almost always a bad thing: why are you second-guessing the expert that made the font? In this case, the font’s already quite a wide font, and the further bump definitely makes the letter spacing unnatural and slightly hinders reading. I could tell as soon as I opened the page that extra letter-spacing was used. (I also wouldn’t mind the font size being increased from 15px back to 16px.)

vmsp 6y ago

I haven't read it yet but I'm guessing these are only useful for American companies?

sunbum 6y ago
Very much looks like it but IANAL
bobbiechen 6y ago
Yes (and even more specific), the "Audience" tab https://handbook.clerky.com/audience https://handbook.clerky.com/audience says >Finally, the content in this handbook is only relevant for Delaware C-corporations, as startups (as the term is used here) are typically Delaware C-corporations.
diggan 6y ago
The submission title should really be "Legal Concepts for owners of Delaware C-corporations". Bit strange to put those details on page three instead of upfront.
- renewiltord 6y ago
  No, I think that's not precise enough because you might think Delaware Bay in New Zealand, company number 4234998. Weird that you wouldn't clarify this.
  - diggan 6y ago
    Yeah, should definitely have "US" somewhere in there, but I've lost hope about getting US netizens to specify which country their texts applies to, if it's the US, as usually the world seems to center around them.

spatx 6y ago

Looks like a good high-level intro for a first-time founder. It would be good to have another section on some common legal policies (privacy policy, terms of service, etc.).

caseysoftware 6y ago

Well done on including info on the target audience: https://handbook.clerky.com/audience https://handbook.clerky.com/audience There are too many people who will respond to a thoughtful article with "well, it doesn't apply in this scenario, therefore it's dumb" so by putting the target audience out front the author can say "yes, it's not for you." I started doing the same in my conference presentations a few years back. It's useful to see a few people nodding their heads to know I'm on target before I get into the meat of the content. And if someone realizes it's not a match for them and leaves (quietly), no harm, no foul.

yellowyacht 6y ago
Worth noting that it's edited by 22 or 23 (it says 23 in the footer) attorneys is especially well done: https://handbook.clerky.com/editorial-board https://handbook.clerky.com/editorial-board It's hard enough to find a concise post like this that is more than one person's opinion, but finding one that combines >20 is worth bookmarking & reading
- echelon 6y ago
  > It's hard enough to find a concise post like this that is more than one person's opinion It's not that hard with a collaborative editor like Google Docs or even git. You usually have one or two people spearhead the effort, then a group of peers offer feedback, insight, corrections, etc. Run the process through a few rounds and you have solid docs with wide consensus. The key is having a good owner that fully groks the message they're trying to send and the audience they're targeting.

candiddevmike 6y ago

I'd really like to see more information on when you should become a C-Corp vs LLC, and how big of a pain in the ass it is to change. Right now, a C-Corp seems like a lot of paperwork and taxes without a lot of benefit.

peter-gust 6y ago
Disclaimer: I work at Gust. That said, https://gust.com/launch/comparison/delaware-corp-vs-llc https://gust.com/launch/comparison/delaware-corp-vs-llc will give you a good idea of the trade-offs and considerations. Based on the homework we've done, C-Corp is a cost- and paperwork-competitive choice if you want to leverage equity for funding or employee incentives. In terms of changing from LLC to C-Corp, statutory conversion is relatively straightforward especially if you structure your original LLC with future conversion in mind (choose a state that supports statutory conversion, understand how membership interest will convert into shares). I _think_ Stripe Atlas might still offer an LLC with an easy conversion path. Some more info on different ways to manage the change here: https://gust.com/launch/faq/articles/i-already-have-an-llc-do-i-have-to-dissolve-it-to-be-able-to-use-gust-launch https://gust.com/launch/faq/articles/i-already-have-an-llc-d... (some Gust specific info in there, but most is general purpose).
- jsperx 6y ago
  Yes, at least as of 4 months ago (when I got mine) Atlas was still offering a Delaware LLC with an operating agreement structured to make it easier to convert to a C Corp later.
deleted 6y ago
[deleted]

shay_ker 6y ago

Can anyone explain why vesting acceleration is considered "undesirable" by acquirers and VCs? https://handbook.clerky.com/hiring/vesting-acceleration https://handbook.clerky.com/hiring/vesting-acceleration Does it mess with the company valuation or who gets paid out? Isn't this a bit unfriendly to early employees?

shay_ker 6y ago
Also why is vesting acceleration given to advisors, rather than employees?
- swampthing 6y ago
  Co-founder of Clerky here :) It's generally less controversial for advisors because it's unlikely that an acquirer will want to retain the advisers for a company it's acquiring.
  - shay_ker 6y ago
    Must be some valuable advisors then! Makes sense, thanks for answering!
Nowado 6y ago
'friendly to owners/unfriendly to employees' is pretty much the main trade off dimension in the whole topic. All that follows seems trivial after we acknowledge that interests of employers and employees don't align, but for the sake of clarity: it creates a 'reward' scenario for employee that isn't a 'reward' scenario for employer (further, compared to vesting taking place at all). Buying party loses asset in a form of trained employee motivated to increase company value, which lowers the value of acquisition. Nobody wants to lose money.
icedchai 6y ago
I think it is a more practical concern: You don't want a good chunk of your employees leaving immediately when the company gets acquired. Many early startups, for example, have a bunch of code that is worth very little without the people who know how it works.

staticassertion 6y ago

This is awesome. As the CEO of a startup, holy crap, the legal and financial garbage I have to sit through is godawful. And lawyers are expensive. And it's something you want to "get right". Bookmarking this.

nmfisher 6y ago
Even though it was the wrong career choice, I'm grateful for my time as a lawyer before switching back to software (and now running my own business). I've probably saved tens of thousands of dollars just by knowing the basics of incorporation/loans/bookkeeping/etc (and perhaps more importantly, I've probably also saved hundreds of hours by knowing what paperwork can be safely ignored).

DethNinja 6y ago

That was a great resource. Delaware is extremely attractive but I’m still doubtful if it is a good alternative for a bootstrapped Canadian company. Honestly I’m really scared about lawyer and accountant fees in USA but haven’t researched it properly yet.