Startup Legal

Transcript

1. Startup Legal: The Nitty Gritty
 
 How to Avoid Legal Hazards and Focus on Building Your Startup
 
 May 31, 2019 DEBRA B. VERNON, ESQ. ZHONG LUN LAW FIRM 2479 E. BAYSHORE RD., STE 215, PALO ALTO, CA 94303 D: (415) 660-9045 | M: (650) 285-9503 DEBRAVERNON@ZHONGLUN.COM
2. Company Formation 2
3. Tip # 1: This is your chance Beyond solving a pain point and making lots of money, by forming this company you have the opportunity to lead. 3
4. Tip # 2: Pick an Available Name Focus time, energy and money on naming the business. Name changes cost more down the line. 4
5. 
 Name Checks - Web searches (U.S. and international) - URLs - Secretary of State websites - Trademark searches 5
6. Tip #3: Form a Delaware C Corp The startup ecosystem is familiar with its benefits. 6
7. Why Delaware? - Business favorable laws and courts - Predictable body of corporate laws - Customer friendly - Public company must-have - Very few downsides 7
8. Other Options - S Corps ◦ Flow through taxation ◦ Can’t issue multiple classes of stock ◦ 100 stockholders max ◦ No foreign stockholders - Partnerships - LLCs 8
9. Tip #4: K.I.S.S. Keep It Simple Superstar Unique business model = unicorn Unique formation = large legal bill 9
10. Tip #5: Keep It Clean Observe Corporate Formalities to Limit Personal Liability 10
11. Formation Hazards To Avoid - Pre-incorporation promises - Unsigned documents - IP not assigned to the company - Founders disputes - Incomplete online formation process 11
12. Tip #6: 
 Sign, DocuSign, PDF Fill and Sign… 12 Circumstances change. Founders leave to do other things. Conflicts can arise over who has what. It can be fatal.
13. Tip #7: Don’t DIY It All LegalZoom Clerky Documents from your BFF’s Startup 13
14. Equity 14
15. Stock is Precious Stock can motivate and compensate when cash is scarce. 15
16. Startup Equity Low valuation = low stock purchase price for founders and early employees. This is a great thing. 16
17. Tip #8: Use Stock Wisely Use caution fundraising with common stock. Obtain 409A valuations. 17
18. Investors 18
19. Early Stage Funding Sources - Bootstrapping - Friends and family - Incubators - Angel Investors - Seed funds - Crowdfunding 19
20. Tip #9: Exercise Cap Table Control Watch the numbers of stockholders. Set minimum investments and other thresholds and screens. 20
21. Tip #10: 
 Choose Investors Carefully It’s a long term relationship. Diligence your investors. 21
22. Intellectual Property 22
23. IP Protection Patents Copyrights Trademarks Trade Secrets 23
24. Tip #11: Protect Your IP - IP assignment - Proprietary Information and Invention Assignment Agreements (PIIAAs) - Investor due diligence review - Disclose in stages - Tailor NDAs to the IP 24
25. Startups also need… 25
26. Tip #12: Obtain Insurance - General liability insurance - Cyber insurance - privacy and data security - Employment practices liability insurance - Directors and officers insurance (D&O) - Key person life insurance 26
27. Debra Vernon Debra is a corporate and securities attorney who advises technology companies, investors and entrepreneurs on legal issues faced throughout all stages of company growth. Debra has represented companies, venture capital firms, angel investors, and investment banks in startup formation, capitalization, financings, mergers and acquisitions, public offerings and corporate governance. Her expertise includes cross-border transactions and restructurings for companies with international operations, with a focus on Asia and offshore jurisdictions. She is a contributing author to “Changing Tides: Powerful Strategies for Female Founders.” debravernon@zhonglun.com P: (415) 660-9045 | M: (650) 285-9503 27