You’ve landed that dream job and you’re excited to get started. The company is even throwing in some stock options! Since you will be an instrumental part of the company, you might think that the company is poised to take off and those options are going to be super valuable. “Sweet,” you say to yourself. “Where do I sign?”
Well, not to rain on your employment parade, but you might want to take a moment to review the structure of those options, and to understand what exercising an option really means.
The adage, “you have to have money to make money” really hits home when you are reviewing the budget needed to launch a business. Starting a business is expensive, and we understand that many of the entrepreneurs and businesspeople that we represent are trying to “bootstrap it,” especially at the outset of a new venture. Saving money is always on the entrepreneur’s mind, and every dollar counts. The annual fee for a registered agent averages about $250, and since most people don’t understand the value of registered agent services, this is one expense that entrepreneurs are tempted to save by doing it themselves. In this post, I’d like to talk about why that $250 can save you more than $250 worth of time, money, and grief in the future.
In the days of yore, when dinosaurs roamed the earth (or thereabouts), goodcounsel offered “fractional general counsel” services. The idea of providing part-time counsel to growing, entrepreneurial companies (like those for which I had previously worked) was sound, but offering it a certain number of days each month was, in retrospect, flawed. If the billable hour is a bad measure of value (which, as a rule, it is), the billable day is not necessarily much of an improvement.
We soon got quite busy with client work of various kinds (on a fixed-fee basis, of course), and the fractional general counsel services fell by the wayside.
Would you like to accept small investments in your company from your Aunt Rose, your brother-in-law Bobby and your best friend from high school? Many people are surprised to learn that, unless these friends and family members are high-net worth investors, this is not the kind of thing that is safe to do – not, at least, if you want to be fastidious about observing securities regulations. Read the rest of this entry »
With some regularity, clients tell me that they want to issue employee equity that represents a fixed percentage of the company, not subject to dilution. What startup company founders should realize is that giving out equity containing an “anti-dilution” feature is an extraordinary and unusual benefit, one that should be agreed to only in exceptional circumstances.
I tweeted this earlier today. To add a little detail: I’ve long been interested in “document automation” and “document assembly” as a way to make the document drafting process more efficient (faster and less expensive) for my clients. Two great looking software packages, ContractExpress and Smokeball, rely on inserting a sidebar into Word, and both are not available for Mac. I’ve spoken to their representatives at length, and both, independently, blamed the manner in which Word for Mac is engineered by Microsoft. I don’t know the technical details, but apparently Word for Mac is different under the hood from the Windows version in a way that renders it impossible for their tools to run.
Whether or not this is accidental or intentional on Microsoft’s part, it just makes life less efficient for those of us using the Mac. My only choice, which I will explore, is to license VMWare, license a copy of Windows and license a copy of Word for Windows, and run those in parallel on my Mac. I thought I was done with Windows, but to paraphrase Pacino, it keeps dragging me back.
Last year, I posted about the silly lawyer drafting practice of representing a number with both numerals and words. It’s a bad habit that many lawyers continue to use unquestioningly, and as I pointed out in that post, it can lead to potentially problematic contractual inconsistencies.
I continue to come across examples of the problem. Here’s another. See if you can spot the issue.
Dickens thought the law was an “ass,” and Sprint is trying to prove him right.
This past Sunday’s New York Times magazine had a fascinating, and ultimately disheartening, article about an entrepreneur who did what great entrepreneurs do. He developed a technology to solve a pressing social problem, specifically, the problem of people texting while driving. Everyone knows this is a huge problem. According to one study, this is now a leading cause of teen deaths in the U.S.
Most startups are in “bootstrapping” mode, which often includes compensating founders and early employees only with equity. In the early-stage community, we view that kind of frugality commendable, and respect founders who go all-in with equity. The problem is, labor laws require a company to pay its employees at least minimum wage (in Illinois, $8.25 per hour), to pay them regularly (in Illinois, at least every two weeks) and to pay time and a half for all hours worked over 40 in a workweek. Most state laws are similar, and the U.S. Department of Labor also enforces federal labor laws and regulations. In all likelihood, if you are a startup, you are violating these laws – even with regard to yourself.