Top 10 Formation Dos and Don'ts for Entrepreneurs
My partners Rob Dellenbach (emerging company / venture capital group) and Craig Tanner (global equity compensation) recently presented at the Haas School of Business in Berkeley, California. The presentation was geared toward business school students, but the subject is one that should be near and dear to the hearts of all new entrepreneurs – the "Top 10 Formation and Compensation Do's and Don'ts":
- DO create an entity; DON'T assume it must be a C corporation
- DON'T sell Common Stock to investors; DO issue Convertible Notes or Preferred Stock
- DO vest co-founders' stock; DON'T risk co-founder windfall
- DON'T forget Section 83(b) Election; DO file WITHIN 30 DAYS
- DO get written IP assignments and NDAs; DON'T assume you own IP
- DON'T go it alone when hiring employees; DO seek out professional advice
- DON'T take stock awards lightly; DO consider alternatives to options
- DON'T promise "percentages" of equity ownership; DO offer specific stock numbers
- DO professionally value stock option prices; DON'T ignore Section 409A
- DON'T ignore non-U.S. and expat employees; DO think globally
The full presentation is attached for those who are interested. It is a short, 15-slide PowerPoint presentation that is easy to follow and has some great nuggets of information. Feel free to shoot me an email, or you can reach out directly to Rob (rdellenbach@reedsmith.com) or Craig (ctanner@reedsmith.com) if you have any questions.
