Packages for Startups

KHNETIC Legal offers several separate packages for startups.  Understanding that money is tight when first starting out, you may elect to take advantage of the “Organization Package” and then a little later down the road, you can move ahead with the services under the other Packages.  It is probably a good idea when you are starting out to take advantage of the Intellectual Property Services we offer.  KHNETIC Legal can also provide you with assistance on basic employment matters and independent contractor issues.  Here is what is included in each package for startups:

Organization Package

  • Reserve corporate name*
  • Draft and file either Articles/Certificate of Incorporation for corporations or Certificate of Organization for limited liability companies*
  • Draft Bylaws
  • Prepare Action of Incorporator
  • Prepare initial Board of Directors Resolutions
  • Prepare Stockholders Consent to approve the form of Indemnification Agreement for Officers and Directors and the Stock Option Plan, if applicable
  • Prepare and place advertisement of incorporation if required by state of incorporation*
  • File any documents required for company to conduct business in a state where it operates other than state of organization*
  • File IRS Form SS-4 (Application for Employer Identification Number)
  • Determine if registered agent is required, and set up registered agent if needed*
  • If Subchapter S Corporation is desired, prepare and file IRS Form 2553
  • Draft Founders Agreement
  • Draft Form of Indemnification Agreement for Officers and Directors

*Filing fees, costs of advertisement and registered agent fees are additional

Capitalization Package

  • Draft Founders Restricted Stock Purchase Agreement
  • Draft Stockholders/Shareholders Agreement
  • Prepare Stock Certificates
  • Draft Stock Option Plan
  • Draft form of Stock Option Award
  • Draft form of Stock Option Agreements
  • Draft form of Restricted Stock Award and form of Restricted Stock Agreement (includes Statement regarding Section 83(b) election and a form to make such election)
  • Prepare and file state securities filings for stock issuances to Founders

Startup Financing:

  • Angel Round of Financing – the first round of outside money, with the exception of friends and family.  I can prepare the following documents efficiently to get your angel round completed quickly and at a very reasonable rate:

    • Convertible Note Term Sheet
    • Convertible Note Purchase Agreement
    • Convertible Note
    • Keep it Simple Security (KISS)
    • Simple Agreement for Future Equity (SAFE), with various terms regarding discounts, caps and MFN clauses 
  • Angel Round of Financing with Priced Equity
  • Venture Capital Rounds – rounds of financing after the angel round.  The following documents can be prepared for any of the series of venture rounds:
    • Term Sheet
    • Stock Purchase Agreement
    • Investors’ Rights Agreement
    • Management Rights Letter
    • Right of First Refusal and Co-Sale Agreement
    • Voting Agreement
    • Indemnification Agreement for Officers and Directors

Business Formation

As the owner of a startup company, it is imperative that you start out on the right foot with business formation. Therefore, the first decision to be made with your business lawyer is what legal entity makes the most sense for your business. There are several different entity types you could consider for your business.  For example, you could operate as a sole proprietor, a corporation, a limited liability company (LLC) or a partnership.  Before making a decision on business formation, you should discuss with your business lawyer the pros and cons of the different entity types as they relate to your business.

Startups Seeking Venture Capital

I have the experience and connections to help startups that are seeking venture capital as a means of funding their business.  I can help you meet with venture capitalists and advise you with respect to what they will be looking for in your presentation to them.  This will result in a higher likelihood of your business being funded by venture capitalists.  Furthermore, since I previously served as General Counsel for the venture fund of a large telecommunications company, I am uniquely positioned to assist startups with working out the terms of the investment, negotiating and drafting the investment documents and getting the investment closed.  In my capacity as General Counsel of a venture fund, I have also worked with startups on successful exit strategies and can be of great value to your business in this respect.

Some Considerations in Choosing Entity Type

There are several factors to consider in the business formation stage when choosing the appropriate entity. For instance, the selection of entity type will determine flexibility in operations, ease of transferring interests, your goals for your business, tax considerations and protection from personal liability.  For startups that have a goal of seeking venture capital, forming a Delaware C corporation makes the most sense.  In addition, you should discuss with your business lawyer ways to help prevent third parties from “piercing the corporate veil” and putting your personal assets at risk.  Your business lawyer will be able to assist you with systems to put in place to help provide you with such protection.

Subchapter S Election

In addition, you will want to talk to your accountant and your business lawyer about whether you should elect to be treated as a Subchapter S corporation for tax purposes.  Subchapter S elections apply to certain corporations, and also may apply, if you make the election, to limited liability companies.  If you decide to make a Subchapter S election, it will affect the way you and your business are taxed and may enable you to conduct certain tax planning with respect to your business.

Call today to energize your business and move forward into the future. 610.524.3250

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