Packages for Startups

KHNETIC Legal offers several separate packages for startups to attempt to help such companies spend their dollars efficiently.  Because I understand that money is tight when first starting out, you may elect to take advantage of the organizationpackage for startups.  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.  Each package for startups includes the following:

Organization Package for Startups

  • Reserve corporate name*
  • Draft and file either Articles/Certificate of Incorporation for corporations or Certificate of Organization for limited liability companies*
  • Draft Bylaws
  • Action of Incorporator
  • Initial Board of Directors Resolutions
  • Stockholders Consent to approve the form of Indemnification Agreement for Officers and Directors and the Stock Option Plan
  • 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)
  • Set up registered agent if needed*
  • File IRS Form 2553 if neded
  • Draft Founders Agreement
  • Draft Form of Indemnification Agreement for Officers and Directors

*Additional fees are filing fees, costs of advertisement and registered agent fees

Capitalization Package for Startups -these are some of the agreements we can draft for you business

  • Founders Restricted Stock Purchase Agreement
  • Stockholders/Shareholders Agreement
  • Prepare Stock Certificates
  • Stock Option Plan, Award document and Agreements
  • 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.  Your angel round will include the following documents:

    • Convertible Note Term Sheet, Purchase Agreement and/or 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.  Any series of venture rounds includes the following documents:
    • 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 the business formation. Therefore, the first decision you will make 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.  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 to help startups that are seeking venture capital as a means of funding their business.  I can advise you regarding what venture capitalists 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, my experience will assist your business with working out the terms of the investment.  This would involve negotiating and drafting the investment documents and getting the investment closed.  In my past capacity as General Counsel of a venture fund, I have also worked with startups on successful exit strategies.  This experience can be of great value to your business.

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 determines flexibility, ease of transferring interests, tax considerations and protection from personal liability.  For startups that have a goal of seeking venture capital, the choice of an entity may differ.  In addition, you should discuss with your business lawyer ways to prevent third parties from putting your personal assets at risk.  Your business lawyer will be able to assist you with putting systems 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 the election as a Subchapter S corporation for tax purposes.  Subchapter S elections apply to certain corporations.  You may also make the election to be treated as an S Corporation even if you are structured as a limited liability company.  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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