Legal and Accounting Basics for Startups
Recently I did watch this YouTube video and thought to share summary of this lengthy video
- Startup needs to be a separate legal entity so that you are protected from personal liability. It means if your company gets sued then it’s not your money sitting in your personal account but it would be company’s corporate account that would be affected.
- Keep legal documents simple and organized.
- Execution has greater value than idea.
- Founders should be on same page and they do understand expectations of each other for equity allocation among them.
- Always look forward not backward means never look back who had idea originally but rather think that execution is more important in long haul.
- Sign stock purchase agreement and 83(B) election agreement documents.
- Founders should vest their shares so that investors have confidence that founders will not just leave company with big chunk of shares.
- Go with accredited investors means people who understand what and why they are investing their money.
- Must sign investment papers and keep them as simple as possible.
- Good to know ‘PRO-RATA’ http://www.investopedia.com/terms/p/pro-rata.asp
- Keep track of company expenses.
- Treat all founders as employees of company and make sure they are paid.
- Set up a payroll service provider to avoid payment related legal issues.
- Firing, yes very stressful job so, it should be quick and make sure all access of terminated employees are blocked.
Please feel free to add your points which you think a startup should take into consideration to run their startup successfully.
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