Legal Concepts for Founders

Worth noting that it's edited by 22 or 23 (it says 23 in the footer) attorneys is especially well done: https://handbook.clerky.com/editorial-board

It's hard enough to find a concise post like this that is more than one person's opinion, but finding one that combines >20 is worth bookmarking & reading

Even though it was the wrong career choice, I'm grateful for my time as a lawyer before switching back to software (and now running my own business). I've probably saved tens of thousands of dollars just by knowing the basics of incorporation/loans/bookkeeping/etc (and perhaps more importantly, I've probably also saved hundreds of hours by knowing what paperwork can be safely ignored).

Disclaimer: I work at Gust.

That said, https://gust.com/launch/comparison/delaware-corp-vs-llc will give you a good idea of the trade-offs and considerations. Based on the homework we've done, C-Corp is a cost- and paperwork-competitive choice if you want to leverage equity for funding or employee incentives.

In terms of changing from LLC to C-Corp, statutory conversion is relatively straightforward especially if you structure your original LLC with future conversion in mind (choose a state that supports statutory conversion, understand how membership interest will convert into shares). I _think_ Stripe Atlas might still offer an LLC with an easy conversion path. Some more info on different ways to manage the change here: https://gust.com/launch/faq/articles/i-already-have-an-llc-d... (some Gust specific info in there, but most is general purpose).

Very much looks like it but IANAL

Yes (and even more specific), the "Audience" tab https://handbook.clerky.com/audience says

>Finally, the content in this handbook is only relevant for Delaware C-corporations, as startups (as the term is used here) are typically Delaware C-corporations.

The submission title should really be "Legal Concepts for owners of Delaware C-corporations".

Bit strange to put those details on page three instead of upfront.

Also why is vesting acceleration given to advisors, rather than employees?

'friendly to owners/unfriendly to employees' is pretty much the main trade off dimension in the whole topic.

All that follows seems trivial after we acknowledge that interests of employers and employees don't align, but for the sake of clarity: it creates a 'reward' scenario for employee that isn't a 'reward' scenario for employer (further, compared to vesting taking place at all). Buying party loses asset in a form of trained employee motivated to increase company value, which lowers the value of acquisition. Nobody wants to lose money.

I think it is a more practical concern: You don't want a good chunk of your employees leaving immediately when the company gets acquired. Many early startups, for example, have a bunch of code that is worth very little without the people who know how it works.

Vesting is a safety device for the company. Equity isn't really intended to "reward" early employees. It is intended to motivate them to work hard on the company so there will be something of value out of which to get a big reward.

The short video here (not the written stuff on the page) may be helpful:

https://www.ycombinator.com/library/5x-how-to-split-equity-a...

A company is like a living organism. Living organisms have inputs and outputs and that's part of being alive.

In this case, one "output" is that people leave sometimes. The fact that it happens is natural and normal. But you don't want them to leave in a way that's like cutting out your heart without anesthesia.

VCs have learned not to give the gains of early employees' hard work back to them. It leaves money on the table that could have gone to the VCs.

The idea is that it's bad because the employees might leave if you reward them with a lot of money. But if you screw them out of a lot of money (when the startup gets acquired, aka the traditional exit event that generated employee rewards), they're even more likely to leave.

The argument that the IP remaining in the startup is useless if the employees leave is ridiculous, because if that is the case, then the valuable asset is not the IP, but the employees themselves.

The undesirability of vesting acceleration is thus generally limited to the VC-funded tech community, as it is otherwise considered a desirable benefit everywhere else.

I believe this is due to the font it uses[0], which is a really fantastic font for text-heavy websites if you're happy to pay the $1500 asking price.

0: https://commercialtype.com/catalog/graphik

Just one part that I object to:

  body {
    letter-spacing: .02em;
  }

I see people doing this from time to time, and it’s almost always a bad thing: why are you second-guessing the expert that made the font? In this case, the font’s already quite a wide font, and the further bump definitely makes the letter spacing unnatural and slightly hinders reading. I could tell as soon as I opened the page that extra letter-spacing was used.

(I also wouldn’t mind the font size being increased from 15px back to 16px.)