TL;DR Download Legal Documents
Legal documents are a necessity for any type of company.
However, legal fees can be costly, and in the end it just hurts companies without proper contracts to protect themselves.
One of our attorneys memorialized these documents for us as we got started prior to any funding, major projects, product releases, etc. They serve as a great starting point.
Most companies, form in Delaware as a corporation. If you ever plan on raising any type of funding (Angel, VC, etc.), or if you plan on getting aquired, distributing shares, this is the way you want to go.
It makes it much easier from a VC standpoint if you are already a corporation. Now that we got some of those basic points out of the way, lets go through the documents and I will explain some of it.
Keep in mind that I am a engineer, turned product person.
None of this is official legal advice.
First off, everything in red needs to be changed to your own company / founder information. Make sure whenever you are done with this, make it a PDF. Its amazing how many legal documents I get that are still in .doc or .docx format.
This Shareholders Agreement was split up between 3 Co-Founders. Make sure you assign someone President, Secretary, Treasurer. This isn't necesarily their job role, but standard founders stuff. When starting off, keep the Board members the Founders. Unless, you already have investors or others that need a Board seat.
We chose to have immediate vesting of shares. Thats the right way to do things for Founders or employees that are there early on when things are tough in your company. The whole vesting situation can get messy.
There is something really great written about it here, by Sam Altman.In this document, we kept it simple and just did 1500 shares. 1,000 were split up by the 3 founders.
500 were still left over for new hires.
Keep in mind, this number can change to however many shares you want, you can have millions. Different companies do it differently.
Its all about the value of the shares. The value of the company. If your just forming there isn't much value. Keep it simple.
The shares would only really be expensive or highly valuable from the beginning if you already have built the next bomb product, raised some money, etc.
Keep in mind, the higher the price your shares are, the more tax you pay and the company has higher franchise fees. Be smart here.
Since we were just starting without any real revenue, we worked with our attorney to determine a low, but fair number for the shares. The number on the document is close, but not exactly what we used.
Make sure to read through the other paragraphs with your founding team. Just because it's not in red, doesn't mean it's not important! This is the part in Exhibit B, Type of Consideration.
So, not as much red (things to change) in this document as the last one.
These bylaws are pretty straightforward, but you need to have them. They are important for any business that plans on lasting for decades.
Hopefully these documents can help you out. We are giving back to small business this year and we mean it.
If you have any questions, I would love to help.