When you're starting a business, doing things right from the get-go is essential. This is a list of some of the most critical legal issues that founders should know about in the process of forming their company.
1. Make sure the corporation's name is available in the Department of State, and preferably as a trademark and domain name. If not yet incorporating, you can reserve the name.
2. Register the corporation by submitting a Certificate of Incorporation in the corresponding jurisdiction's Department of State. (This includes selecting a registered agent that receives essential notifications)
3. The incorporator signs an "Initial Action by Incorporator" where he/she designates the members of the corporation's Board of Directors.
4. The Board of Directors approves a Unanimous Written Consent to ratify the actions taken by the Incorporator, adopt bylaws, designate the corporate officers, authorize equity to founders, and other vital actions for the company to be able to do its business.
5. The founders sign Stock Purchase Agreements and purchase their shares with money and/or Intellectual Property. (If using prior intellectual property, they should sign a Technology Transfer Agreement).
6. When all Stock Purchase Agreements are returned signed, and payments received, the corresponding Stock Certificates are sent to each founder. (If the founders' shares are subject to vesting, file a Section 83(b) election in the IRS within 30 days of the date of the stock grant. Consult with a tax professional)
7. The founders sign Confidential Information and Invention Assignment Agreements to commit not to disclose confidential company-related information and to assign the founders' work product to the company.
8. If the corporation is doing business in a state other than where it is incorporated, register as a foreign corporation in the state where it will be doing business.
9. File all applicable documents regarding federal and state securities laws. All equity issuances are subject to federal and state securities laws or exemptions.
10. Obtain all federal, city, county, and state licenses and permits to do business, such as Employee Identification Number in the IRS, sanitation, and others, as applicable.
Starting your business off of the right foot lays the foundation for the future of your company. Taking the time to address these preliminary logistics thoroughly may seem daunting, but like all big dreams, it's all about planning and putting in the work.
This blog was written by Ivan Ríos Mena, Esq. member of our external team of advisors, Ivan combines his unique legal, business, and operational experience to serve emerging companies in strategic ways, made possible by his eclectic background. The former COO of the PR Science, Technology & Research Trust, and founding member of the global startup accelerator Parallel18, Ivan currently advises businesses in corporate, commercial, government incentive, and intellectual property matters related to different stages of commercialization.
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*NOTE: The content of this website has been prepared for information purposes only. It is not intended as, and does not constitute, legal advice on local or federal matters.