Legal and Accounting Basics for Startups

Lecture 18: Legal and Accounting Basics for Startups

Link: How to Start a Startup

(You can find notes to the other lectures here.)

Kirsty Nathoo, Carolynn Levy (@cjoneslevy)

It is dangerous for founders to get bogged down in the details. (Carolynn Levy)

The primary purpose of forming a separate legal entity is to protect yourself from personal liability. (Carolynn Levy)

The easiest place (to form a company) is Delaware. The law there is very clear and very settled. Investors are very comfortable with Delaware. (Carolynn Levy)

Don’t get fancy (with incorporating). Save yourself some time and money. (Carolynn Levy)

As a founder you always need to be thinking of things in two different ways. You need to ask whether you are doing this as an individual or if you’re doing this on behalf of the company. (Kirsty Nathoo) (Kirsty Nathoo)

Be organized. (Kirsty Nathoo)

Filing documents is not the glamorous part of doing a startup. (Kirsty Nathoo)

At the times where (the documents are) crucial are at a high stress time in the startup’s life. (Kirsty Nathoo)

Keep the documents in a safe place and keep them organized. (Kirsty Nathoo)

Execution has greater value than the idea. (Carolynn Levy)

Value is created when the whole founder team gets together to execute on an idea. (Carolynn Levy)

Resist the urge to give a disproportionate amount of stock to the founder who is credited with coming up with the idea for the company. (Carolynn Levy)

When ownership is disproportionate the founders might not be in sync with one another. (Carolynn Levy)

It is important to look forward in the startup rather than backward. Are all of the founders in it 100% and in it for the long haul? (Carolynn Levy)

The whole team is necessary for execution. (Carolynn Levy)

You need to assign IP to the company. (Kirsty Nathoo)

The standard vesting schedule is four years with a one year cliff. (Carolynn Levy)

One of the reasons of vesting is having skin in the game. (Carolynn Levy)

Single founders need vesting too. (Carolynn Levy)

Vesting aligns incentives among the founders. (Carolynn Levy)

Generally seed round means that the price has not been set. (Kirsty Nathoo)

Raise your money using standard documents. (Kirsty Nathoo)

You have to be really careful about adding an investor to your board. In most cases you want to say no. (Carolynn Levy)

There are so many people that want to give advice to startups and so few people who give good advice. (Carolynn Levy)

All investors who can help should do so. Asking for additional shares is just an investor looking for a freebie. (Carolynn Levy)

You need to know everything about your financing. (Carolynn Levy)

Spend (the investors’) money wisely. (Kirsty Nathoo)

You can’t work for free for your company. (Carolynn Levy)

Breakups get extra ugly when founders haven’t paid themselves. (Carolynn Levy)

You can’t pay just in stock. (Kirsty Nathoo)

You absolutely must use a payroll service provider. (Kirsty Nathoo)

Firing people is really hard (Carolynn Levy)

Fire quickly. Don’t let a bad employee linger. (Carolynn Levy)

Everybody needs to assign IP to the company. (Kirsty Nathoo)

A lot of running the company is following the rules and taking it seriously. (Kirsty Nathoo)

At some point in the first year a service is going to need to be engaged to (file the tax returns) (Kirsty Nathoo)

Recommendations are the best way (to find a CPA). (Kirsty Nathoo)