Articles Tagged with California Startup Attorney

AdobeStock_289024304-300x200When you are thinking about starting your own business, there can be a number of reasons that incorporating in Delaware may seem attractive. Delaware is a particularly attractive state for the incorporation of large corporations because it offers the best franchise tax rules and has typically been the most pro-management. It provides the best protection for board members against derivative lawsuits, there is less protection for minority shareholders than in California, and Delaware also offers limited statutory protection against hostile takeovers.

While all of these concerns can certainly be important, they may mean very little when your company is not ready for an initial public offering (IPO) or stock launch, or later rounds of equity financing. When you are debating this type of decision, be sure to speak with a California startup attorney at Structure Law Group, LLP.

Advantages of Incorporating in Delaware

AdobeStock_309353202-300x199An equal split of shares between founders often seems like the fairest way to split equity in a young business. While this may be the simplest option, it comes with many hidden risks that most entrepreneurs are not aware of until it is too late and the business is in serious trouble. New companies can avoid this problem by working with an experienced startup lawyer from the very start. At Structure Law Group, we help entrepreneurs build a successful business from the ground up. Whether it is making decisions on your business entity type (i.e. choice of entity), your management structure, or your equity compensation, we advise and help design a company that is best suited to your unique needs.

Why Equal Split Of Shares Is the Worst Structure

There are many reasons why an equal split of equity can be the worst structure for the founders of a new business. Often, founders have different ideas about the contributions they will be making to the business. Some envision the creation of intellectual property, while others want to manage marketing and business plans. Some want an active role in the daily management of the company, while others want to invest more passively. These issues cannot be resolved in a single meeting. Often, founders must work together for a time in order to learn each person’s working style, expectations for each founder’s contributions, and vision for the company’s future. It takes partners time to know each other in a business relationship. And just as in a romantic relationship, legal agreements cannot always prevent painful and expensive litigation when the business relationship goes sour.