Startup Funding Espresso Legal Issues Around Equity
Legal Issues Around Equity Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. There are several legal issues surrounding equity to consider: You must have a legal entity to establish equity ownership. There are several types of legal structures including LLC, C-Corp, and more. The LLC is easy to set up and launch the business.\xa0 Delaware C-Corporation is the preferred legal structure by investors. Start with an LLC and move to a Delaware Corporation when investors require it. Be careful promising equity as they will come back to claim it at a later date. Issuing equity falls under the domain of securities law.\xa0\xa0 It\u2019s important to have a lawyer review terms sheets and other legal documents impacting equity issuances to ensure compliance. Make sure options provided to employees are properly documented. Review the tax implications of equity with your accountant so you understand the impact on the business.\xa0 Be careful with convertible notes and other deal structures so you understand the impact of the fundraiser on your cap table. Watch out for key terms in the terms sheet such as \u201cmost favored nation.\u201d This term can give investors the same terms as provided to other investors. Watch out for these legal issues with your equity. \xa0 Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding. Let\u2019s go startup something today. _______________________________________________________ For more episodes from Investor Connect, please visit the site at: \xa0 Check out our other podcasts here: \xa0 For Investors check out: \xa0 For Startups check out: \xa0 For eGuides check out: \xa0 For upcoming Events, check out \xa0\xa0 For Feedback please contact info@tencapital.group\xa0\xa0\xa0 Please , share, and leave a review. Music courtesy of .