http://www.startupcompanylawyer.com/2009/01/14/should-founders-pay-for-their-stock-in-cash-or-contribute-intellectual-property/ Venture capital, seed financings, convertible note bridge debt, M&A, option vesting and other matters explained for founders and entrepreneurs Thu, 11 Mar 2010 09:37:25 +0000 http://wordpress.org/?v=2.9 hourly 1 http://www.startupcompanylawyer.com/2009/01/14/should-founders-pay-for-their-stock-in-cash-or-contribute-intellectual-property/comment-page-1/#comment-3045 umbe Mon, 25 Jan 2010 12:22:09 +0000 http://www.startupcompanylawyer.com/?p=380#comment-3045 Thanks Yokum. Thanks Yokum.

]]> http://www.startupcompanylawyer.com/2009/01/14/should-founders-pay-for-their-stock-in-cash-or-contribute-intellectual-property/comment-page-1/#comment-3041 Yokum Mon, 25 Jan 2010 11:06:52 +0000 http://www.startupcompanylawyer.com/?p=380#comment-3041 @umbe - If you have an attorney, you should rely on his/her advise. You don't need to make an 83(b) election based on your fact pattern. If vesting is placed on your shares in the future, there is no need for an 83(b) election at that time and there is no negative consequence to not filing an 83(b) election earlier. Please read the disclaimers and consult with your own advisors. @umbe – If you have an attorney, you should rely on his/her advise. You don't need to make an 83(b) election based on your fact pattern. If vesting is placed on your shares in the future, there is no need for an 83(b) election at that time and there is no negative consequence to not filing an 83(b) election earlier. Please read the disclaimers and consult with your own advisors.

]]> http://www.startupcompanylawyer.com/2009/01/14/should-founders-pay-for-their-stock-in-cash-or-contribute-intellectual-property/comment-page-1/#comment-3038 umbe Fri, 22 Jan 2010 03:57:31 +0000 http://www.startupcompanylawyer.com/?p=380#comment-3038 I'm in the process of founding an S-corp where I am 99% owner and I have a friend that will own 1% for consulting. I am not setting up any vesting for myself, it's straight assignment of the shares since I'm incorporating the business. My attorney indicated that I don't need to do an 83b election, and after reading some online I think he's correct as I didn't setup any vesting cycle but I'm interested in confirming that here. Also, I am developing software (it's a software company) and have contributed software in the form of an exclusive license to the company (I own and have developed all the IP). If I bring in investors later on and they impose some restrictions on me, could that adversely affect me if they put restrictions on my existing shares having previously skipped the 83b election? Thanks. I'm in the process of founding an S-corp where I am 99% owner and I have a friend that will own 1% for consulting. I am not setting up any vesting for myself, it's straight assignment of the shares since I'm incorporating the business. My attorney indicated that I don't need to do an 83b election, and after reading some online I think he's correct as I didn't setup any vesting cycle but I'm interested in confirming that here. Also, I am developing software (it's a software company) and have contributed software in the form of an exclusive license to the company (I own and have developed all the IP). If I bring in investors later on and they impose some restrictions on me, could that adversely affect me if they put restrictions on my existing shares having previously skipped the 83b election? Thanks.

]]> http://www.startupcompanylawyer.com/2009/01/14/should-founders-pay-for-their-stock-in-cash-or-contribute-intellectual-property/comment-page-1/#comment-3002 Yokum Sun, 22 Mar 2009 12:23:48 +0000 http://www.startupcompanylawyer.com/?p=380#comment-3002 @Christine - It might be best to conceptualize the initial issuances of common stock as partially for past efforts (i.e. inventions that are being contributed) and for future efforts (i.e. sweat equity for performance). Stock for past efforts is fully-vested and is not subject to repurchase. Stock for future efforts is subject to repurchase (which repurchase right lapses over time). The founders need to determine the value allocated to past efforts versus future efforts. The non-working inventor probably needs some amount of fully-vested stock in order to induce him/her to assign IP to the company. @Christine – It might be best to conceptualize the initial issuances of common stock as partially for past efforts (i.e. inventions that are being contributed) and for future efforts (i.e. sweat equity for performance). Stock for past efforts is fully-vested and is not subject to repurchase. Stock for future efforts is subject to repurchase (which repurchase right lapses over time). The founders need to determine the value allocated to past efforts versus future efforts. The non-working inventor probably needs some amount of fully-vested stock in order to induce him/her to assign IP to the company.

]]> http://www.startupcompanylawyer.com/2009/01/14/should-founders-pay-for-their-stock-in-cash-or-contribute-intellectual-property/comment-page-1/#comment-2170 Yokum Sun, 22 Mar 2009 06:23:48 +0000 http://www.startupcompanylawyer.com/?p=380#comment-2170 @Christine - It might be best to conceptualize the initial issuances of common stock as partially for past efforts (i.e. inventions that are being contributed) and for future efforts (i.e. sweat equity for performance). Stock for past efforts is fully-vested and is not subject to repurchase. Stock for future efforts is subject to repurchase (which repurchase right lapses over time). The founders need to determine the value allocated to past efforts versus future efforts. The non-working inventor probably needs some amount of fully-vested stock in order to induce him/her to assign IP to the company. @Christine – It might be best to conceptualize the initial issuances of common stock as partially for past efforts (i.e. inventions that are being contributed) and for future efforts (i.e. sweat equity for performance). Stock for past efforts is fully-vested and is not subject to repurchase. Stock for future efforts is subject to repurchase (which repurchase right lapses over time). The founders need to determine the value allocated to past efforts versus future efforts. The non-working inventor probably needs some amount of fully-vested stock in order to induce him/her to assign IP to the company.

]]> http://www.startupcompanylawyer.com/2009/01/14/should-founders-pay-for-their-stock-in-cash-or-contribute-intellectual-property/comment-page-1/#comment-2168 Christine Sat, 21 Mar 2009 16:52:05 +0000 http://www.startupcompanylawyer.com/?p=380#comment-2168 Very interesting post. What about in the case where the IP is owned by more than one inventor. If one of the inventors is a working founder and the other inventor is a founder who does not intend to work for the company for simply a nonfounder who will not be working for the company. My impression is that founders that leave the company are usually required to sell their shares back to the corp. Can the nonworking inventor be compensated in preferred or common shares that can be retained if they leave or don't work for the company? Very interesting post. What about in the case where the IP is owned by more than one inventor. If one of the inventors is a working founder and the other inventor is a founder who does not intend to work for the company for simply a nonfounder who will not be working for the company. My impression is that founders that leave the company are usually required to sell their shares back to the corp. Can the nonworking inventor be compensated in preferred or common shares that can be retained if they leave or don't work for the company?

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