Comments on: Should founders pay for their stock in cash or contribute intellectual property?

By: Sean Crockett

Sean Crockett — Wed, 16 Nov 2011 00:33:34 +0000

Regarding Section 351 of the IRC, does the second part of the 80% rule (i.e., “80% of the total number of shares of each other class of stock”) apply to issued shares or authorized shares?

For instance, a solo founder who owns 5M shares of a company with 10M authorized (but no other shares issued) would own 100% of the issued shares, but only 50% of the authorized shares. In that case, would that founder fall within the 80% rule? The statute isn't clear.

By: LoganDavisson

LoganDavisson — Sun, 27 Mar 2011 20:35:41 +0000

Hi Yokum,

Can you explain the difference between restricted stock and founders stock. I am being told that there is no relevant difference, and that the recipient is in equally good stead with either.

This representation, I might add, is being made ex post by a co-founder who, after failing to agree on my founders equity stake, was "advised" by our lawyers to just issue the founders stock and assign restricted stock to me. I have not yet talked to our lawyers directly about this, and, funny enough, feel that something odd might be going on.

~LD

By: Jeff

Jeff — Fri, 07 May 2010 20:49:04 +0000

I have seen restricted stock purchase agreement forms where the purchase price is par value and is paid, but then there is an additional paragraph that says that the founder contributes their IP/business plan as additional consideration for the company entering into the purchase agreement. Does this pose the same issues above that you raise generally in terms of assigning over IP or does the fact that its additional consideration sideswipe those issues?

By: Nathan111

Nathan111 — Wed, 24 Mar 2010 11:49:58 +0000

I 've found a template at docstoc:

http://www.docstoc.com/docs/6604405/Employee-Re...

So if the agreement issue date is 4/1/2010 and the purchase(closing date) date is 4/1/2011, and a liquidity event occurs on 4/2/2011, would this qualify as long-term capital gains?

By: Nathan111

Nathan111 — Wed, 24 Mar 2010 08:27:27 +0000

Thanks Yokum! Where can I get a stock purchase agreement template to use? Also, what's the actual share purchase date? When the shares vest or when the share agreement is issued?

By: Yokum

Yokum — Wed, 24 Mar 2010 04:05:52 +0000

@Nathan – vesting is placed on shares via repurchase provisions in a stock purchase agreement. A forward split is done by amended the company's articles/certificate of incorporation.

By: Nathan

Nathan — Sun, 21 Mar 2010 06:10:39 +0000

Yokum,
I'm going to incorporate in Delaware and own 90% of my company and leave 10% floating shares to issue to people that want to help. How do I place vesting on the shares when I issue the 5%?

Also, how is a forward split done?

Thanks!

By: Yokum

Yokum — Fri, 19 Mar 2010 08:20:32 +0000

@shearic – I generally prefer to have founders pay at least par value for their shares even if they are transferring assets for their stock, in order to ensure that the shares are fully paid.

By: shearic

shearic — Thu, 11 Mar 2010 19:25:05 +0000

Yokum – I'm having a hard time finding some info that I hope you'll be able to clarify quickly (with usual disclaimers naturally). I have two partners and we're forming an S-corp with stock with no vesting. The lawyer has said that the stock can just be assigned as opposed to purchased. I've done 3 other startups and the stock was always transferred by a purchase (ranging $0.001 to $0.01 per share), but those situations were restricted stock so were different.

Question I have is whether stock can just be assigned to the founders this way and with no defined value for the stock. What worries me in the back of my head is what tax implications this could have for us individually.

By: umbe

umbe — Mon, 25 Jan 2010 12:22:09 +0000

Thanks Yokum.