Key Founder Considerations When Starting a Company



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Founding a company is a high-risk, high-reward investment for entrepreneurs. Excitement aside, whether you are a first-time founder or a seasoned veteran, there are a handful of “legal” items that you should consider as you ramp up. This post summarizes a few of these key items.

 

Initial founder(s) & equity allocation

Each company will have one or more founders. A baseline question that every founder or founding team must answer is whether the equity allocation amongst founders is split evenly (e.g., 50/50) or allocated unproportionally (e.g., 70/30). All factors should be considered here, but a key metric to think through is the amount of “time” that each founder will dedicate to a company.

It is no secret that founders are often not able to dedicate 100% of their time to a new startup, so attention should be given to that. By way of example, if a company has two founders, with one founder dedicating 100% of their time to the startup, and a second founder dedicating 50% of their time to the startup, perhaps an initial equity split is 70/30, rather than a (Read more...)