Entity Formation, Startup Law

Where Should I Incorporate: Delaware, Texas, California, Nevada?

26 February 2010

I am often asked where one should incorporate their business, for which there are generally three answers: 1) Delaware; 2) your home state (Texas, California, etc.); or 3) off shore (Caymans, BVI, Bermuda). The choice you make depends on your individual business, your investor preferences, and where your customers and investors reside.

Delaware

Delaware is often chosen for many reasons, including: 1) insistence of investors and underwriters; 2) established and efficient corporate law and court system; and 3) favorable protections for directors and officers. These are discussed in more detail below.

Startup Law

Founders Shares: How do you split them up?

24 February 2010

There are a few common ways that founders split up equity and ownership of the company:

1.) Equally: each founder get the same amount of equity. For example, with 2 founders each gets 50%, with 3 founders each gets 33.33%, with 4 founders each gets 25%, etc. This method is most often used by first-time entrepreneurs because it seems more “fair” and is easy to get everyone to agree on it at the outset.

Corporation, Entity Formation, Startup Law

High Tech Startup Packages

15 February 2010

High Tech Startup Packages

At the Copeland Law Firm, we love dealing with entrepreneurs and emerging growth companies, it is our passion. We have advised many entrepreneurs on the formation of new companies, capital structures, financing transactions, employment matters, intellectual property matters, as well as provided counseling on day-to-day legal issues that arise in startup companies. Our clients cover a wide range of industries including software, technology, energy, real estate, insurance, healthcare, manufacturing, construction, advertising & marketing, publishing, and retail.

Corporation, Entity Formation

What is Par Value and How Much Should it Be?

02 February 2010

Par Value of Stocks

Par value is the minimum price that a share can be sold for. This is typically the price founders pay for their shares, although sometimes I recommend issuing founder shares at a multiple of par value (i.e. Par Value x 10) in order to avoid problems down the road if the company needs to execute a forward stock split and the value of the shares hasn’t increased much. This avoids the situation where a forward stock split would require the new share price to be below par value, something not allowed.

Entity Formation

How Many Shares Should My Startup Authorize at Incorporation?

02 February 2010

The Answer

It depends. The number of authorized shares only matters if you plan on issuing stock options to employees, raising outside money from investors, or taking your company public. If you plan on any of these, you need to pay attention to the capital structure of your company from the beginning because if setup correctly, it can save you significant time, effort, and legal fees in the long run. If you do not plan on issuing stock options, raising money from investors, or taking the company public, you can pick any number you want (but pay attention to possible tax and filing fee consequences) and divvy them up between the co-founders accordingly. Otherwise, we recommend authorizing somewhere in the neighborhood of 10M shares, with 8M to 9M set aside for the founders and if necessary, the rest set aside for an option pool.

Debt and Bridge Financing, Venture Capital Law

Cost of Debt / Bridge Financing Legal Fees

18 January 2010

Shouldn’t the money you raise go towards building your company and not to your lawyer? We agree, because we believe it is our duty to preserve and protect your company and the money you raise, not waste it with unnecessary legal maneuverings. We’ve done these deals before and don’t have to reinvent the wheel every time someone gets funded. We know what provisions are boilerplate and what provisions need to be negotiated, so we can focus on what is truly important and not waste your time and money.

Series A, Venture Capital Law

Cost of Series A Legal Fees

18 January 2010

Shouldn’t the money you raise go towards building your company and not to your lawyer? We agree, because we believe it is our duty to preserve and protect your company and the money you raise, not waste it with unnecessary legal maneuverings. With the existence of so many good model documents such as the NVCA model documents, The Funded model documents, and TechStars model documents, the lawyers don’t have to reinvent the wheel every time someone gets funded, so long as the startup and the investor agree to start with a set of model documents. We know what provisions are boilerplate and what provisions need to be negotiated, so we can focus on what is truly important and not waste your time and money.

Venture Capital Law

Austin Area Venture Capital Funding Sources

15 January 2010

Venture Capital Law

Austin Area Seed Funding and Angel Funding Sources

15 January 2010

Entity Formation, LLC, Startup Law

Texas LLC Derivative Proceedings Law

06 January 2010

TEXAS BUSINESS ORGANIZATIONS CODE

TITLE 3. LIMITED LIABILITY COMPANIES

CHAPTER 101. LIMITED LIABILITY COMPANIES

SUBCHAPTER J. DERIVATIVE PROCEEDINGS

Sec. 101.451. DEFINITIONS.

In this subchapter:

(1) “Derivative proceeding” means a civil suit in the right of a domestic limited liability company or, to the extent provided by Section 101.462, in the right of a foreign limited liability company.

(2) “Member” includes a person who beneficially owns a membership interest through a voting trust or a nominee on the person’s behalf.

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502 W. 13th St.
Austin, TX 78701

Phone 512.850.4529
Fax 512.628.6010
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In the News

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