Practice Areas
Where Should I Incorporate: Delaware, Texas, California, Nevada?
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.
Founders Shares: How do you split them up?
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
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.
What is Par Value and How Much Should it Be?
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.
How Many Shares Should My Startup Authorize at Incorporation?
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
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.
Cost of Series A Legal Fees
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.
Austin Area Venture Capital Funding Sources
- Adams Capital Management
- Advantage Capital Partners
- ARCH Venture Partners
- Austin Ventures
- Blue Sage Capital
- Centennial Ventures
- Centerpoint Ventures
- Covera Ventures
- DFJ Mercury
- Duchossois Technology Partners
- Emergent Technologies
- Enhanced Capital Partners
- G-51
- Gefinor Ventures
- Guggenheim Venture Partners
- Origin Partners
- Path 4
- PTV Sciences
- S3 Ventures
- Sante Ventures
- Sentient Ventures
- Sevin Rosen Funds
Austin Area Seed Funding and Angel Funding Sources
- Baylor Angel Network
- Central Texas Angel Network
- Central Texas Business Consulting
- BIG Austin
- Business Community Lenders
- Capital Factory
- Concho Valley Angel Network
- Daylight Partners
- Emergent Technologies
- Emerging Technology Fund
- Eyes of Texas
- Houston Angel Network
- North Texas Angel Network
- PeopleFund
- San Antonio Angel Network
- Texas Mezzanine Fund
- Venio Capital
Entity Formation, LLC, Startup Law
Texas LLC Derivative Proceedings Law
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.
In the News
KXAN - August 6, 2008
The University Star - June 12, 2008
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