Practice Areas
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 Round 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.
Entity Formation, LLC, Startup Law
Texas LLC Windup and Termination Law
TEXAS BUSINESS ORGANIZATIONS CODE
TITLE 3. LIMITED LIABILITY COMPANIES
CHAPTER 101. LIMITED LIABILITY COMPANIES
SUBCHAPTER L. SUPPLEMENTAL WINDING UP AND TERMINATION PROVISIONS
Sec. 101.551. PERSONS ELIGIBLE TO WIND UP COMPANY.
After an event requiring the winding up of a limited liability company unless a revocation as provided by Section 11.151 or a cancellation as provided by Section 11.152 occurs, the winding up of the company must be carried out by:
(1) the company’s governing authority or one or more persons, including a governing person, designated by the governing authority, the members, or the governing documents;
(2) if the event requiring the winding up of the company is the termination of the continued membership of the last remaining member of the company, the legal representative or successor of the last remaining member or one or more persons designated by the legal representative or successor; or
(3) a person appointed by the court to carry out the winding up of the company under Section 11.054, 11.405, 11.409, or 11.410.
Entity Formation, LLC, Startup Law
Texas LLC Supplemental Recording Keeping Requirements Law
TEXAS BUSINESS ORGANIZATIONS CODE
TITLE 3. LIMITED LIABILITY COMPANIES
CHAPTER 101. LIMITED LIABILITY COMPANIES
SUBCHAPTER K. SUPPLEMENTAL RECORDKEEPING REQUIREMENTS
Sec. 101.501. SUPPLEMENTAL RECORDS REQUIRED FOR LIMITED LIABILITY COMPANIES.
(a) In addition to the books and records required to be kept under Section 3.151, a limited liability company shall keep at its principal office in the United States, or make available to a person at its principal office in the United States not later than the fifth day after the date the person submits a written request to examine the books and records of the company under Section 3.152(a) or 101.502:
Entity Formation, LLC, Startup Law
Texas LLC Duty Modification and Indemnification Law
TEXAS BUSINESS ORGANIZATIONS CODE
TITLE 3. LIMITED LIABILITY COMPANIES
CHAPTER 101. LIMITED LIABILITY COMPANIES
SUBCHAPTER I. MODIFICATION OF DUTIES; INDEMNIFICATION
Sec. 101.401. EXPANSION OR RESTRICTION OF DUTIES AND LIABILITIES.
The company agreement of a limited liability company may expand or restrict any duties, including fiduciary duties, and related liabilities that a member, manager, officer, or other person has to the company or to a member or manager of the company.
In the News
KXAN - August 6, 2008
The University Star - June 12, 2008
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