Grellas

Attorneys are of course the best-qualified people to advise you on this. If you are in Northern California, HN user George Grellas is the principal of a law firm that caters to a lot of startups: http://www.grellas.com/

With the proviso that I am not an attorney, here's a vary basic answer to your query:

a) If I read you right, you are the client and are hiring the design firm. I'm sure they're just trying to be helpful, but since it's your idea and your $, it should really be your NDA - you don't have to write it, but at least select it.

b) Don't assume that the plain English in the rest of the agreement is OK just because it's simple. 'Lawyer speak' isn't always necessary, but is wordy because it's precise and specific - and thus, predictable. 'Common sense' and 'obvious' statements usually depend on unstated assumptions, and those assumptions are not always well founded.

c) As far as it goes, this clause 4.1 actually looks good. It says that you own your ideas and that the design firm's access to them is limited as stated elsewhere in the NDA - which I assume specifies only what is necessary for them to perform their drawing and prototyping services. In short, this clause acknowledges and safeguards your rights.

Of course you want to keep costs down: most likely this NDA is fine, the design firm is ethical, and if you go to an attorney you'll feel like you spent several hundred or a few thousand on an umbrella when it's not even raining. But it's like the lock on…

4. It is smart to have founders have their stock vest over time, so if you get into a founder dispute, and one or two leave...it is possible for the founders that stay on to have their work continue to be recognized by continued vesting of their stock, and that departed (and thus no longer contributing via personal effort) founder/shareholders cannot be excessively benefit from the remaining founder's activity by owning shares disproportionate to their continuing activity and commitment.

More than a few startups fail, by neglecting to consider the changes that may come in founder relationships. It is important to talk about departure consequenses.

You may find it enlightening to review a few Venture Capital blogs. Here are a few.

Sam Altman "Lessons Learned" -
http://blog.samaltman.com/startup-advice

George Grellas - Startup Law 101 Series - Grellas Shah LLP -
http://www.grellas.com/faq_business_startup.html

Mark Suster - Both Sides of the Table -
Raising Venture Capital -
http://www.bothsidesofthetable.com/pitching-a-vc/

This case illustrates the dictum that "hard facts make bad law."

In essence, the court went out of its way to try to do equity in what it viewed as a case of an opportunistic founder who tried unfairly to stick it to his co-founders. It is at best a mercy decision and an aberrant one at that (a legal outcome that turns basically on the idea that startups are "different" rests on pretty weak legal reasoning and is likely to remain a one-fer decision).

Founders are often are ignorant about who owns IP as it is created in these sorts of loose, early stages. Very important to get this right (see a piece I wrote on this issue here: http://grellas.com/faq_business_startup_015a.html).

I personally recommend George Grellas (grellas on HN), with whom I have worked on a professional basis and whose services I value greatly. He is someone whose advice I would pay for and trust. His firm's website is http://www.grellas.com/ . (I receive no compensation for making recommendations.)

I am not saying this is a case that he would want to take on (only he could say that, and without knowing more details, it sounds to me [a non-lawyer] as though the entrepreneurs are deceiving the investors while obeying the terms of your license).

Great piece. I realize now that I'm more or less clueless about one of the things mentioned there:

> An understanding of tax laws in your country

How does one learn this? Is there a book you guys would recommend?

I think in addition to tax code, learning a bit of legal stuff is probably necessary too. And for that, grellas's guide is probably handy: http://www.grellas.com/faq_business_startup.html. Learning about accounting would be a good idea too, I'm also clueless there though - any recommendations for learning that?

You'll be eaten alive by taxes if you're not careful, but yes, you can do it.

Law firms help do this. A few grand you can get someone like http://www.grellas.com/ do it 100% venture capital ready in Delaware.

If you're really just looking for a merchant account, make an LLC and get one in the name of that. Far cheaper, but will require the redo when/if you want investment.

Make sure you file the paperwork to do it's taxes like a C corp instead of a disregarded entity (Form 2553)http://www.irs.gov/pub/irs-pdf/f8832.pdf