Startup Lawyer

> ... and anything goes wrong resulting in legal action
> against them...

Such as?

Without properly weighing the risk of a lawsuit, there's no way that we can conclude whether the risk is reasonable.

So, who might be out to sue you? To summarize an article from nolo.com [1]:

* An employee
* A landlord
* A supplier
* A customer

To mitigate these risks:

* Don't hire anyone
* Don't lease an office
* Don't buy goods on credit. Buy high quality goods when
you can't afford to have a problem with them.
* Have an "as is" end-user license agreement. Be very
cautious about making service quality guarantees.
Don't sell software that can cause damage or personal
injury.

If you have to do any of the above, it's time to incorporate. (For another take on when it's time to incorporate, read "The When to Incorporate Decision-Matrix" by Ryan Roberts, J.D. [2])

[1] http://www.nolo.com/legal-encyclopedia/liability-concerns-sole-proprietors.html
[2] http://startuplawyer.com/incorporation/the-when-to-incorporate-decision-matrix

(edit: And a nice quote from HN favorite patio11:

> Incorporation? Incorporate when you have a good
> reason to. (I still don’t, but I might do it after I
> go full-time, largely for purposes of dealing with
> Immigration.) If you’re selling B2C software, your
> number one defense against getting sued is promptly
> refunding any customer who complains, and that pretty
> decisively moots the…

Congratulations and happy trails!

I do have some cautionary advice, though... I say everything here without knowing you, your wife or your idea.

First off, make sure that you read this article and follow it unless you have a good reason not to:

http://startuplawyer.com/startup-issues/if-i-launched-a-startup

Specifically, both you and your wife should have vesting shares. After all, there's a reason that most people do not start up with their loved ones - they say that the best family business is a sole proprietorship. This isn't a corner store and you and your wife might find your marriage taxed by this radical twist on your relationship.

Would you start up with your wife if you weren't married? If not, then my polite suggestion is that you hire your wife and give her lots of equity for her contributions. Taking on a business partner is an incredibly important decision, and if you wouldn't hire her otherwise then it's a potentially questionable decision now. I wouldn't belabour this point but you didn't explain her background.

The other thing is that it pays to startup with a good idea. I'm a big believer in MVPs and pivoting and trying things until it works... but the fact remains that most ideas are terrible and it's hard to tell when one of your ideas is terrible. Most people around you are inclined to tell you how great an idea it is, because they can see in your eyes that you want them to love it. This is an extremely dangerous confirmation bias because you can…

It's normal in my experience. A cliff of some kind has been part of every incorporation agreement I've seen or signed.

http://startuplawyer.com/incorporation/why-your-startups-founders-stock-should-vest-over-time

http://www.startupcompanylawyer.com/2007/07/19/what-should-the-vesting-terms-of-founder-stock-be-before-a-venture-financing/

Moreover, if I were working with a co-founder, I would (and have) insist we vest on that schedule, and certainly not monthly from day 1.

There are a few reasons:

1. I don't want my co-founder leave before a year and having a chunk of the company. Likewise, I want to do right by my co-founder. If I leave before a year is up, it wouldn't be right for me to own a chunk of the company.

2. It's inequitable for the founders to have different vesting schedules than employees. What happens if someone joins the team pre-financing? If they get the same terms as the founders, then what about an early employee vs. a later employee? It makes for a weird, political situation.

3. It makes it easier to raise money. If you're vesting on the same terms as your investors they have no basis to negotiate over that term; they'll just check the box and move on. It passes the "blink test."

These are just my experiences, so YMMV.

Hi guys, slightly off topic, but please help:

Two months ago I incorporated a C-Corp in Delaware, and registered a "virtual office" in the same state, remotely from my country of residence in SE Asia. Mr Ryan Roberts[1] helped with the incorporation, but I still need a US bank account to create an account in Stripe. I need it for my upcoming SaaS.

About a week ago I contacted Silicon Valley Bank to open an account (I can't remember who suggested it, I think Mr Ryan as well), and they sent me a questionnaire which I already filled out and sent back. But I haven't heard from them again. Since there's a story about Stripe in the front page[3], I'm wondering if someone can give me suggestion as how to proceed (e.g. maybe go to another bank).

I've never been to US, and I hope I don't have to go there just to open a bank account.

In case you're wondering, I was inspired by a blog post from Freshdesk[3].

[1] http://startuplawyer.com/about
[2] https://news.ycombinator.com/item?id=6319512
[3] http://blog.freshdesk.com/how-to-incorporate-a-us-corporation-from-outs/

All sorts of problems can crop up if you don't resolve the equity situation up front. Its good you're trying to resolve it as soon as possible.

Depending on how much thought leadership he's provided and how much direction he's given you, it should range from 50/50 in the very best case for you to 80/20 in the worst case (assuming you if you're the #2). That split also depends on whether he is paying you or not to do the work, and whether you really want to loop in with him long-term on the startup.

Are you guys incorporated? Regardless, make sure that the terms are in paper.

When making equity decisions with my co-founder, I found these posts pretty valuable:
http://startuplawyer.com/incorporation/how-to-split-the-startup-founder-equity-pie
http://startuplawyer.com/startup-issues/keep-your-startup-co-founder-closer

Hope that helps.

Also easy to keep an argument going by saying "my point is understood to be correct"

Citations: On NDAs an etc.

....

Why a VC Will Take a Lighter to Your NDA - Wilson Sonsini

http://startuplawyer.com/venture-capital/why-a-vc-will-take-a-lighter-to-your-nda

Why Most VC’s Don’t Sign NDA - Foundry Group

http://www.feld.com/wp/archives/2006/02/why-most-vcs-dont-sign-ndas.html

One More Time: No NDAs - Anil Dash

http://dashes.com/anil/2010/05/one-more-time-no-ndas.html

From PG: YC Library http://ycombinator.com/lib.html

The Cult of the NDA.

tl;dr "Cases where trade secrets and/or patents are both protectable and essential are rare."

http://www.frozennorth.org/C509291565/E1939404619/index.html

.......

Lots of communication happens in confidence, but not under NDA for various reasons.