Philadelphia Magazine just published an article I wrote examining common legal issues for startups. In it, I provide a checklist for founders looking to establish their businesses while minimizing or avoiding common legal headaches later on. Here’s an excerpt:
Startup founders make countless decisions about their businesses. Here’s a list of 10 legal issues that can make-or-break their businesses:
1. Choice of Entity. Although many factors go into determining whether to form a startup as a corporation or an LLC, two important factors are the startup’s funding and hiring plans. A startup will typically form as a corporation if founders expect to raise venture capital (generally $1 million or more), as VC firms often prefer to invest in a corporation to avoid the pass-through profits and losses of the LLC being attributable to the individual partners of the VC firm. Further, if founders intend to incentivize employees through the issuance of stock options, a startup will typically form as a corporation, as a stock option plan of a corporation is typically less expensive to put in place and easier to administer than a profits interest plan of an LLC.
To continue reading, please visit the full article on the Philadelphia Magazine website.