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blacksea
03-21-2006, 05:02 AM
Hi, I and 2 other partners are planning to enter the hospitatlity industry. We want to form a company structure. We have an angel invester ready to fund us the intial seed capital for in change of ownership. All 3 of the partner own no assets and have minimum capital in the business. 90% of the money is going to come from the investor.

I wanted to know how does the shares work with a startup. Intially the startup is not worth nothing hence I presume you can issue a share for $1
The investor wants a return of say 18% each year on his investment for the next five years and in the end he would like a percentage of ownership.

What is the best way to divide the ownership among the partners and at the same time consider the ownership available fo the investor 5 years down the period.

I believe initially everyone should come to an agreement about the percentage they own in the company at the start including the investor.

I'm yet to consult my lawyer. I'd like to hear from experienced or people who had a similar startup setup in the past.

TIA

BusinessMan
03-21-2006, 06:17 AM
Contract, contract, contract.

In a complex arrangement like this there is no escaping the need for a detailed contract covering every forseeable eventuality.

Shares can initially be divided however you wish, but bear in mind the constraints this may place upon the payment of ongoing dividends/etc.

You are going to need to spend time agreeing all this, and then then documenting exactly what is agreed in a contract. I'd suggest that unless you have some legal experience yourself, legal advice is essential.

BusinessWarrior
03-22-2006, 11:18 AM
This is one of those cases where penny wise is pound foolish.

Over 15 years of consulting with business owners on structural issues I have never had to bail out somebody who consulted an attorney in the set up phase. The 1 or 2 disasters I see each week are all from folk that thought that because they could do the job well, they knew all about business.

Doing the job is not the same as 'doing' the company. There is a wonderfiul old adage: you don't know what you don't know. (But your attorney does.)

When a man with money meets a man with experience, the man with experience gets the money, and the man with money gets the experience.

AlecD
03-04-2014, 12:16 AM
I'd have to agree with the aforementioned poster in that a contract would be VERY wise. All in all, consult your lawyer. (;

elliottbailey
08-11-2014, 08:24 PM
I wanted to know how does the shares work with a startup. Intially the startup is not worth nothing hence I presume you can issue a share for $1
The investor wants a return of say 18% each year on his investment for the next five years and in the end he would like a percentage of ownership.
TIA

The investor is risking the most so they would start on a % of the company however the other contributors could be on board for a few months then bail if things get tough. To help with you everyone else could start on 1% and earn more shares for each month they're involved with.

This way if anyone bails it's less messy as they don't hold a decision making level of shares.

Hope that helps - don't overdoo the process though as lots of business don't work out and having the extra few grand in the bank usually makes more of a difference than a contract in the drawer.

Here's some more detail- All that legal stuff (http://businessplansurvivalkit.com/whats-least-legal-stuff-need/). I write the blog so account for bias.

All the Best!

Malik Suleman
12-22-2015, 02:06 PM
how to start with no experience and no loss?

MahaKarthi
06-30-2017, 08:30 AM
The legal structure may be different for different types of companies so it is best to consult with a legal expert while starting business.

ZacharyRichardson
12-04-2017, 10:20 PM
My brother recently started a startup business. He consulted his lawyer Bechara Tarabay (http://twitter.com/bechara56) for assistance. The lawyer helped him with all the paperwork and other procedure. It is a good idea to consult an attorney before starting a business.

rebeccasexy
09-08-2019, 11:49 PM
However, it is important to remember that not all of the company's profits in one year are included in dividends. Remember the company also requires planning and capital to always develop. Let's say the budget for advertising and promotion. Or also with business diversification. All need additional capital. So that companies do not have much burden in the future because of debt. Maybe it would be better if you have more capital than profits. So there is no need for interest to return the capital used. And the company can continue to grow.

raviseo121
08-08-2020, 12:33 PM
However, it is important to remember that not all of the company's profits in one year are included in dividends.

Waqar
10-14-2020, 11:29 AM
Although it is a very old post still worth to share maybe someone else can get help. If anyone wants to start a startup they can contact this wonderful tech lawyer for discussing startup legal issues. David Sharifi is really a nice Tech Lawyer. He is specialized in startups. https://techandmedialaw.com/startup-legal-issues

raviseo121
05-26-2021, 11:58 PM
Thanks for sharing with us

AarushiAashi
05-29-2021, 01:32 AM
By and large talking, there are four classes of business structures, likewise called structures or substance types: sole ownership, association,