Startup Law
Legal infrastructure
for companies
built to scale.
From incorporation and co-founder agreements through your seed round, first hires, and Series A, we handle the legal infrastructure that lets you focus on building. We work with founders who are building companies that are meant to last.
Stage by Stage
The Startup Legal Timeline
Every stage of a startup's life has a distinct set of legal priorities. Miss one, and it compounds. Here is what needs to happen, and when.
Incorporation
Choosing the right entity type and state of formation is the first decision that affects everything else. Most venture-backed startups should incorporate as a Delaware C-Corp. This is not bureaucracy; it is the substrate your cap table, equity plan, and future financing will be built on.
Key decisions: Delaware vs. Nevada, C-Corp vs. LLC, par value of stock, authorized share count, initial capitalization, and registered agent. Getting these wrong is expensive to unwind.
Co-Founder Agreements
The most dangerous legal document a startup can lack is a co-founder agreement. Equity splits, vesting schedules, IP ownership, decision-making authority, and what happens when a co-founder leaves. These must be resolved in writing before they become disputes.
Typical documents: Founders' Agreement or Restricted Stock Purchase Agreement with a 4-year vesting schedule and 1-year cliff, Intellectual Property Assignment Agreement, and initial board consent.
IP Protection
Intellectual property is usually a startup's most valuable asset. Every employee, contractor, and consultant who touches your product must sign a PIIA (Proprietary Information and Inventions Agreement) before doing any work. Without it, IP ownership is murky, and investors will find it.
Also consider: trademark registration for your brand, provisional patent applications if you have patentable technology, and trade secret policies for proprietary algorithms and processes.
First Employees
Hiring your first W-2 employee triggers payroll obligations, benefits compliance, and employment law exposure. Misclassifying employees as contractors is one of the most common and costly startup mistakes. We draft offer letters, equity grant documents, and NDAs that protect the company.
Required: written offer letter, PIIA, equity grant documentation (stock option agreement + board approval), and proper payroll setup. Also verify independent contractor vs. employee classification for all contractors.
Seed Financing
Most early-stage startups raise on SAFEs (Simple Agreements for Future Equity) or convertible notes rather than priced equity rounds. We review, negotiate, and close seed financings, preparing the company-side documents and advising on the key economic and control terms.
Typical deliverables: SAFE or convertible note term sheet review, board and stockholder consents, updated cap table, investor representations, and closing mechanics.
Series A Preparation
Series A due diligence is a comprehensive audit of your company's legal health. Investors will review every contract, equity grant, IP assignment, and corporate record. We conduct a legal audit before the process begins, fixing issues on your timeline rather than an investor's.
Pre-A checklist: clean cap table with 409A valuation, option plan in place, all IP properly assigned, employment agreements signed, corporate records up to date, and material contracts reviewed.
Common Pitfalls
What Founders Get Wrong
Most legal problems at Series A trace back to decisions made (or not made) in the first 90 days. These are the mistakes we see most often, and they are almost all preventable.
Equity Without Vesting
Giving co-founders immediate ownership of their full equity stake with no vesting is one of the most dangerous decisions early-stage companies make. If a co-founder leaves after six months, they walk away with 25% of your company and no obligation to continue contributing. Standard: 4-year vesting, 1-year cliff.
No IP Assignment
If a founder built the core technology before the company was incorporated, that IP may legally belong to the founder, not the company. Institutional investors will not close a financing if IP ownership is unclear. Every founder must assign all pre-company IP to the entity at formation.
Wrong Entity Type
Forming an LLC because it's simpler, then raising a seed round, creates conversion headaches. VCs invest in C-Corps. SAFE notes and convertible notes mathematically assume equity. If your roadmap includes institutional capital, you should incorporate as a Delaware C-Corp from day one.
Contractor Misclassification
Paying someone as an independent contractor when they function as an employee exposes you to back payroll taxes, penalties, and potential securities violations if you've issued them equity. The IRS and state agencies look at behavioral and financial control. When in doubt, classify as an employee.
Ignoring 83(b) Elections
Founders who receive restricted stock subject to vesting must file an 83(b) election with the IRS within 30 days of receiving the grant, or they will owe ordinary income tax on the value of shares as they vest. Missing this deadline cannot be fixed. A properly timed 83(b) can save founders hundreds of thousands in taxes.
No Option Plan at Formation
Waiting until Series A to set up your equity incentive plan means you've been granting equity, or promising equity, without proper documentation. Set up a 409A-compliant option pool at formation. The cost of doing it right upfront is a fraction of the cost of cleaning it up later.
Know Your Instruments
Financing Documents Explained
SAFE notes, convertible notes, and priced rounds are not interchangeable. Each has distinct legal, economic, and control implications. Understanding the differences is not optional for founders.
Simple Agreement for Future Equity
SAFE Note
What It Is
A SAFE is not a loan. It carries no interest rate and has no maturity date. It is a contractual right to receive equity in a future priced round, converting into preferred stock at a discount or upon hitting a valuation cap.
When to Use It
Pre-seed and seed stages when a priced round is premature. SAFEs are fast to close, low-cost to document, and investor-friendly. The Y Combinator post-money SAFE is the current market standard.
Key Terms
Valuation cap (the maximum price at which the SAFE converts), discount rate (typically 15-20% off the next round price), MFN clause (most-favored nation: adjusts terms if a better SAFE is issued later), pro-rata rights.
Debt That Converts to Equity
Convertible Note
What It Is
A convertible note is a loan with an interest rate and maturity date that converts into equity at a future financing round. Unlike a SAFE, it accrues interest and has a deadline, which creates leverage for the investor and pressure on the company.
When to Use It
When investors prefer debt instruments, or when a SAFE is not the market norm in a particular geography or investor community. Some angels and family offices prefer notes. Notes are also used in bridge financings between rounds.
Key Terms
Interest rate (typically 5-8% per annum), maturity date (typically 18-24 months), conversion discount (typically 15-20%), valuation cap, conversion mechanics at qualified vs. non-qualified financing.
Series Seed or Series A Preferred Stock
Priced Round
What It Is
A priced round involves the issuance of preferred stock at a negotiated pre-money valuation. It is more complex and expensive to close than a SAFE or note but provides clarity: all parties know exactly what they own and at what price.
When to Use It
When raising $1M+ and the valuation conversation makes sense, or when institutional investors require a priced round. Series A is almost always a priced round led by a VC firm with a formal term sheet.
Key Terms
Pre-money valuation, liquidation preference (1x non-participating is standard), anti-dilution (broad-based weighted average is standard), board seat mechanics, pro-rata rights, information rights, protective provisions.
Common Questions
FAQ
What is the difference between a SAFE and a convertible note?
A SAFE (Simple Agreement for Future Equity) is not a debt instrument; it carries no interest and has no maturity date. A convertible note is a loan that accrues interest and must be repaid or converted by a maturity date. SAFEs are simpler, faster to close, and have become the market standard for pre-seed rounds. Convertible notes give investors the option to demand repayment at maturity, which can create pressure on the company. For most early-stage startups, a post-money Y Combinator SAFE is the right instrument.
Should I incorporate in Delaware or Nevada?
If you plan to raise institutional venture capital, incorporate in Delaware. It is the default expectation of virtually every VC firm and the ecosystem of investors, lawyers, and advisors around them. Delaware has a well-developed body of corporate case law and predictable governance rules. Nevada is an excellent choice for small businesses, real estate holdings, and companies that will not pursue institutional capital; it offers strong asset protection and no state income tax. If VC is in your roadmap, Delaware C-Corp is the answer.
Do I need a lawyer to close a SAFE?
The SAFE document itself is relatively standardized; Y Combinator publishes free form documents. What you need a lawyer for is understanding the economics before you sign. A valuation cap that seems reasonable today may heavily dilute you at Series A. Pro-rata rights can obligate you to future allocations. MFN clauses interact with subsequent SAFEs in non-obvious ways. We review and negotiate SAFEs from the company side, model the dilution scenarios, and make sure founders understand what they are agreeing to.
What is a cap table?
A capitalization table (cap table) is the definitive record of who owns what in your company: founders, employees with options, investors, and any outstanding convertible instruments. It tracks fully-diluted ownership including unissued options in the option pool. Investors will scrutinize your cap table in due diligence; a messy or inaccurate cap table is a red flag. We help startups build and maintain clean cap tables from day one, using tools like Carta or a well-structured spreadsheet for early stages.
When do I actually need to hire a startup attorney?
Immediately, or ideally before you write a single line of code or pitch a single investor. The decisions made at incorporation (entity type, equity split, vesting schedule, IP assignment) are the hardest and most expensive to fix later. Every week you operate without a founders' agreement is a week of exposure. Every contractor who touches your product without a PIIA is a potential IP dispute. Legal fees at formation are among the best investments a startup can make. We offer flat-fee formation packages for early-stage companies specifically to remove the cost barrier.
Work With Us
Let's build your startup on solid legal footing.
Initial consultations are straightforward — no pressure, no jargon. Just an honest conversation about your business and what you need.
Attorney Advertising. The information on this page is for general informational purposes only and does not constitute legal advice. No attorney-client relationship is formed until a written engagement agreement is signed. See full Disclaimer.