fbFund REV in- house entrepreneur, Andy Stack, shared do’s and don’ts and other tips on IP, employee, and legal issues.
The three most important takeaways I got from Andy were:
1) Don’t forget about this- 83B election. File this within 30 days of stock issuance and it can provide you favorable tax treatment that will save you lots of money.
2) Get your IP assignment protection correctly from the start and make sure you have a good law firm to review.
3) Know when to call in the experts (lawyers) but don’t let a law firm run your business. When faced with a legal gray area, asses the risk yourself and consider the impact of asking for forgiveness instead of asking for permission first.
Intellectual Property
Intellectual property generally includes innovative ideas you develop and code. But when do you patent? When do you copyright? You can’t reasonably copyright every business plan and every document, but try to make many of your documents confidential, and reduce the risk that your work will be passed around. Patent tip: if you have allocated a budget for patents, do multiple US patents as opposed to one international patent. Patent Tip: If you have the money and time, it is worth it to just file the whole utility application instead of a simple provisional application. The effort to detail out the full application early on will pay off; too many times people find that in flushing it out later there are parts not under the scope of the simple provisional they filed.
Employee issues
Try to minimize paperwork, but aim for two employee contracts; you can have one comprehensive contract for the employees that are fully immersed in the product and service, while a second lighter consulting contract would suffice for employees working at a contracting level maybe doing PR or finance or anything not core to the IP of the company. Minimizing non-employee shareholders in the company is also a smart move. An early stage startup will often have contractors or employees that only work with the company for a short time; mitigate annoyances by thinking early about your cap table and establish a cliff at which to start giving employees equity. Stock tip- Get Restricted Stock Purchase Agreement if you can (it’s the more tax favorable way to go).
Working with law firms
You don’t have to work with just one law firm. Consider working with a different firm for your trademarks and patents. Be on the lookout for startup-flexible law firms. You want lawyers that will explain the risk and let you run your company. It’s also crucial that you understand and minimize costs. Know the rates of each team member. Prepare what you want to talk about before you even pick up the phone with your lawyers. Finally, look to see what you can do on your own. For instance, get contract templates early on from your law firm. Then make modifications on your own.
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