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Licensing Agreements for Startups: Turning Your IP into Revenue
Licensing your intellectual property - whether it’s code, brand, or content - can be a smart way to scale without manufacturing or selling yourself. But founders need to tread carefully: Licensing Agreements involve handing over rights to your most valuable asset.
Expanding Your Reach: What Startup Founders Should Know About Distribution Agreements
If your startup sells physical products or software, you may eventually need help reaching customers in new markets. A distribution agreement can be a powerful way to expand without building a large internal sales team.
Manufacturing Agreements for Startups: Legal Basics Behind the Build
If your startup builds physical products - hardware, wearables, or consumer goods - you need more than a handshake with your manufacturer. A well-drafted manufacturing agreement is essential to protect your product, control quality, and limit liability.
Getting Vendor Agreements Right: A Legal Checklist for Startup Founders
As your startup grows, so does your list of vendors - design agencies, cloud providers, contractors, and SaaS platforms. Every one of those relationships should be backed by a Vendor or Service Agreement that protects your interests and sets expectations.
FAQs
Open allWhen should a startup use RSAs instead of RSUs?
RSAs are generally more effective for very early-stage startups with low valuations, since they allow employees and founders to lock in minimal tax liability through an 83(b) election.
How do I know if I should file an 83(b)?
The best approach is to consult with a tax advisor. They will assess your grant type, company valuation, and personal tax situation.
Is the 83(b) election always beneficial?
Not always. It only makes sense if the stock is likely to increase in value. If the company fails, you cannot recoup the taxes you paid upfront.
Does an 83(b) election apply to stock options?
Yes, but only if you receive early-exercised options or restricted stock. Standard vested options are taxed differently.
What happens if I miss the 30-day 83(b) deadline?
You lose the ability to elect early taxation and will be taxed on the value of your equity as it vests, potentially resulting in higher taxes.
Do unusual stock structures affect fundraising?
Yes. Investors prefer simplicity and transparency. Complex or founder-heavy structures may deter investment unless clearly justified and carefully limited.
Is par value required in every state?
Most states require corporations to specify a par value in their certificate of incorporation, though the exact rules vary.
What happens if my company sets par value too high?
It could make early equity grants more expensive and limit flexibility in future financings. That’s why startups typically choose a very low number.
Why do most startups set such a low par value?
To allow founders and employees to receive stock at minimal cost while leaving room for significant increases in value during future fundraising rounds.
What happens if founders disagree about equity distribution?
Open communication, clear documentation, and the guidance of legal or financial advisors can help resolve disputes. In many cases, accelerators or mentors recommend starting with an equal split and adjusting only when necessary.
How do investors view founder equity splits?
Investors prefer balanced and fair structures that reflect commitment and discourage disputes. Unequal or poorly documented splits can raise red flags.