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How Does Outsourced or Fractional General Counsel Work?
Outsourced or fractional General Counsel provides legal leadership without a full-time hire. Startups subscribe to a legal service provider - like @VirtualCounsel - that gives them access to experienced attorneys under predictable pricing structures. This means you can get strategic advice, document review, governance support, and risk mitigation as you need it without a large, fixed salary.
What Does General Counsel Do During Fundraising and Investor Relations?
During fundraising, General Counsel reviews and negotiates key legal documentation -including term sheets, investment agreements, and shareholder rights. They help ensure that terms align with your long-term goals and that you retain necessary rights without unintended obligations.
What Legal Risks Do Startups Face and How Can General Counsel Help?
Startups face a range of legal risks across multiple domains, including contracts, compliance, employment, investor negotiations, and data/privacy laws. General Counsel helps identify these risks before they become problems. They evaluate contracts for liabilities, advise on regulatory requirements in your industry, and help implement policies that protect the business and its stakeholders.
How Do General Counsel Support Corporate Governance?
Corporate governance refers to the systems and rules by which a company is directed andc ontrolled. General Counsel supports governance by helping define and document decision-making processes, preparing board resolutions, and ensuring compliance with bylaws and state laws. This involves formalizing how key business decisions are made - a critical foundation for growth and investment.
FAQs
Open allYes. Many startups issue ISOs to employees and NSOs to contractors, advisors, or employees exceeding ISO limits.
Not entirely. While ISOs aren’t subject to ordinary income tax at exercise, they can trigger Alternative Minimum Tax (AMT).
NSOs provide flexibility, fewer restrictions, and tax deductions for the company. They’re also the only option for contractors, advisors, directors, and international hires.
ISOs qualify for favorable tax treatment but can only be granted to employees, while NSOs are more flexible and can be granted to a broader range of contributors.
An 83(b) election allows employees with early-exercised options to pay taxes at grant, potentially reducing future tax liability if the stock increases in value.
Yes, but typically only within 90 days unless your company offers an extended exercise window. Check your grant agreement.
No. Stock options only create value if the company’s market value exceeds the strike price. Many startup options expire worthless.
ISOs offer potential tax advantages but are only for employees, while NSOs are more flexible but taxed as ordinary income at exercise.
Most warrants have terms ranging from 1–10 years, depending on whether they’re tied to debt financing, partnerships, or strategic transactions.
Warrants allow companies to attract investors or lenders by offering future upside without immediate ownership transfer or dilution.
Yes. If exercised, warrants increase the total number of outstanding shares, which dilutes existing shareholders’ ownership percentages.
Warrants are typically issued to investors or lenders as part of financing deals, while stock options are usually granted to employees as compensation.
Preferred stock often includes conversion rights, especially during IPOs or acquisitions, allowing investors to switch to common stock if it provides better returns.
In most startups, founders hold common stock. However, in some cases founders may negotiate preferred terms to align with early investors.
Preferred stock reduces investor risk by guaranteeing certain returns and giving them priority over common stockholders in liquidation or acquisition events.
Common stock represents basic ownership with voting rights but no guarantees, while preferred stock provides investors with priority in dividends and liquidation.
Dilution is part of the growth journey. A smaller slice of a much bigger company can be worth far more than a larger slice of a small company.
Yes. Employee stockholders are diluted just like founders and investors when new shares are issued.
By carefully planning equity allocations, using vesting schedules, and reviewing the cap table regularly, founders can manage dilution strategically.
No. While ownership percentages decrease, the value of your shares may grow if the company’s valuation increases after a funding round.