Resources for insight and
inspiration
Guides
Insights
Startup Shares 101: Navigating the Complexities of Share Calculations
In the intricate world of startup finance, understanding share calculations is crucial. What seems like a straightforward counting exercise quickly becomes a nuanced exploration of different share types and calculation methods. Let's break down the three key ways startups measure their shares.
Startup Equity Compensation: The Basics
For startup founders and entrepreneurs, equity compensation is more than a recruitment tool. It builds an ownership culture, attracts top talent, and aligns employee incentives with company growth. Understanding the fundamentals of equity plans helps you design a structure that supports long-term success.
Corporate Conversion: Navigating Business Structure Transitions
As your business evolves, the legal structure that worked in your startup phase may no longer be the best fit. Corporate conversion - the process of transitioning from one entity type to another - can help align your company’s structure with your growth, funding, and succession goals.
Foreign Qualification: An Overview
Determining where your startup needs to qualify to do business can be a complex challenge, especially in an era of remote work and digital commerce. This memo provides critical guidance on understanding when and where your startup may need to qualify to do business.
FAQs
Open allFailing to use written agreements. Without NDAs and IP assignments, contractors or employees may legally claim ownership of information you thought was protected.
General skills and experience can move with an employee. But specific confidential information, such as code, strategies, or customer lists, is protected and cannot legally be taken.
Patents require public disclosure and registration, granting exclusive rights for a limited time. Trade secrets remain private and last indefinitely - as long as secrecy is maintained.
No. Unlike patents or trademarks, trade secrets are protected automatically if they meet legal requirements and you take reasonable steps to safeguard them.
It depends on your business. Most startups should prioritize trademarks for brand protection and copyrights for code and content. Patents make sense if you’ve built a unique, defensible innovation.
They may own the copyright or patent rights to what they create, even if you paid for it. Always require a signed assignment agreement.
Sometimes. Pure software code is protected by copyright, but certain software-related inventions (like unique algorithms or processes) may qualify for patents if they meet patent standards.
No. Trademarks gain limited protection through use, and copyrights exist automatically upon creation. But registration strengthens your rights and makes enforcement much easier.
Yes. Contractors often have access to sensitive information and customer relationships, so including a non-solicit in contractor agreements is recommended.
A non-solicit limits poaching of employees or customers, while a non-compete prevents someone from working for a competitor. Courts generally view non-solicits as more reasonable.
A typical duration is 12–18 months. Longer restrictions are more likely to be challenged in court.
Not always. Most states allow them if reasonable, but California restricts employee-related non-solicits. Customer-focused non-solicits may still be enforceable in certain cases.
No. Non-competes should be used cautiously, only in states where they’re enforceable and for roles where they are truly necessary. Otherwise, focus on enforceable alternatives.
Not necessarily. Strong confidentiality and invention assignment agreements often provide more reliable protection for IP and trade secrets.
A non-compete restricts where someone can work, while a non-solicitation clause only prevents them from taking your clients or employees. The latter is generally easier to enforce.
No. Some states, like California, ban them outright. Others only enforce them if they’re narrow and justified by a legitimate business interest.
Templates are a good starting point but rarely cover the specific needs of your business. Customized agreements reduce risk and ensure compliance with state and federal laws.
You may face IRS penalties, back taxes, unpaid benefits, wage claims, and potential lawsuits. States like California impose strict penalties for misclassification.
No. Independent contractors are responsible for their own benefits, insurance, and tax obligations unless you choose to offer additional perks in the contract.
Not entirely. The classification depends on how the work is structured. If you control when, how, and where they work, they’re likely an employee, even if the agreement calls them a contractor.