How do you want to split up the company


That’s an important one. Remember, at this stage only founders will own the Formation, so don’t worry about investors or employees. We’ll come to this later.

Need help or advice? Contact our partner lawyer.


Let’s talk about vesting


We recommend a standard 3 year vesting schedule with a six month cliff which has worked for startups in the past.

Here is a lot more information if you want to get into details.

Ok. Let’s talk about vesting. Every sophisticated startup subjects the shares it issues to vesting. This is a situation in which you and your other founders receive all your shares upfront. This means you can vote the shares and manage the company as you need.

However, for a period of time, the company has a right to repurchase these shares for $1. Over time, this right to repurchase diminishes. After 3 months the company can only repurchase 90% of the shares, after 6 months 80%, etc.

After three years (which is the amount of time we recommend for founders) all the shares have vested and the holder owns them fully and outright.


So why do we do this? Look, sometimes things don’t work out, for good reasons and for bad. You start a company with a great co-founder, and then the cofounder gets an amazing job offer from Google, or runs off to become a surf instructor in Bali, or you realize after a while that you’re not a good fit.

One of the founders leaves, and the other founder or founders are left holding the ball. What’s worse, you have to find a new co-founder. But what are you going to if you don’t have any shares to offer the new cofounder because the old cofounder left with them? This is where the repurchase right comes in. The Company can claw back the shares that haven’t vested and can offer them to someone new to carry the torch. Vesting protects co-founders from both good and bad situations.


We recommend a three year vesting schedule for all founders with a six month cliff. This means that no stock vests for 6 months, at which point 1/6th of your shares vest. After that, the shares vest monthly for the next 24 months until everything is vested. We think this is enough. When you receive your first major round of investment any sophisticated investor will require that the founders re-start their vesting, so this should be more than enough to get you there.


Basically, none of your shares vest for the first 6 months. We think this is fair, because it takes about six months to get everything started and to make sure all the founders are committed to the project. After six months, you get all six months of vesting at once. If someone leaves before the first six months, they don’t leave with any shares. This saves you from losing shares to someone who’s not really up to the task!


We think this is enough. When you receive your first major round of investment any sophisticated investor can require that the founders re-start their vesting, so this should be more than enough to get you there.


Name your directors


Director are decision makers in your company. Together they form the Board, and make decisions by vote on major company issues, like naming the CEO, raising capital or selling your company. Each director has one vote, and you need a majority to approve big decisions.

The typical setup for early stage companies is that the each founder is a director. However you can choose to have only one director (typically the CEO) for simplicity.

A Director is a decision maker in a company. Together, all directors form The Board of Directors, which is the governing body for a company. Every year at their annual meeting, the stockholders of the company elect Directors to the Board. Delaware law requires that you have at least one director. If you have more than one director, we recommend appointing an odd number of Directors so you don’t end up with a board deadlocked 50-50 board for a major decision.

Each Director has one vote, and all major decisions need to be ratified by the Board. You will need the Board's approval to sell your company. You will need the Board's approval to raise a round of financing. The Board appoints officers of the company like a CEO and approves all matters of major strategic importance.


A Manager is a decision maker in a company. Together, all Managers form The Board of Managers, which is the governing body for a company. Every year at their annual meeting, the Members of the company elect Managers to the Board. Delaware law requires that you have at least one Manager. If you have more than one Manager, we recommend appointing an odd number of Managers so you don’t end up with a board deadlocked 50-50 board for a major decision.

Each Manager normally has one vote, though you can change this. All major decisions need to be ratified by the Board. You will need the Board's approval to sell your company. You will need the Board's approval to raise a round of financing. The Board appoints officers of the company like a CEO and approves all matters of major strategic importance.


Delaware requires a CEO and a Secretary for every corporation, as well as at least one Director for the Board of Directors.


You don’t need Officers, but it can help distribute responsibilities among the founders. For instance, one founder can be CEO, another CTO (chief technology officer), another CMO (chief marketing officer) etc.


Name your officers


Officers are responsible for the management and day-to-day operations of a corporation. By law, each company needs at least a CEO or President and a Secretary. The typical setup for early stage companies is that the founders are both directors, and one is CEO and the other Secretary.

You can also be creative and add a Chief Happiness Officer too. Here is a lot more information if you want to get into details.

Officers are appointed by the Board of Directors. They are responsible for the management and day-to-day operations of a corporation. Most founders will be familiar with the CEO or President position.

Delaware law requires that each corporation have a CEO or President and a Secretary.


Delaware law requires that each corporation have a CEO or President and a Secretary. However, one person can fill more than one role. A Founder can serve on the board of directors and be an officer of the Company (very common). In single founder companies, the founder has three hats: Director and two Officer positions - CEO and Secretary.

In early stage startups, the Founders usually both sit on the Board and act as the officers that run the day-to-day business of the company. However, as the company grows and brings on investors, outside directors will likely be appointed to the board.

Here’s a typical setup for a two founder startups:

  • Kenneth, Director and CEO
  • Max, Director and Secretary

The corporation’s CEO or president is responsible for the overall day-to-day activities of the corporation.


The Secretary maintains the corporate records of the corporation and prepares minutes of board and shareholder meetings. The secretary also provides certification for banks or other financial institutions and provides requested copies of corporate documents.


Here are a few other officer positions:

  • Vice president. The vice president fills in when the CEO is unavailable or when the board assigns him or her specific duties.
  • Treasurer or chief financial officer. The treasurer is responsible for the financial matters of the corporation. In early stage startups corporations, this will include daily responsibility for financial matters, keeping the cap table organized, and maintaining the financial corporate records.

It’s important to remember two significant facts about actions taken by officers:

  1. Executive officers have the authority to legally bind the corporation
  2. Officers are not personally liable for their acts while acting (lawfully) on behalf of the corporation


Delaware requires a CEO and a Secretary for every corporation, as well as at least one Director for the Board of Directors.


Percentage of the company



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