

Ask HN: Which step comes first when forming a startup? - ttgano

Tomorrow, we're getting our first investment. As soon as we receive this investment, we're going to use the money firstly for the lawyer, to form contracts and agreements between the founders and to form our corporation. The investment is coming from a private party, so my question is do you need to have a lawyer involved before-hand, or is it ok to consult one after you receive the investment. (Investment is 100k)
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HelgeSeetzen
Step 1: Review investment terms with lawyer.

Step 2: Sign term sheet with investor but do NOT take the investment.

Step 3: Incorporate, assign equity to founders (at near zero valuation), sign
employment & founder agreements, assign any past IP (if applicable).

Step 4: Execute investment agreement and collect money.

Doing it any other way means that you will be struggling with tax liability
issues from day 1. Once the money is invested your shares have a fair market
value and any founder equity you assign will create a tax liability for the
founder (but without liquidity).

A good lawyer should lead you through all these steps for maybe $2k-$5k
depending on the complexity of the terms and your location.

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mryan
I would recommend having a lawyer involved beforehand. Presumably there are
some conditions associated with this investment? If you do not have a lawyer,
how will you know whether the terms of the investment are fair to both you and
the investor?

