

Ask HN: Capital Structure for an early startup - dear

What is the typical capital structure for an early stage web startup with no outside investor yet?<p>- Stock classes: What are the typical classes?  I've heard of founder class with more voting rights, etc.  What about the classes for early employees or friend investors?  How are they typically structured?<p>- How many authorized and issued shares typically?<p>Is it critical to do it right from the outset so us founders couldn't be screwed later on?<p>Thanks
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Mitchella
This is a legal/finance question. Go talk to legal/finance guys about this
issue. Why am I passing your question off onto someone else. 1. Getting it
wrong by listening to a random forum poster could bankrupt you. 2. Answering
questions like this can get people into trouble if "1." happens. 3. Each
company needs something different and is unique in structure so your case
needs to be looked at due to unique factors you may be subject to that we do
not know about from a 4 line message.

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jwb119
Speaking generally:

Your stock classes question is complex and depends on a lot of factors (sorry
to give a typical lawyer answer but it's true here). If you just have founders
and no investors, just common stock can be typical. If it's seed investors and
founders, it usually breaks down into preferred for investors and common for
everyone else. Authorized and issued shares varies depending on these factors
too. Definitely critical to do this right the first time.

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chris_dcosta
Not sure I agree that it's critical to get it right _first_ time, but at the
appropriate time.

Even if you have incorporated, it is possible to do a NewCo later with a
different structure and roll the startup business into the NewCo.

Your company incorprated name does not have to be the name that everyone knows
you by (trading name/site name).

Isn't this what Facebook did when they needed to bring in further investors
way back when?

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jwb119
Hear your point, and agree generally, but parts of this are definitely
critical. For example, you have a hard stop window of 30 days to file your
83(b) election. If you miss it once, it is gone. That can create millions in
additional tax liability if you have a successful company on your hands. If
you don't have someone watching for stuff like this, it can mess you up pretty
bad down the line, regardless of if you roll into a new company. Fixing
problems that could have easily been avoided often ends up being costly.

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dear
No one?

I know there are some template documents available on the web but they are in
legalese. There are founder class F but I am not sure if they are typical and
usable in practice. I know the best way is to consult a lawyer but I also want
to do my own due diligence and hear from HN's collective wisdom.

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nayefc
Initially, divide equally between co-founders and worry about it a little bit
further down the road.

