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Need to issue stock and/or a convertible. Need legal

Need to issue stock...

Need to issue stock and/or a convertible. Need legal assistnace

Lawyer's Assistant: What state are you in? It matters because laws vary by location.

Ca buy I'm a delaware corp

Lawyer's Assistant: What steps have you taken so far?

I've started my company and now friends and family want to give me money. I also have a contractor that wants equity in lieu of payment

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3/23/2018
KLAW
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Customer reply replied 27 days ago
I have two friend who want to invest cash and work part time in the business. I also have a contractor that wants to get equity in stead of cash. Is it best to just issue them common stock with vesting or should i use convertible. We are brand new but will be making money within the next 6 months. The contractor is currently being paid and we see her as a invauable asset for future growth.

Hello and welcome to Just Answer. No attorney-client relationship or privilege is formed by speaking to an expert on this site, the answers are for general information. By continuing, you confirm that you understand and agree to these terms.

The steps to issue stock are ass follows.

First, have the board approve the issuance, Second, Issue the stock via a stock agreement, drafted to each individual investor. You will need a separate agreement for each of your friends and family and for the contractor that wants equity in lieu of payment.

That said, issuing stock is actually a lot more complex then just writing in names and share amounts and taking the funds form the investors. The process has a number of issues and complexities depending on the circumstances. For example, if you plan on issuing stock yourself, you would want to:

1. Determine if you’re issuing common stock or preferred stock - let’s assume common stock for this example;

2. Determine if you’re issuing common stock under your stock plan (typically for employees, advisors or consultants) or outside the stock plan (typically for cofounders and service providers that are entities) - let’s assume cofounder;

3. Check enough authorized but unissued shares are available (if not, you’ll need to take one of a few different course of available actions to fix this) - but let’s assume you have 5M authorize, 4M already issued, 1M reserved for the stock plan and you want to bring on a third cofounder who has the same amount of equity as the other two (1M), which means you have just enough, if not you need to authorize issuing of additional shares;

4. Check for securities law compliance – Depending on your accountant’s advise, and factors regarding the tax election and prior filings, you may need to make state and/or federal filings, before, right after, or sometime after the issuance;

5. Have the board approve the issuance - including the amount of equity, you’ll need to determine the deal structure (is the person buying.

A good rule is to avoid issuing a number of shares that comes too close to your authorized shares. If you need to increase your authorized shares, you’ll need to obtain the shareholder approval according to the procedures specified in your corporate by-laws. If you don’t have any corporate by-laws you should have one drafted by counsel. Obtaining legal guidance in Delaware is highly advisable. Major question which will affect the issuance are 1) are you issuing shares with a par value or no par value, 2) What tax elections have you made for the corp.

Obtaining and retaining executed drafts of Subscription Letters and any Stock Restriction Agreements is crucial for bookkeeping compliance purposes. After printing the Stock Certificates, ensure that each issued stock is signed and dated by the Company’s President and Secretary.

Compliance with securities law requires additional recording and filing. Since these steps involve navigating a sea of complexities with precision, seeking the benefit of legal counsel to guide you will far outweigh the costs, as well as the risks of not doing so.

I hope this helps.

It was a pleasure assisting you today, and I would appreciate if you would rate my service, so I will receive credit and payment for my work. We as attorneys are not employees of Just Answer and are not paid unless you rate the question. After you rate the question you can ask follow up questions, and you will not be charged any additional money for the follow-up questions.

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