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Startup Law 101 Series – Tips From a trade Lawyer on fitting a Founder

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introduction

Why become a founder? What are some things you can do to become a succeeded founder?

Having worked for a long time with the founders as a corporate lawyer in Silicon Valley for many years, and having built my trade, I have some suggestions to share on these points.

Suggestions on why you should become a founder

Why become a founder?

1. whether you succeed as a founder, you will do much more than you would as a receptionist. Obvious, but worth repeating.

The founders want the great advantage that will come from a successful trade. The goal is very difficult to achieve but the prizes can be great.

2. whether you succeed as a founder, keep more than you earn.

As an employee, you will be hit by ever higher taxes on compensation.

Forget the rich. It is the average employee who gets soaked. You pay, for example, up to a third of what you earn for federal, state and local income taxes. Add another nearly 10% for payroll taxes. Suppose now that inflation makes you increase the tax bands. The rates are then increased for those brackets. So the wage rates increase. And the social safety ceiling has been lifted. And new taxes added to fund future health benefits. You will be left with a net amount always decreasing from your pay. Welcome to be the employee of the future.

As a founder, however, your biggest reward by far won't come from your salary, but from an event of liquidity in which you gather your chips. At that point, you pay a one-off tax on capital gains for much of the economic gain from your trade. You pay less income tax because the capital gains rate is lower. And you pay no labor tax at all. With capital gains, you also control a little time and this can help playdown what you pay.

Everything comes from the same effort. Sweat for what you earn. You can take your reward as ordinary income or, as a founder, convert a considerable portion of it into much more profitable fairness earnings. Successfully, you not only earn more but you keep even more.

3. Being a founder can be not only financial but also psychologically rewarding.

When you venture out, you have the opportunity to realize a vision for your company and to benefit not only yourself but also your co-founders, your investors, your employees, your customers and the general public. You can see your company growing and prospering. You can see that it has an affect on others forever.

The satisfaction you can derive from success is a great intangible reward.

4. Finally, being a founder gives you the independence of being your own boss. You will go up or fall according to your merits. This is a great opportunity and a great challenge. This is the only advantage that most entrepreneurs will ultimately say they appreciate most.

Tips for fitting a successful founder

What do you need to succeed as a founder? Here are some thoughts.

1. Above all, build by force.

Prepare yourself before venturing out. Get a solid education. Work with the best to get excellent training in your field. Master your craft. Build relationships. Take what you do best and improve it. This is the key to innovation. And this is the best route for most founders.

Or you could exploit exceptional entrepreneurial talent on your own. Or a specialized skill that allows you to collaborate with others who supply what you may not have. Nothing formidable here. But you need to build some form of strength.

This also means that you do it not venture on the basis of a bare idea. Try this of the age of the bubble: "I worked a year in production and I know how to revolutionize that field through an idea I have for a website". Sorry, but summary ideas won't get you anywhere.

It also means that you do it not do something just because you're tired of something else. Think twice about that romantic little café. That is, unless you know about the tea shop trade. The others do it and they will make you pay. You know what you're doing before you get into something.

Nobody will take you when you go out alone. Therefore, be ready to build on something you do exceptionally well. This is your primary key to success as a founder.

2. Count the cost before venturing.

You need the right temperament to go into trade for yourself. whether you need safety and certainty, being a founder is not for you.

Don't even romanticize the process. trade is difficult. You will lose the certainty of a regular salary. You will have invoices to pay, even whether you are not making money. You will face a series of challenges without interruption, from the problems of people to financial pressures, from the challenges of competitors to legal disputes to immense psychological pressures on all types of obstacles. When you get through all this, or at least most of it, you will have built "good will" – that is, a value of concern for your trade. Goodwill is nothing but the advantages you get from the blood you have shed. It's a huge advantage that makes your trade better than others. But you will you have to shed blood on it. Understand this in advance and prepare to pay the essential costs.

It obviously follows that whether you are not ready to pay the costs you should keep your job regular.

3. When you start, try doing it with a talented team.

There is no fixed rule here. Experience confirms, however, that a team will be much more likely to succeed than a single founder will be. This could be just another way of saying that whether something is really good, others will be attracted to it. More likely, it is another way of saying that launching and building a successful trade is difficult to do and you need a multi-talented team to make it happen. Where you can't supply everything, others will supply what you lack.

4. Make certain you have a valid trade model.

The technical innovations are great but, by themselves, they cannot normally support an enterprise. Sometimes, they can be sold or licensed to a large company. Nothing wrong with that. In most cases, even whether the technology will not be enough.

With or without key technology, whether an enterprise must succeed, it is must have a solid trade model that allows them to build and sustain a meaningful competitive advantage that makes it constantly profitable.

Without that, you will go nowhere, no matter how innovative this or that element of your trade may be.

5. Watch your expenses.

Wasted spending is perhaps the biggest blame for early-stage companies.

Small trade entrepreneurs have much less difficulty with this than startup founders. Why? Because they generally have to do with their own money. whether you know what it took to make money in the first place, the chances of it being wasted are greatly reduced.

One aspect of expensive spending is simply extravagance. Get financed and get out and get the best money can buy. Expensive offices Extravagant salaries. Sumptuous parties And forward and forward. In the companies of the first phase, you will regret these expenses when you hit the road bumps where you want the money. Inevitably, you will hit so much. Plan accordingly.

Another aspect of expensive spending, however, comes from not adequately focusing your efforts in the early stages. You have ten great things you want to do as a company. No judgments are made as to which of these focuses. Spend on all of them. In a short time, your funds are dissipated before you can create a fair revenue stream.

Use good judgment on where you can best use your limited funds and use them wisely.

6. Plan your legal roll-out carefully.

Do not charge unnecessary legal fees in advance. However, when you are ready for a meaningful launch, perform the configuration correctly.

whether you have a founding team, be certain to seriously consider the use of limited actions rather than outright reserve grants when you grant grants to the founders. In other words, keep the strings on the title until it is earned, unless there is an exceptional reason for not doing so. Use low-cost stocks to avoid tax problems. Get the IP in the company. Make work and consulting arrangements, making certain that all the IP from these agreements goes into the company. Review trademark issues in relation to any brand you make. Provisional patent files as relevant. When you're ready to create a larger team, set up a stock incentive plan.

Work closely with a good corporate lawyer to take the right legal steps.

7. Fund your company incrementally where possible.

The worst trap a company can fall into at an early stage is when it is over-extended. Plan intelligently to avoid this trap.

Work with early-stage investors or have a reserve of your own funds to take you through the stages before you have meaningful revenue.

Don't put yourself in a position where you are out of options apartfrom for shopping, your VC opportunity. You will not be financed (the most probable result) or you will be massacred in terms of funding.

Conclusion

Think carefully before venturing out as a founder. The prizes can be big but you have to be ready to face the challenges. whether you think you are, a great world of opportunities awaits you.

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By George Grellas
Startup Compensation

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