The question concerning why founder and employee startup stock should vest over time should be thoroughly discussed and vetted by all startups before they issue shares of stock. This important topic gets frequently discussed with his clients by startup lawyer Andrew S. Bosin who is located outside of New York City in New Jersey and represents clients across the United States, US, New Jersey, New York, New York City, Brooklyn, Albany, Syracuse, Buffalo, Connecticut, Boston, Massachusetts, Florida, Texas, Chicago, California, Dallas, Miami, Orlando, Jacksonville, Washington, DC, Philadelphia, Austin, Houston, Phoenix, Denver, Salt Lake City, Provo, Utah, Atlanta, Charlotte, Raleigh, Los Angeles, San Diego, San Francisco, Silicon Valley, Provo, San Antonio, Indianapolis, Columbus, Cleveland, Pittsburgh, St. Louis, Kansas City, Nashville, Ohio, Idaho, and Alaska.
It is very fairly easy and quick to divide stock up among start-up co-founders. The problem is that most often vesting of shares is not tied to a milestone event required to be satisfied by a co-founder such as raising money or developing the product or reaching a sales goal. Rather, founders typically receive more stock over time for simply remaining with the company. If nothing is tied to receiving more stock and the founder does nothing detrimental to the company so you can’t force them out your going to be in a situation where one or more founders are going to continue to receive stock by the mere fact that they own the company.
The best thing that a new startup can do is to be conservative with issuing stock at the beginning to founders and directors and to require that any additional large chunks of shares issued anytime thereafter be tied to performance milestones. This accomplishes two goals. First, founders have to work for their shares. Second, you will attract smart investors who know that they are going to invest capital in a company where all of the founders are aligned with the same goals and objectives.
Please call Andrew for a free startup legal consultation at 201-446-9643.
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One of the leading nationwide business and technology startup lawyers Andrew S. Bosin is located in New Jersey just outside of New York City and has a nationwide Technology Law Firm serving clients in New Jersey, New York, Buffalo, Queens, Manhattan, New York City, Westchester County, Islip, Oyster Bay, Rochester, Utica, New Rochelle, Tonawanda, White Plains, Binghamton, Saratoga Springs, Rockland County, Brooklyn, Long Island, Albany, Syracuse, Suffolk County, Nassau County, Bronx, Staten Island, Allentown, Scranton, Lancaster, Harrisburg, State College, College Station, Boston, Hartford, Providence, Connecticut, Atlanta, Chicago, Washington D.C., Dallas, Florida, Ohio, California, Austin, Texas, Maryland, North Carolina, Massachusetts, Colorado, Utah, Oregon, San Antonio, Austin, San Diego, Los Angeles, Silicon Valley, San Francisco, Houston, Salt Lake City, Toledo, Akron, Dayton, Provo, Portland, San Jose, Miami, Tampa, St. Petersburg, Ft. Lauderdale, West Palm Beach, Broward County, Dade County, Newark, Delaware, College Park, MD, Cook County, Phoenix, Denver, Boulder, Ft. Collins, Nashville, Memphis, Kansas City, Raleigh, Charlotte, Indianapolis, Boise, Eugene, Manchester, Burlington, Philadelphia, Pittsburgh, Pennsylvania, Vermont, Rhode Island, Boca Raton, Arlington, Virginia, Alexandria, Virginia, Reston, McLean, Cambridge, Quincy, Riverside, San Bernadino, Minneapolis, St. Louis, Cleveland, Columbus, Baltimore, Sacramento, Cincinnati, Orlando, Las Vegas, Round Rock, San Marcos, Louisville, Richmond, Tempe, Southbend, Bloomington, Knoxville, Oxford, Tuscon, Long Beach, Ames, Ft. Collins, Lawrence, Blacksburg, Charlottesville, Champaign, Oklahoma City, Birmingham, Salt Lake City, Baltimore, Mobile, Alabama, Utah, Washington, Seattle, Oregon, Portland, Eugene, Sacramento, Pittsburgh, Wake County, King County, Redmond, Kirkland, Bellevue, San Mateo County, Contra Costa County, Cupertino, Los Gatos, Sunnyvale, Mecklenburg County, Jacksonville, Gainesville, Boynton Beach, Orange County, Palo Alto, Harris County, Waco, Columbia, Missouri, Tarrant County, Bucks County, Lehigh County, Bethlehem, Pennsylvania, Burlington, Portland, Maine, Manchester, Concord, Nashua, Cambridge, London, Paris, UK, England, Dublin, Scotland, Edinborough, Amsterdam, Germany, Munich, Berlin, Madrid, EU, European Union, Spain, Austria, Vienna, Geneva.