How Many Shares Should My Startup Authorize when Forming?

How Many Shares Should My Startup Authorize when Forming?

Business Formation, Corporations, Start-Up, Stock Options
Historical Stock Securities by pictavio via Pixabay As a Phoenix attorney that has represented a number of local and out of state startups, I can tell you that one of the Top 10 questions I get is some variation of, “How many shares should the startup company authorize at formation?” How many shares is my Startup required to authorize? First off, at least here in Arizona where I practice at least, there is no law or regulation that requires a startup to have a minimum or maximum number of shares that need to be authorized or to founders or set aside in an equity incentive program. With that said, there are practical and operational limits, which we explore in this post. Typically, with technology-oriented startups at least, I recommend that…
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Why Your Startup Needs Bylaws

Why Your Startup Needs Bylaws

Business Formation, Corporations, Entity Formation
To help your startup succeed with as few internal complications as possible, founders should make having a set of robust corporate Bylaws a priority from the beginning. In this post, we take a look at what Bylaws are, what they do, and why your startup needs to have them in place (hint: it's the law in Arizona). What are Bylaws? While it's tempting to believe that corporate Bylaws are only for large, faceless, mega-corporations, as opposed to your lean, development-stage startup, nothing could be further from the truth. Any company (of whatever size) that chooses the corporate form through which to conduct its business should really have a well-crafted set of Bylaws in place. In a nutshell, a corporation's Bylaws are the internal guidelines that deal with how your corporation…
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What Up, B? Is a Benefit Corporation Right for Your Startup?

What Up, B? Is a Benefit Corporation Right for Your Startup?

B Corporation, Corporations
It's hard to believe that five years have past since Arizona allowed new businesses to form as "B" corporations here in our State.  While the bulk of my work with startup companies still involves more traditional corporations and LLCs, lately I've witnessed an uptick in interest from startup founders asking about organizing as a B corp.  I believe this trend will continue as the appetite for ethical corporate governance and good corporate citizenship continues to grow.  So what is a B corporation anyway? The B Corporation: What It Is and Is Not For those that don't know, the "B" in B corporation stands for "benefit" (or, more specifically under Arizona Revised Statutes §10-2402, a "general public benefit").   Think of these entities as (with apologies to the late President Bush)…
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What Is My Liability as A Startup Co-Founder?

What Is My Liability as A Startup Co-Founder?

Contracts, Corporations, Start-Up
The forming and launching of a startup is an exciting, possibly life altering event.  However, if you and your fellow co-founders are not careful to take certain precautions, being a co-founder has potential to be life altering in a negative way.   In this post, we'll talk about an oft-posed question I get as a Phoenix startup company attorney: What is my liability as a co-founder of a startup? Ways Your Startup Could Be Liable When I talk to startup clients about their liability concerns, I find it helps to break the universe of potential liability into two main camps: tort and contractual.  Note: I will save a potentially large---but no less serious---third category of corporate tax, payroll tax, and pension liabilities for another day/blog post. In its most basic…
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Do I Need to Register My Out-of-State Corporation?

Do I Need to Register My Out-of-State Corporation?

Business Formation, Corporations, Entity Formation, Foreign Corporation
If you're an Arizona-based startup that is actually incorporated in another State (for example, Delaware), do you have to register your foreign corporation in order to transact business here in Arizona? This question is more common than you might think in my Phoenix technology startup law practice. Earlier this month, I met with a cloud middleware outfit that had originally formed as a corporation in a state back east. Their U.S., Canada, and Mexico operations had been relocated here to the metro Phoenix area for several months. During our meeting, I asked the client's officer if they had registered to transact business here in Arizona. After a puzzled look amongst themselves, they admitted to me that they hadn't. Like I said before, this occurs more often than I like to…
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