Asset Purchase Agreement: Fill & Download for Free

We recently acquihired another small startup and with the help of our legal team were able to do this for extremely minimal legal fees, paperwork etc. The structure was a combination asset purchase and employment agreement for the founder who decided to come on board at Referly.I've written a more detailed post here, which includes a link to the downloadable template document for the asset purchase. It's a great starting point if you're thinking about doing a smaller deal.How to Acquihire - With Template Legal Docs

On September 28, 2018, Y Combinator released a new post-money safe document. The pros and cons of a convertible note vs. safe should be viewed in light of the most recent changes.Based on my own experience as a venture capital lawyer, many startups today are more comfortable using the YC Safe as a replacement for a convertible note.Why Safes?Best answer: Safes are faster, cheaper, and simpler.Standard deal terms means less ambiguity, “This Safe is one of the forms available at http://ycombinator.com/documents and the Company and the Investor agree that neither one has modified the form, except to fill in blanks and bracketed terms.”No interest rateNo maturity dateNo minimum threshold for qualified financing (trigger=preferred stock)Seemingly favorable tax treatment if the instrument is ultimately viewed as an equity security (QSBS, equity vs. debt, balance sheet, etc.)Why might one use Convertible Notes over Safes?Summary: Convertible notes are more traditional, highly customizable, and have priority of asset distributions compared to equity and Safe holders in the event of a liquidation (sale or bankruptcy). Plus, Safes require the company to sell preferred stock and, if the company never intends to sell preferred stock and never does, then issuing a Safe is not recommended because it will be like having an IOU that can never be redeemed, barring a liquidation event.Interest rateMaturity dateMinimum threshold for qualified financingConvertible exit mechanism —if the company rejects funding or becomes a non-fundable zombie, security stays as debt.Senior preference over other safes and shareholdersClarity in tax treatmentLonger shelf life (Millions of test cases spanning hundreds of years)Switching Between Notes and SafesIt’s generally not a good idea to issue both convertible notes and safes since they often treat different fundraising and conversion mechanisms differently. For example, outstanding convertible notes are often treated as debt and therefore have priority over any outstanding safes. If a company has already issued convertible notes, founders may consider continuing to issue convertible notes for simplicity. If a company has only issued a few convertible notes, then it may be possible to work with existing investors (with approval from the company’s board of directors and good advice from startup legal counsel) to convert the outstanding convertible notes into post-money safes. Ideally, however, you would stick with one track and work around the issues.Where can I find a Good Convertible Note?I always recommend Cooley Go’s Series Seed Convertible Note, as it provides a great framework and form templates for a convertible note with a term sheet, board consent, and note instrument. Instead of multiple documents (form of note purchase agreement plus convertible note), there is just one document: the Convertible Promissory Note.Where is the YC Safe?You can access the new YC post-money safe (v1.0) set of documents here:YC Startup Documents.You can also access the YC Post-Money Safe User Guide here:Safe User GuideThere are four variations of the new post-money safe, plus an optional side letter.Safe: Valuation Cap, no DiscountSafe: Discount, no Valuation CapSafe: Valuation Cap and DiscountSafe: MFN, no Valuation Cap, no DiscountPro Rata Side Letter (Optional)

The ProcessI don't know much about the IP part, but regarding the US company creation, I've done it four times myself and helped many fellow entrepreneurs do it (disclaimer: I'm not a lawyer). The process is the following:Decide what company type you want to create. Most probably you'll be interested in C Corporations or LLCs.Decide where to incorporate. Delaware is a great choice because of it's tax advantages, administrative and legal efficiency, and because it's investor-friendly and offers good legal protection to founders.Find a professional business service to help you establish your company. If you don’t have time to compare I recommend using Harvard Business Services, since they have the lowest registered agent fees in the market, which are the highest recurring costs business services will charge you after setting up your company. A professional business service will help you with steps 4, 5, 6, 7 and 8 below.Chose an available company name. You can do this for free using some professional business services[Corporations] Decide how many shares to authorize and their par value. The rule of thumb here is to authorize 10 million shares with a par value of $0,0001 or $0,00001 if you think your business is going to scale (e.g., a startup). If you have a small business (e.g., consulting company, web page creation service) you may think of authorizing 5000 shares or less, with a par value around $0.02 or $0.2 per shareFile the certificate of incorporation, in case of a corporation, or the certificate of formation in case you want to set up an LLC. Don’t forget to apply also for an Employer Identification Name, since you’ll need it in order to open a bank accountPrepare the bylaws of your corporation or the operating agreement of your LLC. Use legal templates, like the ones provided in Orrick Practice Group: Start-Up Forms LibraryWhen you get the company papers back from the professional business service, make the incorporator from this business service adopt those bylaws or operating agreement and make sure he’s handed in a written paper the control of the company over to you. This paper is usually called a Statement of IncorporatorOnce your company is created you have to follow some formalities, especially in the case of a C Corporation. Failing to do so can get you into trouble, since a court may then decide to pierce your corporate veil, meaning that creditors of your company could go against your personal assets (e.g, your money, house, car, etc.).To avoid this in the case of a C Corporation, you have to follow the following steps. Whenever I write [Template] it means that you can do this with a template from Orrick Practice Group: Start-Up Forms Library (or from another source).Prepare an Offer to Purchase Stock [Template] and send it to each shareholder in the companyPrepare a Common Stock Purchase Agreement [Template] and offer it to each shareholder in the company.If the common stock purchase agreement contemplates vesting, then it’s very convenient from the tax standpoint that every shareholder files a document that’s called Section 83(b) Election with the Internal Revenue Service before 30 days after getting the shares.Prepare a Stock Ledger [Template] that tells how many shares each shareholder getsAnd then, you can celebrate the Organizational Meeting, which will define the moment when the corporation starts operating as such.Send a Waiver of Notice [Template] for the Organizational Meeting to all the participantsPrepare a Banking Resolution [Template] to be approved at the meeting that authorizes one or more people to open a bank account for the corporation(Optional) Prepare a Shareholder Agreement that regulates how shareholders interact with each otherCelebrate Organizational Meeting and write down its minutes using a [Template]The whole process may look a bit scary, but it's actually not that complicated since legal templates help you along the way.CostsSince you care about money, with a professional business service the company formation costs can range between $200 and $800, and the yearly costs are $50 for the registered agent + a minimum of $175 or $350 of Franchise Tax, depending on the method used (authorized shares vs. par value capital method).If you are a ForeignerThere are some very important warnings you should consider. In this post I've summarized them: Starting your own US Company as a Foreigner.