Avoid Admin Landmines with Accurate Paperwork

When I started my company, I wasn’t sure what I was doing. I read everything I could find and made the best decisions I could, but some of them were wrong.

Years later, I needed to create a stock option plan for key hires. I wanted their incentives to be aligned with the company’s. I knew I couldn’t figure out how to do it, so I hired a startup lawyer. He promptly informed me of the mistakes I’d made when I created the company as a legal entity. Luckily they hadn’t hindered us to that point, but we couldn’t go any further without resolving them. I ended up paying him to redo all the paperwork correctly so the new stock option plan would be clean. The process was great and I enjoyed working with our lawyer, but it did cost a decent amount of money.

There’s something to be said for making sure certain foundational things are done correctly. Especially things that relate to ownership. If you can afford a startup lawyer, I suggest going that route. Their experience will be invaluable because they can explain the implications of various decisions. Many now offer packages for startups that are fairly inexpensive (and definitely less expensive than their charges for later redoing paperwork to fix your errors). If that isn’t an option, there are other alternatives, such as Clerky, that provide high-quality documents at a lower rate in a self-service model.

Legal and administrative paperwork that’s relevant to hiring can have huge implications down the road, but creating these documents isn’t something founders do often. Founders should seek out qualified advisors or other resources that can help them avoid landmines.