2. Milestone: Collect all company documents

Gather company documents

This is your checklist of company documents. Some of the documents might be irrelevant as you may not have need for them. Please go through the list and check what you have.

Incorporation documents

1. Articles of Incorporation – It is also known as Certificate of Incorporation. It documents the existence of the company by company name, company registration number, jurisdiction in which the company is registered, date of incorporation, number of shares that have been authorized, the par value, the director’s name and the name of the registered agent. It is generally filed with the Secretary of State in the State of Incorporation.
2. Bylaws – It usually covers the internal proceedings of the company such as; the purpose of the organization, who its members are, how directors are elected, how meetings are conducted, and what kind of officers the organization will have and a description of their duties.
3. Initial Organizational Resolutions of the Board of Directors – It determines that the company has been incorporated. It also states the appointment of the Officers and authorizes the issuance of shares to the Stockholders (If the shares have not been authorized in the Articles of Incorporation), among other things.
4. Written Consent of Incorporator – It is the consent where the Incorporator (e.g. registered agent) covers who wishes to incorporate the company,  who is the director or shareholder as well as number of authorized or issued shares
5. EIN – this is the company tax identification number. It is different from the number issued from the Secretary of State. The IRS Web site allows you to obtain an employer identification number once the Company is incorporated.

Stocks

You will need all these documents once you start issuing shares to founders, employees or investors. Make sure that you have all documents in order. This part is very important as you should have all documents ready and in order. Actually, you need to know who the owner of the company is and how many shares they own.

1. Shareholders Agreement – This is an agreement covering the issuance of shares between founders, employees and investors.
2. Your current cap table – You might start recording your shares on any software (such as eqvista.com ) or a spreadsheet (excel file).
3. Preferred Stocks (if any) – It is usually issued to Investors.
4. Common Stocks (if any) – It is usually issued to Founders & Employees.
5. Preferred Stock Purchase Agreements or Common Stock Purchase Agreement – This is an agreement between the company founders, Investors or anyone who becomes an owner of the company.
6. Stock Ledger – This is a record of the current shareholder. We can call it the shareholder list.

Employees Stocks Options (ESO)

Once you decide to issue any ESO, make sure that every stocks options movement or initiative are properly recorded.

1. Resolution of Directors stock option plan document – director’s written consent to adopt stock option plan
2. Option Agreement – a contract used in investing that gives you the right to purchase an equity for an agreed upon price up to a certain time frame.
3. Exercise Notice (Minutes or Resolution) – The receipt of an exercise notice by an option writer that requires him/her to sell the security in the case of a call option, or to buy the security.

Warrant, SAFE, KISS, Convertible Note (if you have any)

Signed agreements and other related documents optioning to purchase equity.

1. Warrant – It is a financial instrument that gives the right, but not the obligation, to buy or sell a security most commonly an equity at a certain price before expiration.
2. SAFE (Simple Agreement for Future Equity) – published by Y Combinator. The investor makes a cash investment in a company, but gets company stock at a later date, in connection with a specific event. The investor provides funding to the company in exchange for the right to convert its investment to equity upon some future event.
3. KISS (Keep It Simple Security) -published by 500 Start-ups – The investor makes a cash investment to a company, but gets the company’s stock at a later date, in connection with a specific event. The investor provides funding to the company in exchange for the right to convert its investment to equity upon some future event.
4. Convertible Note – It is an investment without establishing an explicit valuation or ownership of the company in which they are investing.

Shares Valuation

As your company matures, you may need to get your company valuated. There are certain rules about this.

• Have you just commenced business and wondering what your Price Per Share value is? (Fair Market Value) If you don’t have a 409A valuation yet, you can use Par Value as determined by “Directors Resolution” FMV (Fair Market Value) and correct values at a later date. Take a close look at the Articles of Association or Articles of Incorporation.
• 409a Valuation – Is needed if you have commenced business.

• Invite your Law firm: This is the time to ask your law firm, accountant, CPA firm or third party to help you with Cap table or you can continue building a cap table yourself. It is advisable to hire a law-firm as you might be required to have legal advice on your company’s capitalization during any future financing rounds. Your company documents must be in order; stock certificates, option grants, and other securities.
• Have a Board of Directors: Invite Board of Directors to manage the shares.
• Electronic Stock Certificate (E-share)

Can I use Eqvista if I have already issued paper shares?

Definitely, you can use our system- Eqvista even when you are still using the classical way of issuing shares.

Types of shares

Certified share (digital or paper) is a certificate which is issued in a traditional way where the issuer issues a certificate (in paper or digital form). Uncertified share is simply a book entry or a record about the shareholder (one line entry). There is no additional certificate or record except the record on the spreadsheet. E-shares are much easier to issue and manage. Read this guide to know more paper share certificate, digital share certificate and Electronic share.

I have already issued certified shares, can I switch to Uncertified Shares?

Yes, you can switch. By amending the Articles of Association (or by-laws). Legally there is no problem issuing and keeping both paper and electronic shares; however, it is always better to process this with your lawyer.

You will need any of the following:

• Board Resolution E-shares
• The first step toward issuing uncertificated shares (Electronic Share) is to record a board authorization of uncertificated shares. Here is how:
  • Board resolution (the simplest one)
  • Amendments to by-laws
  • Amendments to the articles of incorporation
• If your company is a brand-new company, you will just want to make sure that you include this resolution with the other board resolutions in your start-up documents.