What should I do if I might bring a co-founder on in the future?

Three Approaches

If you might bring on additional co-founders later, there are a few approaches you can take with respect to issuing shares in the post-incorporation setup. The best approach will depend on your particular situation.

Leave Shares Unallocated

The more certain you are that you will bring an additional co-founder on later, the more it may make sense to leave shares unallocated. As you issue shares in the post-incorporation setup and reserve shares for issuance from your stock plan, you can leave some number of shares unallocated (i.e. not issued and not reserved for issuance from the stock plan). That way, when that co-founder joins, those shares will be available for issuance to them.

Authorize More Shares Later

The less certain you are about bringing an additional co-founder on later, the more it may make sense to proceed under the assumption that no new co-founders will join. You could then issue shares in the post-incorporation setup and reserve shares for issuance from the stock plan without accounting for potential future co-founders.

Under this approach, if you add a new co-founder later, you would need to see if your company has enough authorized shares available for issuance to the new co-founder. If not, you would need to file an amendment to your certificate of incorporation to authorize more shares for issuance (we have a product you can use for this).

In theory, it is possible to transfer shares from existing founders to a new co-founder. However, in practice, startups rarely do this because it is more complex and requires significant legal fees. Consequently, we do not have any products for transferring shares from one founder to another.

Delay Post-Incorporation Setup

If you are fairly certain you will bring an additional co-founder on soon, it may make sense to delay completing the post-incorporation setup until that co-founder joins. Please note, however, that there may be consequences to delaying the post-incorporation setup.

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