Hi everyone,
My friends and I are about to start a company together, but we're not sure how we should contribute cash to the startup after incorporation (Delaware). The number of authorized shares would be 10 million, and we plan for each of the 3 founders to contribute $4,000 ($2,000 initially. If the company has enough cash flow to sustain itself up until the first financing round, we will cancel the other $2,000). We're not sure how we should execute this plan. I've read some advice online, and people seem to split between buying the shares directly vs assigning the shares and then making loans to the company. What method do you guys think is most suitable for our two-round founder financing? What methods did you guys use? and why?
If it's through loans, how should be the term of the loans? (I'm thinking no specified maturity date and extremely low interest rate?)
If it's through share purchase, how many shares would you issue in this case for 3 founders, out of the 10 million authorized shares?
I know this is a matter we should consult with a startup lawyer. I'm asking here just to garner some first-hand perspectives from fellow entrepreneurs and see how the status quo looks like. Thanks a lot!
[link] [comments]
