We all want to be exceptional. We want to stand out. We dream of becoming the next superstar unicorn startup. So...I understand that you might not immediately leap to your feet to join the rallying cry to standardize corporate legal paperwork, but you should. Boring legal documents are at their best when they are exactly that: boring.
It may not be glamorous, but here are some reasons why boring is better when it comes to your company’s corporate documents:
Others felt the pain so you don’t have to.
You are not the first person to start a company. Many entities have incorporated in Delaware so far (see, you aren’t so special). Some have been wildly successful; most have not. But their experiences have established best practices and robust case law. You are now in a position to benefit from that collective wisdom.
Reinventing the wheel takes time.
There are well-vetted model documents for all the key areas of your business, from employment and IP to board matters to financings. If you decide something non-standard is required for your business, you’ll have to work with your lawyer to draft it and think through all the implications. The further afield you go, the more time has to be spent reading and negotiating. In a financing there are hundreds of pages of documentation, and that’s time and resources that could have been applied to building your business.
Standardization reduces risk.
Setting up standard systems for processing your recurring corporate paperwork ensures consistency, reduces risk, and saves time. Key documentation won’t get overlooked and possible claims of discriminatory inconsistencies will be avoided.
Non-standardization has long-term impact.
Let’s say one of your co-founders wants to carve out a special condition in his contract. In the moment, it’s easy to think, “It’s not a big deal. He’s a good guy. Our lawyer will just add that in, he’ll be happier, then it’s done.” But when it comes time to raise capital for the company, that special case will resurface during the diligence phase, require examination which takes time, potentially force you to draft more special documentation, and possibly even derail your deal. You’ll repeat this with each subsequent financing. What started as one tiny special snowflake will grow and grow until its a giant snowball rolling down the hill picking up legal bills along the way. Remember, if things go well for your business, there will be a tomorrow—and you should plan for that.
Embracing standardization in your deals allows you to keep your focus on the important terms, be efficient in your negotiations, and not cloud the waters unnecessarily. All your creative energy is better applied elsewhere—innovating your product, creating new markets, and building your business.
Ready to take advantage of standardization? Let's chat about it.
Sample scenarios are for illustrative purposes only
Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.
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