Legal Compliance

Legal & Compliance Skill

Guide founders through the legal foundations every startup needs—incorporation, founder agreements, employee equity, legal documents, fundraising instruments, and cap table management.

Important Disclaimers

Always include when providing legal guidance:

• This is educational information, not legal advice
• Recommend consulting a qualified attorney for specific situations
• Laws vary by jurisdiction and change over time
• Complex situations require professional legal counsel

Core Workflow

1. Assess Stage and Needs

Determine where the founder is:

2. Route to Appropriate Guidance

Based on the question, load the relevant reference:

• Incorporation questions → references/incorporation-guide.md
• Founder agreement/vesting → references/founder-agreements.md
• Employee equity/ESOP → references/employee-equity.md
• Terms of service/privacy → references/legal-documents.md
• SAFEs/convertible notes → references/fundraising-instruments.md
• Cap table modeling → references/cap-table-guide.md

Decision Trees

Entity Selection

Planning to raise VC?
├─ Yes → Delaware C-Corp
└─ No → Will you have outside investors?
         ├─ Yes → Delaware C-Corp (likely)
         └─ No → Consider LLC for tax flexibility
                 └─ But: Converting LLC→C-Corp later is expensive

Founder Vesting

Multiple founders?
├─ Yes → 4-year vesting, 1-year cliff for ALL founders
│        └─ Credit prior work? Start vesting date earlier
└─ Solo founder → Still consider vesting (for future co-founders/investors)

Equity Grant Sizing

Determine: Stage × Role × Seniority

Example: Series A hire, Senior Engineer
→ Load references/employee-equity.md
→ Find: 0.1-0.25% typical range
→ Adjust for: market conditions, candidate negotiation, competing offers

Key Frameworks

Incorporation Checklist

1. Choose entity (C-Corp for VC-track)
2. Choose jurisdiction (Delaware standard)
3. File incorporation documents
4. Adopt bylaws and initial resolutions
5. Issue founder shares with vesting
6. File 83(b) elections (within 30 days!)
7. Execute IP assignment agreements
8. Obtain EIN

ESOP Pool Sizing

Standard Vesting Terms

• 4-year total vesting period
• 1-year cliff (25% vests at month 12)
• Monthly vesting thereafter
• Double-trigger acceleration on M&A

Assets

Cap Table Template

Location: assets/cap-table-template.xlsx

5-sheet workbook containing:

• Current Cap Table: Ownership summary
• Option Grant Ledger: Track all employee grants
• Convertible Securities: SAFEs and notes tracker
• Pro Forma Cap Table: Model funding scenarios
• Instructions: How to use each sheet

When founders ask about cap tables:

1. Explain the concepts from references/cap-table-guide.md
2. Offer the template for their use
3. Help them understand how to model scenarios

Integration Points

With Fundraising Skill

• SAFE/note terms affect cap table
• Pro forma modeling for pitch
• Investor-standard documents

With Business Model Skill

• Compensation philosophy
• Equity vs cash tradeoffs
• Total comp benchmarking

Common Questions

"Should I use a SAFE or convertible note?"

→ Load references/fundraising-instruments.md → SAFEs: simpler, no interest, no maturity (YC standard) → Notes: debt structure, some investors prefer → Recommend: Post-money SAFE for most situations

"How much equity should I give my first engineer?"

→ Load references/employee-equity.md → Seed stage engineer: 0.1-0.5% depending on seniority → Consider: full-time vs part-time, prior experience, market rate cash

"Do I need a privacy policy?"

→ Load references/legal-documents.md → Yes, if collecting any user data → Required for: app stores, payment processing, EU users → Recommend: use generator as starting point, lawyer review for complex cases

"What's a fair founder split?"

→ Load references/founder-agreements.md → Consider: contribution so far, going-forward commitment, skills/experience → Key principle: vesting matters more than initial split → Always: document the reasoning

Output Formats

For Guidance Questions

Provide clear, actionable advice with:

• Direct recommendation
• Key considerations
• When to consult a lawyer
• Relevant resources

For Template Requests

1. Explain what the document should contain
2. Provide template or point to standard sources (YC, Clerky)
3. Emphasize need for legal review
4. Never provide as "final" legal document

For Calculations

Use cap table template or provide formulas:

• Ownership percentages
• Dilution scenarios
• SAFE/note conversion math
• Option pool sizing

Reference Quick-Lookup

Resources to Recommend

Incorporation:

• Stripe Atlas
• Clerky

Legal Documents:

• YC Standard Documents
• Cooley GO

Equity:

• Carta Equity Education
• Index Ventures Option Plan

Cap Table:

• Carta
• Pulley

Adapted from Linas Beliūnas's The One-Person Unicorn founder skill set.