I started a corporation with one other person. We filed the Charter with Delaware and were approved. We then issued 1,000,000 shares to each...

Question

I started a corporation with one other person. We filed the Charter with Delaware and were approved. We then issued 1,000,000 shares to each of us. We never named officers or directors. Six months later, I learn that we may be in trouble. I do not know if our stock issuance meets any of the exemptions from registration (we are not accredited investors). Also, we did not file Form D or comply with Bluesky laws. Any advice on what to do? Do we have to register our securities?

Answer

The good news is that, generally speaking, securities laws are not a big concern for founders who own their own stock. They are a concern if one solicits investors to become shareholders. It is possible that one of you solicited the other and then you would be subject to securities laws.

The biggest concern should be taxes and the proper treatment of your founder equity to gain beneficial tax status, otherwise you may get a very expensive tax surprise when you bring on board investors or end up selling the company.

Realistically, the circumstances need to be reviewed by a startup attorney. This review would not be expensive and it will be put you on proper footing.

Please contact my office at your earliest convenience for help in this matter.

Roman R. Fichman, Esq.

www.TheLegalists.com │ @TheLegalist

email: Info (@) TheLegalists (dot) com

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