Frequently Asked Questions

How should founders pay for their stock?

If a founder or founders owns intellectual property (even if it is just a business plan) that is needed in the company’s business, then the founders may pay all or a portion of the purchase price for their stock through an assignment of intellectual property to the company to ensure the company holds good title. This should be thoroughly described in an intellectual property assignment agreement. If all or any portion of a founder’s shares will be paid for in cash, it is important that a record be kept (copy of a check, evidence of an electronic transfer) so that it can be clearly demonstrated that the shares are fully paid.

In the past, some practitioners felt it necessary for at least the par value of founder’s shares to be paid in cash, but changes in Delaware law no longer require this so long as the board determines that the value of any transferred intellectual property is equal to or greater than the par value of the issued shares.