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Early stage startup (C-Corp) and a soon-to-be board member is asking for $120K/yr in equity, how do we structure this?

With cash in short supply, bootstrapped startups are usually not in the position to offer cash compensation to directors. (Expenses, however, are normally reimbursed.) Instead, a young company often offers directors equity in lieu of compensation.

The customary range is between 0.5 to two percent of outstanding shares vested over a period of between two to four years. Lead directors can receive as much as 10 percent more than other members. Founders and investors who sit on the board should not be compensated with limited exceptions. If a company reaches the Series B round of financing, directors should be compensated with cash retainers and offered new equity incentives.

In terms of how to structure and draft this you should retain counsel. You can do that at LawTrades (disclosure: I’m the CEO!). We’re recreating the legal department for startups by offering flat-fee pricing, free consultations, free price quotes, and a money-back guarantee.

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