For a seed round, is it typical for founders to take out some money to pay for or reimburse the founders for past expenses?

My answer to For a seed round, is it typical for founders to take out some money to pay for or reimburse the founde…

Answer by Raad Ahmed:

Brett and Gil nail it right on the head in that this is not advisable unless you expense these items in the period between the term sheet was signed and the money was in the bank.

As previous writers stated, always think of your fiduciary responsibility to backers and shareholders. Will paying or reimbursing founders for past expenses breach this duty? I would also concur that ultimately the duty to fully disclose expenses and only deal with those expenses after full consent from interested parties has been obtained is key. The last thing you want is an impression that you have lost faith in the viability of the venture want to cover your own costs at the expense of the business at an early stage. If it’s a minimal amount of expenses it will likely not be an issue but always be mindful of legal obligations to follow internal procedures and the terms of funding and lastly the impression this can convey to potential investors

If you’d like to dig deeper with an actual startup attorney, feel free to book a free consultation on LawTrades.

For a seed round, is it typical for founders to take out some money to pay for or reimburse the founders for past expenses?

Legal is hard. Let’s tackle it together.

Speak to one of our Legal Pros and discover how we can help.

Let's Talk