Drafting for unofficial startup ownership

Question

I have an advisor in my startup that I would like to get 1% anti-diluted ownership. However, because the company hasn't yet been incorporated, I can't actually issue out any shares.

However, to make him feel secure about his ownership, he's asking that I sign something that essentially would guarantee him the 1% ownership once the company were to be incorporated.

My question is, how would I go about drafting up something like this to sign and hand to him? I come from the engineering world and don't have the "legalese" skills needed for writing something like this.

Answer 1

In general, you don't need specific wording to make a contract.

"I will give you 1% of the shares when we incorporate in return for your advice." you say. "OK", he says.

... and we have a legally binding contract (with or without a handshake). The terms might be a little vague but if you don't get into a dispute that won't matter. Even if you do get into a dispute there is enough substance in the contract and the circumstances for a court to make a ruling.

However, if he wants something in writing (and its probably a good idea), write down what you will do and when, what he will do and when and what the (prospective) company will do and when (companies can be bound by contracts made in anticipation of their existence) and what will happen if one of you doesn't do what they said they would by when they said they would.