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Startup Equity Contract Template for United States

A Startup Equity Contract is a legally binding agreement under U.S. law that outlines the terms and conditions of equity compensation in a startup company. This document governs the issuance of stock options, restricted stock, or other equity instruments to employees, advisors, or consultants. It includes vesting schedules, exercise terms, transfer restrictions, and compliance with federal and state securities laws, particularly SEC regulations and relevant tax provisions such as IRC 409A.

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What is a Startup Equity Contract?

The Startup Equity Contract serves as a foundational document for companies offering ownership stakes to key stakeholders. This agreement, governed by U.S. federal and state laws, is essential when startups want to attract and retain talent through equity compensation. The contract typically includes detailed vesting schedules, exercise provisions, and transfer restrictions, while ensuring compliance with SEC regulations and tax laws. A well-structured Startup Equity Contract protects both the company's and recipient's interests while establishing clear parameters for equity ownership and associated rights.

What sections should be included in a Startup Equity Contract?

1. Parties: Identification of the company and equity recipient

2. Background: Context of the equity grant and relationship between parties

3. Definitions: Key terms used throughout the agreement

4. Grant of Equity: Details of equity type, amount, and vesting schedule

5. Vesting Terms: Specific conditions and timeline for equity vesting

6. Exercise Terms: Conditions and procedures for exercising equity rights

7. Transfer Restrictions: Limitations on selling or transferring equity

8. Termination Provisions: Effects of employment termination on equity

What sections are optional to include in a Startup Equity Contract?

1. Right of First Refusal: Company's right to purchase shares before third-party sale

2. Drag-Along Rights: Ability to force minority shareholders to join in sale

3. Tag-Along Rights: Right to join in sale of majority shares

4. Acceleration Provisions: Conditions for accelerated vesting in case of acquisition or major company events

What schedules should be included in a Startup Equity Contract?

1. Vesting Schedule: Detailed timeline of vesting milestones

2. Shareholders Agreement: Reference to or incorporation of existing shareholders agreement

3. Stock Option Plan: Complete terms of the company's equity incentive plan

4. 83(b) Election Form: Tax election form for immediate taxation of restricted stock

5. Board Resolution: Approval of equity grant by board of directors

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

United States

Publisher

Ƶ

Document Type

Equity Agreement

Cost

Free to use

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