These complicated agreements perform a simple and necessary function.

If you have two co-founders, you may well wish to share the initial equity in your corporation equally among the three of you. All very fair and balanced.

But what happens if one of you loses interest, or finds an alternative path that interests him more, in other words, what happens if one of you leaves?

It happens all the time, and is only unfair if the departing founder keeps all her stock despite leaving while the others work on for months or even years without her. Where does the equity come from for the person who assumes her functions?

A Restricted Stock Purchase Agreement fixes this problem essentially by having each founder’s shares vest over time. Again, simple to state, difficult to implement. For example, the shares are deposited in escrow during the vesting period, and a neutral escrow agent needs to be appointed.

Stock Certificates will be created for each Founder.

Section 83(b) election. Very important. Must be filed with the IRS by each founder within 30 days of purchasing restricted stock. Don’t blow this one! If you do, it can’t be fixed.

State “blue sky” filing. In California, Section 25102 (f) filing.

I will walk you through both the contacts and the logistics of implementing them.