Nov 7 2007

Term Sheet for an LLC vs. a Corporation

Q: We have an interested Angel for an investment in our startup LLC. We have a strong lawyer for support. We’d like to submit a draft Term Sheet to, as you say in your blog, “control the paper”. Everything I find online about Angel Term Sheets contemplates shares, which presumes a corporation (vs. an LLC). We expect to give secondary (non-voting) membership as well as putting the investor on an Advisory Board. Can you point to resources that are more appropriate to an LLC structure?

A: (Brad) Your lawyer should be able to quickly crank this out.  There’s nothing special about it – just slightly different language given the notion of “members” vs. “shareholders” and the difference in how members rights are allocated / delineated.  I don’t know of any generic forms online, but if your lawyer doesn’t have this in a boilerplate form, I’d recommend you revisit the notion that you have “a strong lawyer for support.”