Have you thought about having advisory board members? If so, in exchange for their expertise, you will probably be giving them some equity in your company. An advisory board can be a huge benefit but it’s important to have a clear agreement with each of your advisory board members. A few of the matters that should be included are:
- Meeting attendance or other expectations, such as a particular number of hours of consultation
- Fees — Typically this is equity that vests over the term of the agreement. Because there are tax consequences to issuing restricted stock, the advisory board member often receives non-qualified stock options.
- The company’s ownership of all written materials.
- Confidentiality provisions, including an obligation to return all confidential material on termination of the agreement.
- Mutual non-disparagement.
- A provision clarifying that the company and the advisory board member are not partners and that the advisory board member is not an employee.
With a carefully crafted agreement, having advisory board members can be a great step to take.
For more information, see www.winstead.com/LegalGuide