Chicago Startup Attorney
Founder-friendly.

The Practice

The two mistakes
that kill startups legally.

Equity, financing,
and founder economics.

Avoidable legal risk in an early-stage company often arises from how founder equity, employee equity, intellectual property, and investor instruments are handled at the start. Much of that work is squarely legal; several of the items below also carry tax consequences, and on those Adam works alongside your CPA or tax advisor rather than in place of one. The areas below are technical, fact-specific, and governed by rules that change — this section describes the kinds of issues founders should be aware of, not the specific deadlines, rates, thresholds, or elections that apply to a given company. Those must be confirmed against current law and your facts, with qualified counsel and your tax advisor, before you act.

Founder restricted stock and the 83(b) election

When founders or early team members receive restricted stock subject to vesting, a Section 83(b) election can change how and when that equity is taxed. The filing window is short and strict — generally 30 days from the transfer of the stock, with no extensions — so the decision and the filing have to be handled correctly and promptly. This is a tax election: Adam handles the underlying restricted-stock and vesting paperwork and coordinates timing with your tax advisor, who confirms whether and how to file. Other equity structures — such as RSUs, unexercised options, and early-exercise arrangements — raise different issues and should be reviewed separately. Confirm the current rules and procedure with your tax advisor before acting.

Vesting, IP, cap tables, and option pools

Founder vesting, an option pool sized for early hires, and a clean capitalization table are central to what investor due diligence reviews, and vesting documents commonly address what happens to unvested equity on a change of control. Equally important is intellectual property: proprietary information and inventions assignment agreements (PIIAs) should be signed at formation, at each hire, and by any contractor or pre-incorporation contributor, so that code, designs, and other work product are owned by the company rather than by individuals. Unaddressed gaps in any of these — undocumented grants, ambiguous vesting, unassigned IP — are common diligence problems. Adam structures vesting, drafts the equity and IP-assignment documents, and documents the cap table so issues are easier to identify and resolve before a financing. These should be reviewed against the company's governing documents, stock plan, investor documents, and current law before issuance.

Stock options and company valuations

Before granting compensatory stock options, a company generally needs a defensible valuation of its common stock to set the exercise price, and tax rules (under Section 409A) govern how that price and valuation must be handled to avoid adverse tax treatment. Valuations are time-limited and can be affected by later events such as a financing, so they need to be kept current. The choice between incentive stock options and non-qualified stock options also affects eligibility, documentation, and tax treatment. The valuation itself is performed by an independent valuation professional, not by the firm; Adam handles the option-plan and grant documentation and coordinates the corporate implementation with your valuation provider and tax advisor, who confirm valuation and tax treatment. The specific requirements here change — confirm current rules before granting.

QSBS (Qualified Small Business Stock) awareness

For stock in a qualifying C-corporation, Section 1202 can allow noncorporate holders to exclude some or all of the gain on a later sale, subject to holding-period and other requirements. This is an area of active change — federal law was amended in 2025, the rules differ depending on when the stock was acquired, the exclusion and its tax effect can vary with how long the stock is held, and many service businesses — along with certain others, such as financial, farming, hospitality, and extraction businesses — are excluded altogether. Eligibility turns on a number of fact-specific conditions (including how and when the stock was issued, the company's structure and size, how it operates, and events like redemptions and secondary sales), and federal treatment may not match a given state's. QSBS is a tax matter: Adam can structure the entity and stock issuance with QSBS in mind, but whether any stock qualifies, and any actual tax benefit, must be confirmed by your tax advisor under the rules in effect at the time. Do not rely on QSBS treatment, or on the timing of any sale, without that confirmation.

Attorney Advertising. This section describes legal services and provides general information only. It is not individualized legal advice, tax advice, accounting advice, valuation advice, or investment advice, and does not create an attorney-client relationship. The tax matters described here (including Section 83(b), Section 409A, and Section 1202/QSBS) are technical, fact-specific, and subject to change; nothing here states the deadlines, rates, thresholds, or requirements that apply to a particular company, and all of them must be independently verified against then-current law before any action is taken. Tax elections and valuations are handled in coordination with your qualified tax advisor or valuation professional. Adam Lysinski practices law in Illinois; this content is not an offer to provide legal services in any jurisdiction where he is not authorized to practice.