This content was created by Tim Draper. This content was uploaded by Tim Draper. This is a YouTube video titled "Starting a company with your friend | Richard Horning" (created 2017-10-05). The excerpt is a short Q&A/talk in English where an expert (Speaker A, likely Richard Horning) answers an attendee (Speaker B) about practical startup and legal issues: using company vs personal credit cards and building corporate credit, how personal credit reporting can affect founders, and structuring co-founder equity (restricted stock purchase agreements with vesting) to handle disputes and transitions. The speaker emphasizes planning for practical matters when entrepreneurs move to or start a company in the U.S.
Chapters
What other practical things should I tell you about? Startup law isn't all that comp— yes?
I have a question. So if you're a U.S. citizen, you have your own personal credit cards, but you become incorporated, does the same rule apply where they don't take your personal credit rating, you still need to open up a credit card for your company and get a whole new line of credit?
You want to get a credit card for the company.
Okay.
That was what the problem was in Finland.
Yes.
The woman had her personal line of credit, with her personal credit card, she was reimbursed for the charges that were company charges, but it wasn't showing up on the credit report of the company itself because it was a personal credit card, not a company credit card. Yeah, so you as individuals will have the same problem. You go to rent an apartment for an extended period of time, the landlord wants to know, how am I going to be sure That the rent's going to get paid. The problem of kicking you out is part of the background. So you too need to worry about how do I personally get into the credit rating business. So you need to go to a bank that will give you a personal line of credit on a credit card. If you give them a security deposit for the credit card, it should work.
Okay.
And then now your credit card company is reporting on you. Which is a good thing. In the early days, you'll be— if you start raising money in the United States, you'll run into all kinds of strange instruments, SAFEs, convertible notes, founder stock, all those kinds of things. One of the things that Founders need to think about when they start a company with their good friends is, so what happens if we have a falling out with our— my good friend? How do we structure our arrangements so that my friend who owns 35% of the company and I own 65% of the company, he doesn't go off to the South Pacific with his 35% and leave me to do all the work? Sits there. So you end up almost invariably getting on a restricted stock purchase agreement with vesting so that if your friend quits or you have a falling out and you say, you've got to go, he doesn't get to go to the South Pacific with all 35% of the company. He gets to keep some of it, but you'll need the Part that he didn't earn to hire his or her replacement. So you need to be aware of this problem. Again, it's a planning problem. Let me pause for just a second. The biggest challenge that I see with young entrepreneurs who come here from outside the United States is failure to plan. For the activities that you're going to engage in here. How am I going to stay? How am I going to get into the credit reporting system? How am I going to form the company? What are going to be my relationships with my co-founders once we're here so that we don't have a problem of transition if necessary? So you have to have a dialogue. You need to have a plan. You need to have some idea of how you're going to take care of these practical problems. It's not an academic issue. It's a practical problem.
