Founders arrive at Sun Law having learned legal strategy from Twitter threads and podcast guests. Three beliefs come up over and over, and each carries a bill.
Myth: "LLC vs. C-Corp doesn't really matter"
Institutional investors mostly cannot hold LLC interests without creating tax problems for their own limited partners. So they make you convert. That conversion arrives as legal fees, a possible tax event, and three weeks of delay, in the same month you are trying to close a round.
The reality: Building to raise, start with a Delaware C-Corp. Bootstrapping, an LLC probably serves you better. Pick one on purpose rather than defaulting into whichever form you filed at 11pm.
Myth: "Founder agreements are for when you don't trust each other"
You write a founder agreement while you do trust each other. That is the only window where two people can talk calmly about equity splits, vesting, and who keeps what if someone quits. Try opening that conversation the week one of you wants out.
The reality: Vesting protects the founder who stays as much as the one who leaves. Without it, a co-founder who works three months may walk and keep half your company, and your next investor will notice.
Myth: "Templates are enough"
A template holds up until the day you need it to do something: settle a dispute, survive diligence, answer an investor's lawyer. Language written for a generic company protects a generic company.
The reality: Keep the template for the structure. Rewrite the IP assignment, the confidentiality carve-outs, and the termination triggers to match what your business does.
The Cost of Getting It Wrong
Founders burn months of runway fixing entity structure in the middle of a raise. Co-founder disputes end companies that a $2,000 agreement would have held together. Both start as a decision to save money on legal work.
The bill still arrives. It arrives later, larger, and at the worst possible week.
Call a lawyer before you need one. A $3,000 formation done right costs less than the $30,000 restructuring that replaces it.