Series A Legal Readiness: A Founder's Checklist

A Series A is the first time most founders encounter real legal diligence. Seed rounds are typically closed on SAFEs or convertible notes with minimal scrutiny. A Series A is different — there's a lead investor, a law firm representing them, and a diligence process that will surface every shortcut you've taken since incorporation.

But not to worry. The companies that close Series A rounds quickly and cleanly aren't the ones with perfect legal histories — they're the ones that identified and fixed issues before investors get knee deep in due diligence.

We've helped dozens of companies through this process. The difference between a 30-day close and a 90-day slog very often comes down to preparation. Here's the checklist I walk founders through, organized by when you need to tackle each item.

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Fix Now (3+ Months Before You Fundraise)

These are the items that take time to resolve, have tax implications tied to your company's valuation, or require cooperation from people who may not be easy to track down. Start here.

Finalize cofounder equity. This one surprises people. I sometimes see companies where the founders agreed on a split verbally — maybe even documented it in an email or operating agreement — but never actually issued the stock. No board consent, no stock purchase agreement, no shares in the cap table.

Pre-term sheet, this is usually fixable with minimal tax consequences. You can issue shares at the current fair market value (which, pre-Series A, is still low) and file an 83(b) election. The founder pays pennies in tax and the equity is formalized.

Post-term sheet, the calculus changes completely. Once a term sheet sets a price, you can no longer credibly argue the common stock is worth $0.0001/share. Issuing founder shares at that point means either a significant tax bill on the spread or a complicated restructuring. I've seen this single issue delay a closing by weeks while tax counsel tried to find a workable structure. Fix it now while the numbers are small.

Fix missing 83(b) elections. The 83(b) election must be filed within 30 days of purchasing restricted stock. There are no extensions. If a founder or early employee purchased stock subject to vesting and didn't file, every vesting event since has been a taxable event at ordinary income rates. I wrote about this in detail in How 83(b) Elections Work.

Pre-term sheet, there are sometimes workarounds. Depending on the facts, you may be able to restructure the equity grant — repurchase the unvested shares and reissue them, for example — in a way that effectively resets the clock. It's not pretty, and it requires careful tax analysis, but it's possible.

Post-term sheet? The valuation delta makes most restructuring solutions prohibitively expensive. The founder is stuck with the tax consequences of every past and future vesting event. I've seen personal tax bills in the mid-six figures from missed 83(b) elections alone. If there's any chance this applies to you or your cofounders, talk to a tax advisor now — not after you've signed a term sheet. See our Startup Equity Tax Guide for more on the tax landscape.

Finalize employee stock grants. Pre-Series A, you often have the option to grant restricted stock directly to employees and early team members. Restricted stock is simpler, more valuable to the recipient (they own actual shares, not options), and the tax treatment is more favorable — especially with an 83(b) election.

Post-Series A, the difference between the 409A fair market value and the preferred stock price typically makes restricted stock impractical. You'll need to switch to stock options under a formal equity incentive plan, which means employees get a less valuable instrument (the right to buy shares at a strike price, rather than the shares themselves). The tax treatment is worse. The paperwork is more complex. And employees who were promised equity will understandably ask why their grant looks different than what you discussed.

If you have key hires or early employees who deserve equity, issue it now. The window where restricted stock makes sense closes when your valuation goes up.

Resolve ex-cofounder and early contributor issues. This is the item that can genuinely tank a round, and it's the one founders most want to avoid dealing with.

Here's the scenario: a technical cofounder left six months in. They wrote early code. Maybe they have unvested shares that were never formally repurchased. Maybe they never signed a CIIA (Confidential Information and Inventions Assignment agreement), so the company doesn't clearly own the IP they created. Maybe both.

These people have leverage, and they know it — or they will once an investor's lawyer sends a diligence request and you can't produce a clean IP assignment chain. The fix often involves negotiating a separation agreement, accelerating some equity to get cooperation, and securing a clean IP assignment. This takes time and sometimes money. Three months out, you have negotiating room. Two weeks before closing, the ex-cofounder has all the leverage and knows it.

For more on navigating these situations, see Founder Disputes and Breakups.

Board structure. This one is nuanced, and it's advice you won't hear from most lawyers, but I think it matters.

Your Series A investor will almost certainly want a board seat. That's standard. Your Series B investor may want one too. Preferred financing rounds can add pressure for additional investor representation on the board, whether through a new seat, an observer right, or a change in board composition. If you start your Series A with a two-person board (the two cofounders), you could end up in a 2-2 split after the A, and potentially in a minority position after the B.

The smart move is to proactively expand your common board seats before you start fundraising. If you don't already control three common seats (two founders plus one independent or founder-designated seat), consider adding them now. This isn't hostile — it's good governance. It gives you room to add investor seats in future rounds without losing board control prematurely.

I know this sounds unusual. Most founders don't think about board composition until a term sheet lands on their desk with a board structure provision already written. By then, the negotiation is about the investor's proposed structure, not yours. Setting up a thoughtful board structure before fundraising reframes the conversation entirely. You’re not fighting to add seats — you already have a plan.

For more on board governance generally, see our Startup Board Governance Guide.

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Fix Before the Term Sheet

These items are important but more mechanical. They don't have the same tax-sensitivity or third-party dependency as the items above, but they need to be done before investors start doing real diligence.

Outstanding SAFE and convertible note cleanup. You'd be amazed how many founders don't have a clear picture of their own cap table. I've seen companies with six different SAFEs outstanding — some pre-money, some post-money, with different valuation caps and discount rates — and no model showing what the cap table looks like post-conversion.

Your lead investor will model this. Their lawyer will model this. If your numbers don't match theirs, it creates doubt and delays.

Before you start fundraising, build (or have someone build) a fully diluted cap table model that includes every outstanding SAFE, note, and warrant. Know your conversion terms cold. Understand how the post-money SAFE math works and how multiple SAFEs at different caps stack. If there's a convertible note with approaching maturity, understand the mechanics of interest accrual and what happens at maturity. This is basic financial literacy for a Series A founder, and investors will judge you on it.

Get pending stock grants done. If you have promised equity to employees or advisors — whether restricted stock or stock options — get those grants formally approved and documented before you start fundraising. Pending but unissued grants create cap table uncertainty, and investor counsel will flag every one of them. If issuing stock options, you may need a current 409A valuation to set a defensible strike price, so factor in that lead time. The point is: don't let promised-but-unissued equity become a diligence issue when it could have been a routine board approval three months earlier.

IP assignment audit. I cannot overstate how important this is. Investor counsel will ask for a complete list of every person who contributed to your product — employees, contractors, interns, that friend who helped you build the prototype — and they'll want to see a signed CIIA or IP assignment agreement from each one.

Gaps in IP assignment are the single most common diligence flag I see. And they're the one that makes investors most nervous, because an unassigned IP claim is a potential existential risk to the company.

The fix is usually straightforward: track down the person, explain the situation, and get them to sign an assignment. Most people will cooperate. But some won't, or they'll want something in return, which brings you back to the ex-cofounder problem above. Do the audit now. Make a list of everyone who ever wrote code, designed UI, created content, or contributed anything creative to the product. Check each name against your files. For anyone missing a signed agreement, start the outreach process.

See IP Due Diligence for Startups and Hereby Assigns: IP Assignment in Startups for deep dives on what proper IP assignment looks like.

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Can Wait Until Diligence (But Shouldn't Surprise You)

These items will come up during the diligence process. You don't necessarily need to fix them in advance, but you should know where you stand so nothing catches you off guard.

State qualifications and corporate housekeeping. Are your Delaware annual reports filed? Are you in good standing? If you operate in a state other than Delaware (and you almost certainly do), are you qualified to do business there? Are your board meeting minutes up to date?

None of these are hard to fix. A late annual report is a small fee. Foreign qualification is a filing. Board minutes can be prepared retroactively (not ideal, but workable). But if investor counsel pulls your Delaware good standing certificate and it comes back "voided" because you forgot to pay the franchise tax, that's an embarrassing conversation and a signal of operational sloppiness.

Spend an hour reviewing your Delaware franchise tax status, state registrations, and corporate minute book. Fix anything that's obviously wrong. For the rest, at least know what the status is so you can address it without scrambling.

Data privacy basics. If your product collects any personal data — and it almost certainly does — you need a privacy policy that accurately reflects your actual data practices. Not a template you copied from another website in 2023. An actual policy that describes what you collect, why, how you store it, and who you share it with.

If you're handling significant amounts of PII, or if you're in a regulated space (health, finance, education, kids), investors will want to see a more robust compliance posture. But for most early-stage SaaS companies, the bar is: do you have a privacy policy, does it match reality, and do you have basic data security practices in place?

For a deeper look at what this means in practice, see Startup Data Privacy Compliance.

Material contracts review. Pull your key contracts — customer agreements, vendor agreements, partnership deals, licensing agreements — and read them with an investor's eyes. Specifically, look for:

• Change-of-control provisions. Does any contract terminate or require consent if the company raises a round or changes ownership? This is more common than you'd think, especially in enterprise customer agreements.
• Exclusivity commitments. Have you promised any customer or partner exclusive rights to your product in a market or geography? Investors hate exclusivity because it limits your upside.
• Unusual terms. Revenue shares, equity kickers, perpetual licenses to your IP, or anything else that a sophisticated investor would flag as non-standard.

You don't need to renegotiate all of these before fundraising. But you need to know they exist, because they'll come up in diligence and you'll need to explain them. If any are truly problematic (a broad change-of-control clause in your biggest customer contract, for example), start the conversation about amending them now.

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Why Early Beats Late

Every item on this checklist is dramatically cheaper and simpler to fix early than late. That's not just a general principle — it's a consistent pattern I've seen across dozens of Series A closings.

When you address these issues months before fundraising, the work is methodical and low-pressure. Your lawyer has time to think through the best approach. People you need to track down are cooperative because there's no urgency creating leverage. Tax-sensitive issues can be structured carefully.

When the same issues surface during diligence, everything changes. You're negotiating with ex-cofounders who know you're under time pressure. You're explaining to your lead investor why the cap table doesn't match what you told them. You're rushing tax analysis that should have been done thoughtfully. And you're doing all of this while also negotiating deal documents, managing your team, and trying to keep the business running. The complexity — and the cost — compounds fast.

Some of these issues, if discovered late enough, can't be fixed at all. A missed 83(b) election is the classic example. But I've also seen rounds fall apart over unresolved IP claims, undisclosed SAFEs that materially changed the cap table, and ex-cofounders who refused to cooperate.

The best time to fix all of this was at incorporation. The second best time is right now — before the fundraising clock starts ticking.

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The Takeaway

Series A readiness isn't about being perfect. No early-stage company has a spotless legal history. It's about knowing where the issues are, having a plan to address them, and getting the time-sensitive ones handled before valuation changes and investor scrutiny make them harder and more expensive to fix.

If you're 3-6 months out from a Series A, start with the first section of this checklist. If you're closer, work through all three. And if you're reading this thinking "I'm not sure where we stand on half of these" — that's exactly the right time to find out.

The founders who raise cleanly aren't the ones who never had problems. They're the ones who solved them before anyone else was looking.