Meaning
The formal process of establishing a corporate entity for physical product ventures secures early intellectual property and hardware designs. Completing the hardware founder formation process requires the founders to assign all their prototypes, schematics, and design files to the new corporation. This ensures that the entity owns all early-stage technology before it receives external funding or hires employees.
It acts as the legal starting point for the company’s corporate existence.
Entity Creation
Creating the corporate entity provides a legal shield that protects the founders from personal liability. It also provides the necessary structure to issue shares, allocate stock options, and sign commercial agreements. This structure is essential for presenting a professional and investable platform to venture capital funds.
Asset Migration
Migration of assets from the founders to the corporation must be documented through contribution agreements. These documents list all software, hardware prototypes, schematics, and design files that are being transferred to the company. This ensures that the startup, rather than the individual founders, owns the technology.
Initial Capitalization
Subsequent share allocations are paired with vesting agreements to align the team for future growth. The shares issued to the founders during hardware founder formation are subject to repurchase options that expire over time. This incentivizes the founders to remain with the company and continue developing the hardware.
