When your start-up needs capital or is looking to exit, potential investors and buyers will want to see everything and know everything about your company since inception. Their goal is to know it better than you do. So, you’ll be asked to turn over all your books and records for a deep-dive due diligence process. These corporate records are also required to back up the key representations and warranties the company will make in the deal documents and to ensure that the statements made to investors and buyers about the company are true, accurate and complete.
Poor corporate record hygiene signals lurking risks to investors and buyers – even when no risks are there, which can impair the company’s valuation or kill a deal altogether. Cleaning up issues in the midst of financing or acquisition transactions is much more costly and time consuming than maintaining good recordkeeping from day one.
So here is a recommended checklist of documents to keep at the ready in a due diligence notebook you can hand over immediately upon request:

If Your Start-Up is a Corporation

• Certificate/Articles of Incorporation (stamped as filed with the relevant secretary of state), including all filed amendments
• Bylaws
• “Foreign” Filings (registrations to do business in states other than the state of incorporation)
• Organizations consents by the incorporator and initial stockholders and directors that, among other things, appoint initial Board members, adopt the Bylaws, appoint initial officers and authorize any other actions that require formal approval such as issuance shares to founders
• Founder Vesting Agreement and any other agreements among stockholders
• Copies of minutes from all Board meetings and stockholder meetings
• Copies of all Board and stockholder resolutions, adopted either at meetings or by written consents
• Stock Ledger
• Option Ledger (listing every option holder, type of options held, number of options, vesting schedule and exercise price)
• Capitalization table that includes all stockholders and holders of other securities that are convertible into stock such as options, warrants and convertible promissory notes
• Copies of all issued stock certificates
• IP Assignments (in which founders, employees and contractors have assigned all IP rights to the company)
• Evidence of IP filings/registrations (for any trademarks, copyrights, patents and domain names)
• All contracts and amendments, including NDA’s, employment agreements and contractor agreements (fully signed and complete copies)
• Option or equity incentive grant documentation (including Board approvals)
• Financial statements and tax records
• Annual or biennial reports or statements of information filed with the state and any other documents filed with the state

If Your Start-Up is an LLC

• Certificate of Formation/Articles of Organization (stamped as filed with the relevant secretary of state), including all filed amendments
• “Foreign” Filings (registrations to do business in states other than the state of formation)
• Operating Agreement
• Founder Vesting Agreement and any other agreements among members
• Copies of minutes from all meetings of managers and members
• Copies of all manager and member resolutions, adopted either at meetings or by written consents
• Membership Units Schedule
• Option Schedule (listing every option holder, type of options held, number of options, vesting schedule and exercise price)
• Capitalization table that includes all members and holders of other securities that are convertible into membership units such as options, warrants and convertible promissory notes
• IP Assignments (in which founders, employees and contractors have assigned all IP rights to the company)
• Evidence of IP filings/registrations (for any trademarks, copyrights, patents and domain names)
• All contracts and amendments, including NDA’s, employment agreements and contractor agreements (fully signed and complete copies)
• Option or equity incentive grant documentation (including required approvals)
• Financial statements and tax records
• Annual or biennial reports or statements of information filed with the state and/or any other documents filed with the state

Creating proper documentation and maintaining appropriate records are concepts that sound simple and routine. Yet, start-ups are notorious for failing to do so. Following the simple guidelines above will significantly decrease uncertainty over critical areas such as who are the equity holders and how many securities do they own, show investors or buyers that the company owns outright its key IP, and eliminate a potential impairment to the company’s valuation.