Frequently Asked Questions
How should the advisor be compensated?
Starting companies usually give their advisors equity as compensation, considering that they usually do not have enough finances to pay the advisors and also advisors usually prefer equity compensation. In the agreement, the parties can choose between cash and equity compensation. Equity compensation is also preferred due to the fact that the advisor does not work at fixed times and therefore the cash compensation would be difficult to define.
There is no clearly defined market rate for advisors. The amount of the compensation usually depends on the experience and knowledge of the advisor, the company and the exact services provided. Very common equity compensation is as follows: vesting period is 2 years, size of the grant under 1% and cliff of 3 months. This will be defined in the stock purchase or option agreements.
Will the advisor’s expenses be reimbursed?
Parties can agree whether the advisor’s reasonable expenses incurred in the course of performing services under the agreement are going to be reimbursed. If the company agrees with the reimbursement, the advisor is still obligated to provide written notice in advance describing the nature and the maximum amount of the expenses and if the company pre-approves the expenses, they are going to be reimbursed.
Is the advisor an employee of the company?
The advisor is an independent contractor and not an employee of the company, meaning that he / she is not eligible for any employee benefits nor will the company make deductions from payments made to him / her for employment or income taxes. The advisor also does not have authority to enter into contracts that bind the company or create obligations to the company without the prior written authorization of the company.
Who owns the intellectual property rights of the property created by the advisor?
By signing the agreement, the advisor assigns all rights, titles and interests concerning the intellectual property created by him / her in the course of performing the services agreed on in the agreement. In addition to that, the advisor consents to assist the company in obtaining and enforcing any intellectual property right, even after the termination of the agreement.
When does the agreement expire?
The agreement continues until it is terminated by either party. The parties have the right to terminate the agreement at any time for any reason, notifying the other party in advance about the termination.