Exploring
by
Streiff Law
&
The Family
Part I - Founding
Part II - Growing
your GmbH / UG
Part III - Funding
daniel@streifflaw.de
Part II - Growing
your GmbH / UG
1. Why LegalStrasse & How it works
2. Employment, Freelancer & Coops.
3. Employment Contr...
9 out of 10
Startups fail
Many for lack of a legal infrastructure
and legal knowledge
daniel@streifflaw.de
daniel@streifflaw.de
a new hope
Empowering founders
through legal
infrastructure & knowledge
daniel@streifflaw.de
Why
Legalstrasse
#1: Avoid the pitfalls
daniel@streifflaw.de
Why
Legalstrasse
#2: It’s free!
daniel@streifflaw.de
Why
Legalstrasse
#3: More bootstrapping
daniel@streifflaw.de
Why
Legalstrasse
#4: Join forces
1. Go to legalstrasse.com
2. Select & download docs
3. Edit marked passages with
help of comments
4. For hiring use Employ...
Part II - Growing
your GmbH / UG
1. Why LegalStrasse & How it works
2. Employment, Freelancer & Co’ops
3. Employment Contr...
Employees vs. Freelancers
daniel@streifflaw.de
Shareholders
GmbH/UG
MDs
Freelancer
Distributor/
Contractor
Employees
Why bother?
“Scheinselbständigkeit”!
daniel@streifflaw.de
By treating an employee as a
freelancer in Germany, you
withhold...
So how do I know the status?
“Statusfeststellungsverfahren!”
daniel@streifflaw.de
Just like with MDs do a status check asa...
So what indicates an employee
and what a freelancer? (1 of 2)
daniel@streifflaw.de
Employee Freelancer
Integrated in GmbH ...
So what indicates an employee
and what a freelancer? (2 of 2)
daniel@streifflaw.de
Employee Freelancer
Vacation, sick leav...
Where hiring employees
beats Freelancers
Employee Freelancer
Works when, where and what MD
directs him within contract lim...
Where hiring Freelancers
beats Employees
Employee Freelancer
You deduct wage tax & social insurance Pays his own social in...
Special case:
Working shareholders
daniel@streifflaw.de
Shareholders
GmbH/UG
MDs
Employees
Freelancer
Founder & MD of
own ...
Part II - Growing
your GmbH / UG
1. Why LegalStrasse & How it works
2. Employment, Freelancer & Co’ops
3. Employment Contr...
daniel@streifflaw.de
● Always start and terminate a
contract in writing.
● You can limit a contract to up to 2
years.
● Em...
First Steps of employment in Germany
No employment Employment
Signing
● Employment contract
● Data privacy declaration
● E...
daniel@streifflaw.de
Whoever deals with customers’ or
employees’ private data has to give
this declaration.
Data privacy d...
Part II - Growing
your GmbH / UG
1. Why LegalStrasse & How it works
2. Employment, Freelancer & Co’ops
3. Employment Contr...
daniel@streifflaw.de
Main issues:
● Status check w/in 1 month
● Secure Intellectual Property
(IP) & Confidentiality
● Risk...
Part II - Growing
your GmbH / UG
1. Why LegalStrasse & How it works
2. Employment, Freelancer & Co’ops
3. Employment Contr...
daniel@streifflaw.de
Share company value with employees to
incentivize them to join, stay & perform.
Employee Participatio...
Comparing employee
participation models (1 of 2)
Taxable upon transfer Taxable upon exercise Taxable upon exercise
- - mor...
Comparing employee
participation models (2 of 2)
Shares (ESOP) Share Options
(ESOP?)
Virtual Options
(VSOP)
! ! ! ! ! ! ! ...
How options work
● Option value
= share value -
strike price
● Exit
= trigger to
execute option
Strike
price
daniel@streif...
Your input for VSOPs
Exit
● Exit cases
● dilution
● liquidation
preference
Options
● Total and
individual number
● Strike ...
Vesting #1 employee stays
Employee vesting:
● 1y cliff,
● to ceiling in y3,
● Exit after y4,
● 100% at y5
(double trigger)...
Vesting #2 employee leaves
Employee Vesting:
● Period 3y,
● 1y cliff,
● Good Leaver
after y2,
● hits floor at y3
daniel@st...
daniel@streifflaw.de
Ready to grow!
daniel@streifflaw.de
Next legal workshop:
Part III - Funding
your GmbH / UG
1. Finance Options
2. Convertible note
3. Term...
Thanks to Gregor Cresnar from Flaticon.com for designing all icons!
Thanks for
listening!
Comments &
questions to
daniel@s...
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LegalStrasse - Hiring 101: Avoid the legal pitfalls hiring for your startup! 

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Check out LegalStrasse, Free legal documents for German startups! https://www.legalstrasse.com/

When you’re starting a company, you have to build your product & talk to your customers—but at some point—you’ll have to dive into legal stuff. In order to do so, you’ll have to either 1) get a lawyer that may confuse you & charge you for standard legal documents or 2) become a lawyer yourself. 

Well, that’s exactly why we’re launching LegalStrasse: To empower entrepreneurs in Germany with all the legal tools they need. We provide them with state of the art drafts of all the contracts they need – for free. ✊

For this second workshop, Daniel Streiff tells you about all the pitfalls of hiring & explains how to use the free legal documents that we provide on LegalStrasse! Employment contract, freelancer contract, Employee participation, nothing of that will be a secret anymore. 

https://www.legalstrasse.com/

Made with love by The Family <3 thefamily.co

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LegalStrasse - Hiring 101: Avoid the legal pitfalls hiring for your startup! 

  1. 1. Exploring by Streiff Law & The Family
  2. 2. Part I - Founding Part II - Growing your GmbH / UG Part III - Funding daniel@streifflaw.de
  3. 3. Part II - Growing your GmbH / UG 1. Why LegalStrasse & How it works 2. Employment, Freelancer & Coops. 3. Employment Contract 4. Freelancer contract 5. Employee participation daniel@streifflaw.de
  4. 4. 9 out of 10 Startups fail Many for lack of a legal infrastructure and legal knowledge daniel@streifflaw.de
  5. 5. daniel@streifflaw.de a new hope Empowering founders through legal infrastructure & knowledge
  6. 6. daniel@streifflaw.de Why Legalstrasse #1: Avoid the pitfalls
  7. 7. daniel@streifflaw.de Why Legalstrasse #2: It’s free!
  8. 8. daniel@streifflaw.de Why Legalstrasse #3: More bootstrapping
  9. 9. daniel@streifflaw.de Why Legalstrasse #4: Join forces
  10. 10. 1. Go to legalstrasse.com 2. Select & download docs 3. Edit marked passages with help of comments 4. For hiring use Employment & Freelancer contracts, ESOP & Data Privacy D. daniel@streifflaw.de How it works
  11. 11. Part II - Growing your GmbH / UG 1. Why LegalStrasse & How it works 2. Employment, Freelancer & Co’ops 3. Employment Contract 4. Freelancer contract 5. Employee participation daniel@streifflaw.de
  12. 12. Employees vs. Freelancers daniel@streifflaw.de Shareholders GmbH/UG MDs Freelancer Distributor/ Contractor Employees
  13. 13. Why bother? “Scheinselbständigkeit”! daniel@streifflaw.de By treating an employee as a freelancer in Germany, you withhold wage tax & social insurance contributions (~40% ) You risk criminal punishment, huge payments + late fees when being audited!
  14. 14. So how do I know the status? “Statusfeststellungsverfahren!” daniel@streifflaw.de Just like with MDs do a status check asap with the German Pension Insurance (DRV) Until the end of the procedure, withhold social insurance & wage tax & build reserves. Can’t fake it: The contract doesn’t determine the status, but you must choose and execute the right contract for the actual relationship!
  15. 15. So what indicates an employee and what a freelancer? (1 of 2) daniel@streifflaw.de Employee Freelancer Integrated in GmbH organization Independent of GmbH Works when, where and what MD directs him within contract limits and of Working Time Directive Free to work if, when, where and how he pleases within the limits of contract (e.g. deadlines) Has to do job himself May have employees, sub-contractors one job he financially depends on Several clients, finance independency
  16. 16. So what indicates an employee and what a freelancer? (2 of 2) daniel@streifflaw.de Employee Freelancer Vacation, sick leave, parental leave - - Advertises his services (e.g. own website) Employee Participation Program Bonuses Uses GmbH working material & facilities Uses his own working materials
  17. 17. Where hiring employees beats Freelancers Employee Freelancer Works when, where and what MD directs him within contract limits and of Working Time Directive Free to work if, when, where and how he pleases within the limits of contract (e.g. deadlines) daniel@streifflaw.de Produces IP for company Needs to sell & transfer IP to company (usually part of compensation) Identification with company through culture and incentives Bonuses
  18. 18. Where hiring Freelancers beats Employees Employee Freelancer You deduct wage tax & social insurance Pays his own social insurance and taxes daniel@streifflaw.de Union participation in bigger companies - Termination protection Termination as agreed Minimum wage & monthly payment Only paid when required & as agreed Has claim to work part-time - Claim for sick, parental & regular leave Needs to insure himself No discrimination in pay or treatment -
  19. 19. Special case: Working shareholders daniel@streifflaw.de Shareholders GmbH/UG MDs Employees Freelancer Founder & MD of own company (UG)
  20. 20. Part II - Growing your GmbH / UG 1. Why LegalStrasse & How it works 2. Employment, Freelancer & Co’ops 3. Employment Contract 4. Freelancer contract 5. Employee participation daniel@streifflaw.de
  21. 21. daniel@streifflaw.de ● Always start and terminate a contract in writing. ● You can limit a contract to up to 2 years. ● Employees may only work up to 48h regularly on a 6-day-week (40 for a 5-day-week) and extra 25% of unpaid overtime if agreed. Employment Contract
  22. 22. First Steps of employment in Germany No employment Employment Signing ● Employment contract ● Data privacy declaration ● ESOP sign-up & vesting Monthly Payment ● Pay net salary deducting social insurances & wage tax Regulation ● Get business number at employment office ● Gather employee’s docs ● Register him with tax, emp office, accident & social insurances End of trial period ● If a trial period is agreed, you can fire employees in that time without cause on short notice Pre-signing ● Interview ● No discrimination ● No work until signing of contract daniel@streifflaw.de
  23. 23. daniel@streifflaw.de Whoever deals with customers’ or employees’ private data has to give this declaration. Data privacy declaration Just attach it to the contract. This includes: ● Employees ● Freelancers ● Cooperation partners
  24. 24. Part II - Growing your GmbH / UG 1. Why LegalStrasse & How it works 2. Employment, Freelancer & Co’ops 3. Employment Contract 4. Freelancer contract 5. Employee participation daniel@streifflaw.de
  25. 25. daniel@streifflaw.de Main issues: ● Status check w/in 1 month ● Secure Intellectual Property (IP) & Confidentiality ● Risk of (pre-)payment & work acceptance / remedy Freelancer Contract
  26. 26. Part II - Growing your GmbH / UG 1. Why LegalStrasse & How it works 2. Employment, Freelancer & Co’ops 3. Employment Contract 4. Freelancer contract 5. Employee participation daniel@streifflaw.de
  27. 27. daniel@streifflaw.de Share company value with employees to incentivize them to join, stay & perform. Employee Participation Two main concepts: 1. ESOP = Employee Stock Ownership Plan 2. VSOP = Virtual Stock Options Program
  28. 28. Comparing employee participation models (1 of 2) Taxable upon transfer Taxable upon exercise Taxable upon exercise - - more net (deductible) Participation rights - - Notary share transfer Notary intro & Exit - Shares (ESOP) Share Options (ESOP?) Virtual Options (VSOP) = real shares for co-founders = options for real shares in Exit = options for cash equivalent of shares daniel@streifflaw.de
  29. 29. Comparing employee participation models (2 of 2) Shares (ESOP) Share Options (ESOP?) Virtual Options (VSOP) ! ! ! ! ! ! ! ! ! daniel@streifflaw.de
  30. 30. How options work ● Option value = share value - strike price ● Exit = trigger to execute option Strike price daniel@streifflaw.de
  31. 31. Your input for VSOPs Exit ● Exit cases ● dilution ● liquidation preference Options ● Total and individual number ● Strike price Vesting ● period, cliff ● leaver, fade out, floor ● double trigger daniel@streifflaw.de
  32. 32. Vesting #1 employee stays Employee vesting: ● 1y cliff, ● to ceiling in y3, ● Exit after y4, ● 100% at y5 (double trigger) daniel@streifflaw.de
  33. 33. Vesting #2 employee leaves Employee Vesting: ● Period 3y, ● 1y cliff, ● Good Leaver after y2, ● hits floor at y3 daniel@streifflaw.de
  34. 34. daniel@streifflaw.de Ready to grow!
  35. 35. daniel@streifflaw.de Next legal workshop: Part III - Funding your GmbH / UG 1. Finance Options 2. Convertible note 3. Term sheet hacks
  36. 36. Thanks to Gregor Cresnar from Flaticon.com for designing all icons! Thanks for listening! Comments & questions to daniel@streifflaw.de

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