Carta Onboarding FAQ
Carta will issue electronic securities for your company from its date of incorporation to the present. In addition, Carta can prepare a 409A valuation for your company, and facilitate your next financing round.
- Companies -- Manage your company’s cap table and corporate governance, get 409A valuations, and conduct compliance reviews all in one place.
- Investors -- Issue certificates and convertible notes to your investors electronically, and choose how to share your cap table with them.
- Legal -- Streamline how you work with your legal team to manage your company’s equity, and share a single source of truth that is updated in real-time.
- Employees -- Provide employees a place to track their stock option vesting, view their option documents, and exercise their options using ACH transactions.
Carta is a transfer agent registered with the U.S. Securities and Exchange Commission. Because of this, we are required to maintain accurate records for you and ensure compliance for the benefit of your company and your stakeholders. Involving your legal team in the onboarding process ensures that we import complete and accurate data about your company’s equity. This minimizes the risk of errors that can be very costly down the road, gives your company the opportunity to organize your data and documents, and allows you to fix past mistakes.
When you sign up for Carta, we send an invitation to your legal contact to join your account. As the legal administrator, they will be responsible for the importing your cap table, uploading required documents, and completing our critical account quality control checks. To view the Setup Guide that your legal administrator will see, click here .
While this may seem like it could be expensive, rest assured you will enjoy long-term savings because of the legal clean-up that is part of onboarding. We need your legal team to be confident in the accuracy of your Carta data when they need to issue a legal opinion on your company’s capitalization. If your legal team is not confident about the data in your Carta account, you will likely incur much higher fees associated with due diligence and other requirements.
Fred Wilson of Union Square Ventures noted: “Employee equity issues are tricky. You can and will make a bunch of expensive mistakes with employee equity unless you have the right counsel. There are plenty of law firms and lawyers who specialize in startups and you should have one of them at your side when you are setting up your company and throughout its life. That is true for a lot of reasons, but employee equity is one of the most important ones.”
Whether your cap table has only two founders certificates or over 1,000 securities, we have a defined, streamlined process that will get you up and running on Carta as soon as possible. Most companies are able to import their cap tables in under 30 days; some companies with small cap tables can complete the process in a matter of hours. Ultimately it depends on how quickly you and your legal team can work together to import your cap table data and documents to Carta. Other factors include the complexity of your cap table history, the number of issuances and transactions that have been made, and the completeness of your records.
We strive to complete the onboarding in no more than 90 days, so we encourage you to start the process when you have enough time and resources to dedicate to the project. In general, if your onboarding takes longer than 90 days your account will be moved into “Icebox Mode.” This means your access to using Carta services will be frozen until the onboarding is completed.
- Certificates of Incorporation
- Original plus all amended filings.
- Option plan documents (for each option plan, if you have more than one)
- Board-approved stock option plan document
- Template option agreement (called a “form of option agreement”)
- Template exercise notice (called a “form of exercise notice”)
- Option pool history (board approval dates and option pool total shares)
- Recommended: signed option agreements and exercise notices
- Warrants (if you have any)
- Signed warrants and/or blank warrant template
- Convertible notes and SAFEs (not including those already converted)
- Signed convertible notes and/or blank convertible note template
- Complete chronology of the company’s fair market value (FMV), including:
- Board-approved FMVs
- All 409A valuation reports
An accurate 409A is determined by a validated cap table. This means that we will need to finish onboarding before we can get started with the 409A valuation. Get a head start by connecting your financials in Settings and filling out the request form in the Valuations section.
- First, the certificates are issued by the company and signed by its authorized representatives.
- Second, the shareholder has possession of the certificate through their Carta account.
For Carta to be able to provide you accurate data while closing a round of financing, conducting an audit, expensing stock compensation, or performing a 409A valuation, a complete account of your cap table history is required. We also offer the ability to generate historical cap table reports.
The electronic stock certificates issued through Carta will replace any paper stock certificates for the shares the company has issued. Each holder of a paper certificate will be asked to sign an affidavit voiding the paper certificate and accepting the electronic certificate in its place.
Below is a sample affidavit that each holder of a paper certificate will be asked to sign. When the stakeholder agrees, a printable record of their signature is added to the certificate record in Carta.
Click here for more details on the affidavit and the acceptance of electronic certificates.
Adopting Carta for your company’s equity management requires converting all your existing issuances to our electronic standard (although there are some exceptions for certain legal conditions). We have a fiduciary duty to make sure all of your stakeholders have an opportunity to accept their equity through our platform and must follow-up until all securities are accepted.
A stakeholder is a founder, investor, employee, or other person or entity who holds an equity interest in your company. For example, a company with one founder, four investors and ten option holders would have fifteen stakeholders. We count only unique stakeholders -- so if a single person or entity holds several issuances (even different types of securities), we still count that as one stakeholder.
By default, each shareholder and option holder will be able to view only their own holdings, and will not be able to see your company’s cap table, their fully diluted ownership, or the holdings of other stakeholders. You can manage how much information certain stakeholders get to see through account settings and permission settings.
Stock splits pose different issues for every cap table management platform. Carta has developed an approach to ensure accuracy for implementing both historical and future stock splits in your Carta account.
Onboarding historical stock splits -- through our experience with thousands of onboardings, we’ve learned that it’s most efficient to implement all post-split cap table values during onboarding. We then reverse-engineer the company’s pre-split cap table after activating the account. That is a more precise method of reflecting stock splits than manually trying to untangle data sets that include both pre- and post-split cap table figures during onboading. This is not an attempt to cut corners - it is designed to maximize efficiency, minimize onboarding duration, and prioritize urgently needed post-split data over pre-split data generally needed only for recordkeeping. Based on this approach, stock-split clients receive more accurate, high-priority data and reporting sooner, and can focus on lower-priority data later.
When onboarding the post-split data is complete, the client can immediately generate reports and use our compliance services for data going back to the most recent split date. Our engineers then calculate the historical cap table data going “backwards” based on the inverse of the of split ratio the company used. The pre-split data and the post-split data are then merged to provide a historical account of the company’s cap table. Nothing changes on the current cap table, and stakeholders won’t need to re-accept anything because the terms they accepted when the account is activated will reflect the current state of their equity interest.
Implementing future stock splits in Carta -- when you request a stock split on your active account in Carta, we conduct a review with you to make sure your account is fully up-to-date, and that all transactions that have been reflected in your account. We then generate three pro-forma models of the proposed split for approval from your legal team and internal decision-makers. Once approved, our engineers run the split on your account, and you will then see the post-split values and quantities reflected in the account, along with a notation on each issuance explaining the effect of the stock split.
A stock option repricing is essentially a board-approved amendment of an existing option. Carta treats this as a cancellation of the original option and subsequent issuance of a new option at a new price. The old option is cancelled as of the repricing date, and the new option with the new price is granted as of the same date.
Onboarding historical option repricings -- on the onboarding spreadsheet, your legal team lists all of the original options using the original strike price, and enters the repricing date as the cancellation date for each. Any repriced options are listed again as new options with the new strike price, and repricing date is used as the grant date. The new options are linked to the old options by entering the old option ID number in the “Amended from” column for the new option.
The implementation fee reflects the value that our team brings to cleaning up your cap table throughout the onboarding process. Our onboarding managers are trained professionals who have backgrounds in law, equity management, finance, and accounting. On nearly all the cap tables we have onboarded to Carta, our team has spotted errors, inconsistencies, and compliance issues. As part of the onboarding process, we try to identify these errors and help you correct them. Sometimes our engineers and product designers will get involved in special onboardings to meet your company’s needs.
Use the business email address if the security is issued to the firm. If it’s issued to the person (shareholder name is a person’s name) then you should use the personal email address. For investment firms, Carta picks up on the @ domain of the security holder email address. This will funnel all securities to one account. For example, all securities issued to @krakatoaventures.com will flow to Krakatoa Venture to accept in one account.
We recommend that you use your employees’ personal email addresses. However, it’s OK to use any email address they can access to receive an email invitation from Carta to accept their equity -- including a work email address. They can change it later, if needed.
Carta does not generate legal documents, including option documents. Your legal team remains responsible for creating legal documents, which can then be uploaded to the appropriate place in your Carta account.
We rely on you to work with your legal team to complete the import spreadsheet and other onboarding tasks in order to reduce the risk of mistakes. You and your legal team are more knowledgeable about your company’s cap table history, the terms of your documents, and other nuances about your company’s equity. Keep in mind also that your legal team will be responsible for helping you maintain your account over time, and ultimately they must sign off on the accuracy of the data in Carta. In our experience with thousands of onboardings, we have learned that getting your legal team involved earlier reduces the introduction of incorrect data and reduces your legal costs in the long run.
When you adopt the Carta electronic standard, you are saying goodbye to paper. With each prior certificate that continues to circulate outside of Carta, our ability to manage your cap table with complete confidence is reduced. We must make sure that your shareholders have accurate information about their equity interests in your company. This means we need your existing shareholders and option holders to accept the information you upload to Carta. Securities that were previously issued in paper form will be replaced as part of the onboarding process. If no paper documents were previously issued, then your shareholders and option holders can accept the electronic issuances on a first-time basis.
You can contact your onboarding manager by email or by setting up a call through your Setup Guide. Before you do that, we recommend searching our Online Resource Center (support.carta.com) for answers to your questions. This is usually faster than waiting for an available call time.
Carta is a tool for you to streamline the workflow between you and your legal team. Carta is not a replacement for your legal team or a way to be exempt from legal compliance requirements. We therefore rely on you to work with your legal team to manage your Carta account and update your company’s cap table on an ongoing basis. If you have any questions, make sure to direct your post-onboarding support issues to firstname.lastname@example.org or to email@example.com if your company has more than 100 stakeholders.
It’s not required, but in certain cases it may be recommended or best practice.
Stock options and warrants issued in Carta are intended to supersede all previously signed documents, although we work with you to make sure that the terms reflected in Carta match the existing terms exactly. Some companies choose to have all holders sign the same standard forms through Carta. Other companies choose to attach the signed agreements to the corresponding options or warrants in Carta to reduce confusion.
Certificates in Carta only represent ownership of shares of the company’s stock, and do not supersede the terms of any stock purchase agreements or other documents that created the ownership. You can attach those documents to a certificate in Carta for record-keeping purposes, if you wish.
Convertible notes and SAFEs in Carta are generally informational and do not replace existing agreements. We recommend attaching the signed documents to your records in Carta. However, if you are closing a financing round on Carta and issuing notes or SAFEs as part of that round, you will use blank templates rather than signed versions.
If you are in the middle of a round, make sure to let your Onboarding Manager know. Best practices are to expedite the onboarding and close the round on Carta. The financings feature will allow you to circulate closing docs, collect signatures, and receive funds from investors.