Class No. 10 (Facebook, Inc.)

“It wasn’t about two kids in a dorm room anymore.” –Ben Mezrich, The Accidental Billionaires, Ch. 25.

When an entrepreneur starts a new venture, like Mark Zuckerberg did when he launched “thefacebook” at Harvard in the spring of 2004, he or she must also decide what legal structure their business will take, such as a sole proprietorship, a partnership, a limited liability company, or a corporation. Accordingly, in our next class we will revisit three critical moments in the founding of Facebook: (i) Eduardo Saverin and Mark Zuckerberg’s initial partnership agreement in late 2003/early 2004, (ii) Facebook’s articles of organization when it became a Florida LLC (limited liability company) in April 2004, and (iii) Facebook’s subsequent decision in July/August 2004 to become a Delaware corporation after venture capitalist Peter Thiel agreed to make a $500,000 angel investment in the social network startup in exchange for 10% of the company. In addition to studying the progression of Facebook from a general partnership to a Florida LLC to a Delaware corp, we will also debate the following question: Why did Facebook, with headquarters in Northern California, decide to incorporate in Delaware?

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