When a preferred class of stock is created for investors, one of the first things that they ask for is liquidation preferences. When the company is sold or goes out of business, the first dollars come back to them to pay them back their money and sometimes the multiple of the money that they put in before any of the other shareholders share in the revenues that come out of the sale or the liquidationRead More…
Incentive stock options are a way that people used to draw employees and partners in over time in a startup company when you do not have enough money to pay them. They are really good and they work, but there are negative tax consequences that can come from it. Usually when you exercise your options, you’ll buy the stock and resell it right away because you can’t afford to buy it otherwise. There are someRead More…
Estate planning law has a series of rules and regulations that have been established and that are different in every state. To understand all of these rules is much more than filling a simple form. Most of the estate plans that we see that have been drafted without the advice of expert counsel on estate planning have pieces that haven’t been thought through because there wasn’t someone who has experience involved in drafting the document.Read More…
Going out for equity financing in a start-up business is a brand new task for most people unless you have done it before. Try to get somebody involved in your company who knows how to do it, rather than going through the learning curve yourself. There are a lot of books written on how to do it. Everyone has a different perspective on how to get your money, which documents to prepare, what kind ofRead More…
When you are an employee and you have received stock options and you are about to exercise those options, you have to recognize what the tax treatment is. The difference between the price you pay for the stock and the value of the stock at that time is phantom income to you. If you pay a dollar a share and the stock is worth two dollars a share, that extra dollar a share shows upRead More…
When we set up an estate plan, we draft pour-over wills which take your assets and put them into the revocable trust. We also draft a certificate of trust, a short form of the trust that you can share to people so that they can see who the trustees are and what their power is but not necessarily who you are giving your assets to. We also draft a general assignment that says to pourRead More…
The time to use an LLC is when you’re probably going after only one round of financing. When you have one or two investors lined up, when the investors want to get the significant tax benefits of the LLC, or when you want to get an LLC as a holding company with subsidiaries underneath it. The decision to use an LLC really needs to be thought through because there are some limitations associated with theRead More…
Crowdfunding is a new concept that started in the last 10 years. You see hundreds of websites where a company that hasn’t yet made their product or develop their service goes online and people come in to either buy their product or to support their service without getting any ownership of the company. The securities laws don’t apply, but the FTC laws might apply. You’re able to raise money if you have a good enoughRead More…
Generally when you hire people to work for your company, you want it to be a work-for-hire agreement. That means they can quit anytime they want and you can fire them at any time that you want. Within that agreement it should have confidentiality provisions as well as provisions that say that all the work that they do for you belongs to the company. Those are really important pieces to the puzzle that can throwRead More…
Drafting an estate plan includes what we call a “revocable trust”. You put your assets into the trust. The trustee (yourself) controls those assets. You can buy or sell assets. However, putting assets into a revocable trust doesn’t necessarily protect them from creditors. If you want to protect your assets from creditors, there are a whole series of asset protection ways that you can do. One of these ways is primarily forming irrevocable trusts whereRead More…