What do you do about banking when you first start your company? You’re probably not going to get a line of credit unless you have a personal guarantor. A personal guarantor is when you give somebody equity in your company for them to sign off on a bank loan. They’re putting the money in, and if the company doesn’t succeed, they have to pay it back. You choose your bank for convenience and to buildRead More…
When you go out to raise money, put together a business plan to see if you can get investors interested in what you’re doing. We actually have a series of documents we like to see our clients prepare. The type of investor you have dictates what kind of documents you are going to present. So, of course, there is going to be some form of a business plan, preferably under 10 pages long. Sometimes theyRead More…
When you first form a corporation, the founders buy stock at a very low price. At some point in the future when you start adding on people, they can pay that same low price for the stock because that’s the value of the stock. Later on, however, when you first have an outside investor come in to purchase stock at a higher value, you reset the value of the company. Your new people who youRead More…
When you go to form a corporation, people talk about whether you should have a corporation or an LLC. If you’re going to have a corporation you need to file articles incorporation just like you would with an LLC. The difference is that on an LLC you have an operating agreement, which tells you how to run the company. This agreement is 20 or 30 pages long and it gives you an idea of whatRead More…
When we form a new entity or when a client comes to us with an LLC as their entity, we will talk about the benefits of a C corporation. There are many positives to a C corporation. The main bad thing is that you pay taxes on the income that the C Corporation earns at the corporate level. Then when you pay the income out to the individuals, they pay dividend taxes, so it’s doubleRead More…
We’re often asked what the value of a startup company is. Everyone in the big business world who is doing investing (the investment bankers and the venture capitalists), do rates of return, ROIs, cash flow analysis, and studies of how large the market is. They’re a whole series of things that are mathematical calculations, but that’s not really how the valuation is established for startups. The usual process starts with an investor comparing your businessRead More…
Filing for trademarks is a critical piece of the puzzle when you’re first starting your business. If you’re going to rely on branding to build your company and its value, you have to do a trademark search. You can do this on your own by going to the department of corporations trademark division online. However, doing this won’t tell you if there is someone who has a name similar to yours. If you don’t checkRead More…
When you raise money, the first thing you want to look for is strategic investors. Friends and family may be the ones who come to you first, but strategic investors have a lot more to offer than just putting money into your company. These are people who will help you with the management of your company. They’re people who will make introductions to the channels and distribution or other management members. They’re people who canRead More…
When deciding if you should file an S election for a corporation, you want to think about the tax consequences of making that election. An S election has a whole series of hoops you have to jump through. The reason for wanting an S election versus a C corporation is it only has one level of taxation. Most of our startups at the end of their fiscal year, if they have a profit, pay itRead More…
When you go out looking for money, a lot of people will say, “I need to have a list of everybody I know and everybody you know that has money and let’s go meet with them and ask them if they’ll put money in our deal.” That’s not really the right way to go about it. Instead. you should think about who the people who are most likely to invest in this deal are. TheRead More…