When you have a regular corporation and you don’t file an S election, the corporation is going to be taxed at approximately 9% in California and 34% in federal government. Of course, the rate at which you are taxed for state taxes differs per state. You get the credit for the state tax against your federal tax so you’re paying about a 40% tax rate. When you hand out dividends to your shareholders out ofRead More…
Choosing your accountant when you first start your company is a very important decision. This isn’t somebody who just helps you set up your books, it’s also somebody who helps you determine your cash flow projection, confirms that your projections are correct, helps you do some of the numbers associated with operating your company, helps you build your financial model, and may even have contacts that will help you build your capital resources when you’reRead More…
Some start-up companies logically break into separate sections, where they develop a product and want to go after different marketplaces. There are some very complex tax issues associated with having different divisions of the company and you have to make sure that you think through having those tax issues or you form separate companies related to your parent company. The issue of LLC versus corporation comes out. Corporations don’t have capital gains treatment, which isRead More…
People often ask me if you should talk to other people about what your idea is or should you have people sign a non-disclosure agreement (NDA). In 40 years of practicing law, I’ve only seen one lawsuit concerning an NDA. If you have a really good idea, meet with a patent attorney, see if there’s something you can file a provisional patent on, which will cost a few thousand dollars. You file that provisional patent,Read More…
The Secretary of State in the state in which you’re incorporated, California for our cases, requires you to file a statement of information each year, which lists your officers and directors in the company. If you don’t file it, they can fine you and suspend you, so make sure that you do this filing in a timely fashion every year. The information should come either to you or to the person who formed the corporationRead More…
It’s important to understand what pre-money valuation and what post-money valuation are when you’re going out to find capital for your company. Pre-money valuation is the value that you put upon your company that you think it is worth. That value comes from how much you’ve accomplished, how far you’ve taken your business plan, how much of your business is proprietary that other people may not be able to take from you, and how goodRead More…
The federal government and the state of California both have requirements for withholding taxes from employees. These taxes are due when the payroll is met or if you’re small enough on a quarterly basis. The key issue is you should be working with your accountant to figure out which taxes have to be paid, what the amounts are, take the appropriate deductions, and set the money aside. A separate issue is if we’re dealing withRead More…
We often have people come to us asking us to sign a non-disclosure agreement (NDA) or asking a client to sign an NDA. An NDA is basically a document that says: “I haven’t heard this idea before. You’re giving it to me for the first time. It’s not common knowledge out there. But I will keep it a secret for you for a period of time.” We have been asked to sign an NDA numerousRead More…
When you’re determining how much stock an individual owns and how much stock you’re going to give up when you go to raise money, we establish a cap table. It is basically a spreadsheet that has the names of the people who own stock, how much stock they own, and what percentage they own. When we issue additional shares to an employee or to somebody who is investing money, we amend the cap table byRead More…
A corporation or an LLC provides a level of liability protection to the people who are involved in the company. The issue is forming properly, issuing stock properly, putting sufficient capital into it ($10,000 would be great to have at the start), then keeping up the corporate formalities. These formalities include: filing tax returns, having annual minutes, issuing stock, issuing additional stock, and keeping track of the money that goes into the company in theRead More…