What do you give to advisors in your company? Generally speaking, you do not give them money because you are a start-up and you cannot afford a lot. We give between a quarter and a half percent of stock to an advisor with an agreement that they will work with you for 12 months and that the stock vests over 12 months. If after 6 months they haven’t worked with you, you can stop theRead More…
When you first start a company, people ask, “Do we need to enter into employment agreements with ourselves?” Generally speaking, the answer is no. You can come to an agreement on how much compensation you are going to make, when you are going to make it, how much capital you are going to raise, and what is going to happen when you raise that capital. You set your expectations properly, but there is no needRead 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…
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…
New startups often establish their employees as independent contractors so they don’t have to pay employment taxes since these taxes can be very expensive. However, whether or not someone qualifies as independent can only be determined by the IRS or the State of California. They’ve recently set out new rules and regulations that make it tougher for an individual to be ruled as an independent contractor. More often than not, if somebody is only workingRead 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…
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…
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…
As many of you know, California’s new AB5 Law is in full swing. It has taken California, and especially Los Angeles based small businesses, by storm forcing many of these businesses to employ workers who were previously classified as independent contractors. To alleviate some of the burden, our attorneys have compiled all of the required (and optional) steps and documents to comply with state and federal employment laws. We call it the “2020 California EmployerRead More…
