Employment agreements and offer letters are often used interchangeably when hiring employees. Although offer letters and employment agreements share some characteristics in common, they are not the same. For an early-stage or startup company, correctly using the employment agreement and offer letter can help to prevent unnecessary and unanticipated liability
Taxation of stocks can be a complex tax item for a company and its stockholders. This article addresses some of the key points and considerations on taxation of stock dividends, taxation of stock sales, and taxation of stock redemptions. Payment in Kind Dividends’ taxation is based on whether they are
Dilution of Owners’ Equity and anti-dilution terms can be a very complicated subject for investors and startups. This article takes an overly simplified approach and focuses on dilution and antidilution in investment and how startup equity finance impacts owners’ equity. The first subject matter will be what is dilution and
A capitalization table (cap table) is needed when presenting to investors the structure of the company’s equity pre and post-investment Money. It easily identifies pre-money valuation and post-money valuation, and provides information on which parties own which classes of shares, warrants, options and other rights to purchase equity over time.
Taxation strategy is one of the key considerations when forming and funding a startup business. This article addresses key considerations of capital contribution tax on structuring a tax-free transaction for the stockholder(s) when contributing cash or property to a corporation in exchange for stock from the corporation. Such tax-free contribution is addressed under Internal Revenue Code Section 351.
Limited Liability Companies (LLC), under most states, are required to be governed by an operating agreement. This article addresses some of the key considerations of a LLC or Partnership agreement for founders.
How to valuate a startup for equity financing is often asked by startups and early stage companies. There is no exact formula when assembling a valuation for a startup company. This is because there are numerous unknown or unproven factors that may greatly affect the outcome of the companies performance
Forming a business is a multi-step process. An entrepreneur should first determine what type of business structure (eg LLC, Corporation, Partnership) to have, followed up by the choice of state, and then consider: i) choose a business name; ii) name reservation; iii) DBAs; and iv) regulatory compliance.
This article covers the key considerations and questions an early stage business should ask its legal counsel.