An S-Corporation Isn’t a Type of Entity As a business attorney, I am often asked by founders launching a new business or startup if they should form an S-corporation. They often approach me for advice while deciding between a C-corp and an S-corp (or between an LLC and an S-corp). Understanding how does S-corp affect personal taxes is a crucial part of this decision-making process. One point of clarification, which is a bit technical, although helpful [...]
Private Company Stock Investing: Until Recently, Limited to Accredited Investors For most investors, investing in stocks starts and ends with public stocks – stocks that are traded on a national exchange, such as the New York Stock Exchange or the Nasdaq Stock Market. The reason for this is that investing in private company stocks (and other securities) has long been off limits to small time retail investors (as opposed to institutional investors, such as private [...]
The Value of a Limited Liability Entity Generally You have probably heard that you need a limited liability business entity (corporation, LLC, etc. ) to protect you from personal liability. There’s a well-known company that runs ads on the radio often. The company provides incorporation services. They’re not a law firm, they just file papers to form corporations and limited liability companies (that may be their exact words, actually!). Their ads sell fear – fear of losing everything if your business is sued and you didn’t set the business up to operate through an entity that provides liability protection.
Buying an existing business (along with selling businesses, this is known as “mergers & acquisitions,” or just “M&A”) is a great way to buy into a new business or expand your existing business. From an expansion standpoint, in fast moving markets or industries that are tough to penetrate because the market leaders are well-entrenched, buying your way in may be the obvious preferred choice compared to starting from scratch or growing your existing business organically. [...]
As a business lawyer based in Austin, with clients throughout Texas, Delaware and other states (even a couple in other countries), a large part of my legal work involves technology startups – companies where founders put in very little money, raise a few rounds of angel investment and venture capital over a few years, and aim to scale their startup from the garage to an IPO or lucrative exit through a merger or acquisition (M&A). [...]
I spend a lot of my securities law practice advising savvy startup owners and seasoned entrepreneurs on the most effective methods for structuring their companies in a way that both satisfies the law and positions their businesses to successfully raise investment capital. When raising capital, many of these owners and entrepreneurs decide they should (or need to) go the route of using a private placement memorandum (PPM) to inform potential investors about the structure of their business, [...]
On July 25, 2017, the Securities and Exchange Commission (SEC) issued a long-awaited (by securities lawyers like myself, at least) ruling on initial coin (token) offerings, specifically a token offering launched in May 2016 by an organization called The DAO (decentralized autonomous organization). The SEC’s decision regarding the DAO is not surprising from a traditional securities law perspective, although their analysis and supporting statements carry significant insights into where this innovation vs. regulation battle is [...]
Many entrepreneurs and startup founders think they need to decide between forming an S-Corporation (S Corp) or a C-Corporation when they start a new business. This is a misconception. S-corporations are not their own type of corporation. They are not their own type of entity. You don’t go to the secretary of state and form an S-corporation. What you do is form a corporation or Limited Liability Company and then you approach the IRS and [...]
What is a Series LLC? One type of legal entity, which even some business attorneys find challenging to handle, is the series limited liability company. And, that’s understandable. While the concept of a series LLC may be fairly easily understood, forming one is not simple. Adding to the challenge is the fact that series LLCs are relatively new structures, so the sample forms and information available about them online is limited compared to other entity [...]
You’re probably familiar with that age-old adage penned by Shakespeare: “A rose by any other name would smell as sweet.” Something similar can be said about private placement memorandums (PPMs), which are sometimes called offering memorandums or offering documents. Okay, so they don’t usually smell nearly as sweet as roses, but savvy business owners intent on offering private (rather than public) securities know that one of these documents—by whatever name it’s called—can be invaluable. Others [...]
