When talking to people about option grants, refer to “fully diluted” and always promise a share amount not just a percentage. I often get asked: “When I tell a new hire how many shares he or she is getting, should I tell them the percentage this represents and, if so, should I express this as a… Read more »

The inevitable has happened. There is an oft-repeated saying in the information security world:  “There are two types of companies:  those that know they’ve been hacked and those that have yet to find out they’ve been hacked.”  No matter how many times it happens, however, people rarely get used to it.  While no one enjoys… Read more »

For a general overview of the different types of business entities, see my other article Choosing the Correct Business Entity: The Basics. For a quick reference, see also the chart in our article Comparison of C corp, S corp and LLC Entity Types. Characteristics The limited liability company (LLC) is a form of business organization which in recent years… Read more »

An S Corporation is the same as any other corporation except for the manner in which it is taxed. S Corporations generally do not pay federal income tax but pass the tax liability for their profits through to their stockholders.  Consequently, profits earned by an S Corporation will be taxed only once.  Similarly, losses of… Read more »

Most startups offer equity participation in their company to people providing services to the company, whether as employees, consultants, advisors or otherwise (which we will call “service providers” in this article).  We often get asked about the difference between the two most common forms of equity grants – stock and options.  This article is intended… Read more »

Should I obtain a patent? Patents provide inventors exclusive rights in their discoveries. Entrepreneurs in the pharmaceutical, life sciences, medical device and many other fields look favorably upon the benefits of patents, including: creating barriers to entry for competing products; discouraging potential patent litigants; enhancing company valuations; generating licensing revenue; and facilitating cross-licensing and other… Read more »

Control is a critical component of every venture capital deal. Control can be used to dictate desired outcomes or, through “negative controls,” to block undesired outcomes. Negative controls are typically enumerated as “protective provisions” that give the venture investor the right to unilaterally block a variety of corporate actions. A majority of the board and… Read more »

1. Advisors Choose experienced advisors early, including attorneys and auditors. Advisors who work with the SEC and investment bankers regularly will expedite the process and help avoid glitches and delays in your SEC review. Speed matters. Execution is critical. 2. Underwriters Identify prospective investment bankers and leading analysts in your market space. Consider the appropriate… Read more »

After brainstorming for hours and asking all of your friends and colleagues for feedback, you’ve finally come up with the perfect name. Miraculously, the URL was available, at least in the .us top-level domain. However, you are not yet in the clear. When selecting a corporate name, you need to keep these questions in mind:… Read more »

Entrepreneurs are used to juggling many roles on their way to building a great company –you’re a founder, employee, director and officer. When you’re wearing the director “hat” for a private Delaware corporation, make sure to be mindful of your fiduciary duties to limit potential personal liability. This is a complex area of the law,…

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