2015 ncet expo: jim newman - legal pitfalls for start-up / early stage companies
TRANSCRIPT
![Page 1: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/1.jpg)
TOP 10
LEGAL PITFALLS FOR START-UP/EARLY STAGE COMPANIES
September 18, 2015
Atlantis Casino ResortGrand BallroomReno, Nevada
JAMES NEWMANHolland & Hart LLP5441 Kietzke Lane, 2nd FloorReno, NV [email protected]/327-3014
![Page 2: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/2.jpg)
Non-Disclosure Non-Compete Non-Solicitation Don’t Take Employer Materials or Information Carefully Review What You Sign Your Former Employer May Bring Legal Action Against You and/or Your New Company/ Employer
1. EXERCISE CAUTION WHEN LEAVING YOUR EMPLOYER
![Page 3: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/3.jpg)
Choice of Entity
◦ Corporation S or C Corp.
◦ Limited Liability Company
◦ Other Sole proprietorships or general partnerships are strongly discouraged
2. CONDUCT BUSINESS THROUGH AN ENTITY
![Page 4: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/4.jpg)
Roles and Duties◦ Director/Manager v. Officer v. Employee◦ Contracting Authority
Actual v. “Apparent” authority
Respecting the Entity/"Separate" Legal Person
◦ Company Bank Accounts◦ Executing Contracts in Company Name◦ Helps to Avoid Claims of "Alter Ego" or Piercing the Corporate Veil◦ Personal Obligations
Guarantees
2. DOING BUSINESS THROUGH AN ENTITY
![Page 5: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/5.jpg)
3. YOU NEED A SHAREHOLDER AGREEMENT
![Page 6: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/6.jpg)
Not Always “Friends” Provisions of LLC Operating Agreement or Shareholder Agreement
◦ Management/voting◦ Transfer Restrictions
Equity is personal property and freely transferable [subject to securities laws] unless restricted by contract
◦ Triggering Events Marriage Dissolution Death Disability Termination of Employment
◦ Buy/Sell Terms◦ Valuation Method(s)
3. YOU NEED A SHAREHOLDER AGREEMENT (Continued)
![Page 7: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/7.jpg)
Raising Capital is Difficult Double the Amount 3 to 6 Months Effort Time Consuming
4. UNDERCAPITALIZATION
![Page 8: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/8.jpg)
Debt or Equity◦ Notes
Convertibility Senior to equity
◦ Equity Common Stock v. Preferred Stock
5. RAISING MONEY
![Page 9: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/9.jpg)
Securities Laws Will Apply◦ Registration requirements and exemptions
◦ Anti-fraud rules Regardless of circumstances or exemptions, you can't commit
fraud in the sale of securities
◦ Both federal and state laws apply
◦ Why you care/remedies Rescission Regulatory action
5. RAISING MONEY (continued)
![Page 10: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/10.jpg)
Select Your Investors Carefully◦ Fewer investors can be easier to manage◦ More sophisticated and/or experienced
investors may better understand your situation
◦ Experienced investors can also provide non-financial assistance to your company
5. RAISING MONEY (continued)
![Page 11: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/11.jpg)
Initial Assignments of Property Confidentiality and Assignment of
Invention Agreements Consulting Agreements Loans and other arrangements Minutes and ownership records
6. GOOD RECORDKEEPING
![Page 12: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/12.jpg)
Fiduciary Duties◦ To shareholders/members◦ To creditors
Securities Laws◦ Anti-fraud rules
Tax Laws◦ Withholdings on compensation
Fair Labor Standards Act◦ Wage, hour, O-T and other laws
7. PERSONAL LIABILITY ISSUES
![Page 13: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/13.jpg)
Identify IP ◦ Patents◦ Copyrights and Trademarks
Advantages◦ Barriers to entry◦ Higher valuations
Non-Disclosure and Assignment of Inventions
8. PROTECT INTELLECTUAL PROPERTY
![Page 14: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/14.jpg)
Don’t Be Surprised
It’s Your Business!
9. READ YOUR CONTRACTS
![Page 15: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/15.jpg)
Attorney Accountant/CPA Banker Insurance Broker/Agent Others?
10. STAY IN REGULAR/PERIODIC CONTACT WITH YOUR ADVISORS
![Page 16: 2015 NCET Expo: Jim Newman - Legal pitfalls for start-up / early stage companies](https://reader033.vdocuments.us/reader033/viewer/2022051503/58794bd01a28abb1418b4eed/html5/thumbnails/16.jpg)