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The Trouble with Using Finders to Raise Funds

Sometimes a company will engage a “finder” to help it find financing. I always tell founders that they should confer with the company’s legal counsel when considering whether to engage a finder.

Personal v. Business Expenses?

Many startup owners, in the early days as the sole owner, may feel tempted to run “sort of” personal expenses through their corporation on the theory that they have no other owners to harm.

Stats on Angel Financings

Some interesting statistics from the Halo Report for the rolling 12 month period ended June 30, 2012.

Leasing Your Office Or Facility – What Are You Getting?

Negotiating a lease for your company’s office or facility can be precarious. Real estate is not your core business, and you do not want to spend tremendous time (or expense) finalizing the lease document. In addition, start-ups and emerging companies without strong financials do not enjoy significant leverage in strong real estate markets.

Delaware Franchise Taxes 101

Sometimes, about January, I get an urgent call from a founder telling me that his or her corporation has received a franchise tax bill from the State of Delaware for tens of thousands of dollars.

Special Classes of Founders Stock

The vast majority of technology startups are capitalized in the same manner: common stock to the founders, common stock reserved in an option pool for employees and consultants, and preferred stock (Series A, Series B, etc.) sold to investors. However, a small but probably growing percentage of startups consider a more complicated stock structure that includes, in addition to the types of equity above, a special class of common stock reserved for founders.

Classifying Employees: Independent Contractors Or Exempt

If there is a ground zero of potential liability, this is it. Cash-strapped federal regulators and states are focusing on misclassification cases with renewed zeal and enthusiasm. And companies, even with the best of intentions, often mischaracterize employees as independent contractors (consultants or advisers). Independent contractors are not subject to wage and hour laws, meaning they don’t need to be paid minimum wage or overtime, are not subject to payroll taxes, and are not entitled to meal and rest periods. Some companies use the “try and buy” approach of hiring a “contractor” for a few months before “converting” him or her to a full-time employee. But companies and contractors are not free to decide what type of relationship they are creating. Federal and state laws alone dictate what constitutes an employee versus an independent contractor relationship.

Fund GENEROUSLY to Milestones

Founders often seek advice regarding the amount of capital to be raised. The conventional wisdom is to raise sufficient capital to permit the company to achieve a milestone that will result in a material increase in the company’s value. The milestone might be…