Lawyers will tell you it’s important to incorporate your company as soon as you possibly can to avoid personal liability and to settle all outstanding matters among the founders. That’s good advice, but the place to start is with a Term Sheet for the incorporation.
The market for initial public offerings continues to heat up. Once your company has selected the managing underwriters for the offering and wants to begin the IPO process in earnest, an organizational meeting with management, the underwriters, counsel and possibly the auditors will be scheduled.
In a prior Founder Tip of the Week we discussed how the Internal Revenue Code (the “Tax Code”) characterizes unvested founder stock as not being purchased until it has vested, and that this characterization can have adverse tax consequences for the founder because the Tax Code treats as taxable income the excess, if any, of the fair market value of stock at the time it vests over the purchase price of the stock (the “spread”).
Founders and executives of mature private companies often underestimate the complexity and lead time of the initial public offering process. The right timing is crucial for a successful IPO so it is critical to be ready to go when the company’s results and capital market windows align.
Perkins Coie’s startupPerColator is kicking off a series to help founders contemplating an initial public offering, or an “IPO,” prepare for this extensive and often complex milestone in the life of their company. An IPO, is the result of a great deal of effort, coordination of resources and resolution of myriad legal and business issues. Below are a few tips on how to start preparing your company today.
A new Delaware law, signed on July 17 by Gov. Jack Markell, allows companies to be formed as public benefit corporations (PBCs), which balance stockholders’ returns, the impact on other people affected by a company's business activities, and the creation of an overall public benefit. Starting on August 1, Delaware companies will be able to form or reincorporate as PBCs, or merge with PBCs.
Founders are often reminded, “great companies are bought, not sold” - emphasizing the importance of focusing on the business rather than the exit plan. True enough, but founders can help themselves through an early understanding the levers for buyers in their industry. Knowing that can help entrepreneurs position their companies for a successful sale - and it may also cause them to focus their startup in a different way.
On Wednesday, June 26th, Perkins Coie’s Palo Alto office hosted the startupPerColator event, “What Every Startup Needs to Know.” Lowell Ness, a Perkins Coie partner in the Emerging Companies & Venture Capital (ECVC) practice, moderated a panel which included Herb Stephens of NueHealth, Thomas Huot of VantagePoint Capital, Jennifer Jones of Jennifer Jones and Partners, Yuri Rabinovich of Start-up Monthly, and Olga Rodstein of Shutterfly.
Whether a financing, merger or other acquisition, or other major transaction, parties often outline the major provisions in a non-binding term sheet or letter of intent. A principal benefit of this approach it to help the parties identify major areas of disagreement early to avoid wasted expense on additional diligence and drafting of the definitive agreements.
A corporation is a separate entity with its own liabilities for which the individual owners cannot be held personally liable. It is a concept that is old as dirt and right as rain, right? Surely everyone accepts this basic premise of doing business as a corporate entity? Well, perhaps everyone but the plaintiff’s attorney seeking to hold someone with deep pockets financially responsible for his client’s injuries.