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First, let’s get the terminology of term sheets out of the way. Whether the document that outlines your deal is called a “term sheet,” a “memorandum of understanding” or a “letter of intent,” these terms mean nearly the same thing. We will use the “term sheet” in this article,
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UW students and faculty interested in startups can talk monthly, face-to-face, with a venture capital investor and startup attorney. Randall Lucas of Voyager Capital and I hold open office hours the first Wednesday of each month at the University of Washington. Who comes to see us? A wide range, from
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(This was a longer post but I have abbreviated it to simplify it.) Right now there is no guidance from the IRS which expressly countenances electronic signatures on 83(b) elections. This is unfortunate. I would recommend the new administration issue guidance right away which countenances electronic signatures on 83(
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Congress is trying to make life easier for early stage and startup companies. This is good. But so far, nothing has been proposed to fix Section 83(b) of the Internal Revenue Code. Section 83(b) haunts every founder who receives shares subject to vesting. If you are founding an
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Congress is preparing a bill known as the Financial CHOICE Act of 2016. There is a lot in the bill (and so it is worth scanning the table of contents for issues you might care about). One of the provisions of the bill, Section 1066, would revise the Form D
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The first bill out of the new Congress next year might set the accredited investor definition to adjust with inflation. As the bill is currently drafted, every 5 years the financial thresholds would go up based on inflation. The bill is called the Financial Choice Act. You can find it
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Indexing the Accredited Investor Standard to Inflation: A Bad Idea Now that the election is over, it is unclear, at least to me, which direction startup public policy will take. It is in all of our best interests that we have a startup public policy that promotes innovation and creativity.
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Section 201(a) of the JOBS Act repealed the ban on generally soliciting or generally advertising private securities offerings, provided certain conditions were met. Many people believed that this change in the law would be one of the most dramatic brought about by the JOBS Act. But things didn'
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Broad-based employee stock ownership is one way to ensure that the wealth created in startups is widely shared by those who helped create the wealth. But broad-based stock ownership in private companies is thwarted by our tax code. Our tax code discourages the sharing of stock ownership among a company&
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I have heard this a number of times in regards to S Corporations & Blank Check Preferred Stock: "A corporation cannot make an S election if it has preferred stock authorized in its charter, even if the preferred stock is 'blank check,' meaning it doesn't
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Restricted Stock Units (RSUs) are not a good choice of equity compensation for a startup. RSUs work great for big public companies, like Amazon or Microsoft. And sometimes RSUs can work great for private companies. But it has to be a really unique private company for RSUs to make sense.
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Warrants can be confusing from a tax point of view. There are a couple of reasons for this. But the primary reason is probably that how a warrant is taxed is driven. Warrants are by the factual circumstances under which it was issued. Was it issued as part of an