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This post in the purchase and sale of a business series discusses employees and employment matters to consider when purchasing (or selling) a business.

One of the most important parts of a business is the people doing the day-to-day work. When looking into purchasing a business, it’s important to identify and understand the needs and rights of key employees, review existing employment agreements, and consider any employment related successor liability issues that may come up as part of the transaction. We’re continuing our series on the Purchase and Sale of a Business by highlighting important employee related considerations when purchasing a business.

Identifying (and Locking Up) Key Employees

Does the business you’re purchasing rely heavily on a few key employees? Especially for service-based businesses that rely heavily on relationships, these key employees can be one of the most valuable assets for the business. Making sure you…

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Locking up Key Employees

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A cap table (or capitalization table) is a spreadsheet listing all of your company’s securities (stock, options, etc.) and who owns those securities.

A cap table (or capitalization table) is a spreadsheet listing all of your company’s securities (stock, options, etc.) and who owns those securities. Cap tables provide a basic look into the “total pie” and each shareholder and option holder’s piece of that pie (basically who owns what). More detailed cap tables will include formulas that allow the company to model future transactions. 

There’s no one-size-fits-all way to structure your cap table. Some provide only a general summary of the breakdown of ownership in a company, while others include extensive details about the individual holder, the type of securities held, issue dates, ownership percentages on a fully diluted basis, and other granular details.

When’s the Right Time to Build a Cap Table?

It’s relatively…

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Cap Table Pie

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In today’s post we’ve highlighted the key issues you’ll want to consider when forming a Washington corporation.

A few weeks back, we provided a checklist for forming an LLC. In today’s post we’ve highlighted the key issues you’ll want to consider when forming a Washington corporation.

Check the Business Name. As we mentioned with LLCs, you’ll want to make sure the name you want for your corporation isn’t already registered with the Secretary of State (which you can check here). For corporations, you’ll need to include some reference to the fact that the company is a corporation, such as “Inc.” “Corp.” or “Co.”

Articles of Incorporation. The “Articles of Incorporation” is the document you file with the Secretary of State in order to form your corporation. This document must include (at the bare minimum) the name of the corporation, the…

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Building a house

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Pioneer Square Labs is a "startup studio," with its sights set on helping entrepreneurs develop ideas and then validate or crush them.

Startup accelerator? Nope. Startup incubator? Nope. Venture fund? Nope. Pioneer Square Labs is a “startup studio,” with its sights set on helping entrepreneurs develop ideas and then validate or crush them.

Started by several prominent Seattle-based entrepreneurs, investors, and technologists (including co-founders Geoff Entress, Greg Gottesman, Mike Galgon, and Ben Gilbert), Pioneer Square Labs just raised $12.5 million from from 13 venture capital firms and over 50 angel investors. The prominent venture fund Foundry Group led the round, with its managing director, Brad Feld, taking a seat on PSL’s board. The headquarters for its operations are currently on the fifth floor of the Galvanize building in the Pioneer Square neighborhood of Seattle.

Pioneer Square Labs offers Seattle startups and entrepreneurs access to several invaluable resources, including proven…

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Pioneer Square Labs

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Today’s post highlights some of the key characteristics of end user license agreements.

If you’ve used the Internet any time recently, you’ve likely had to click “I accept” or “I agree” in order to use a particular website or software application. Typically, you are accepting and agreeing to an “end user license agreement.” As a software developer, it’s incredibly important to protect the intellectual property behind the software, as well as reduce as much liability as possible. These end user license agreements spell out the terms of the license for your use of the particular software. Today’s post highlights some of the key characteristics of end user license agreements.

What is an end user license agreement?

An end user license agreement (EULA) is an agreement between a software developer or author and an individual or…

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EULA notice

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Certain trademark rights arise automatically once you begin using a trademark. Today’s post highlights these common law trademark rights.

Trademarks can be an extremely valuable asset for your business. Think about the value tied to Nike’s Swoosh or the McDonald’s “golden arches.” Protecting the value behind these trademarks is one important step towards building a wall around your company’s intellectual property. Many people don’t realize that certain trademark rights arise automatically once you begin using a trademark. Today’s post highlights these automatic rights, also known as common law trademark rights.

Common law trademark rights versus registered federal and state trademark rights

“Common law” is a term for the rights that have developed through case law versus statutes or codes. Common law trademark rights arise automatically and give the owner of a particular trademark certain rights (see below) without the need to…

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McDonald's Trademark

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LLCs are attractive because of LLC basics, including liability protection, pass-through taxation, flexible management, and simple statutory requirements.

Over the last 20+ years, LLCs have become one of the most popular types of business entity. Entrepreneurs find LLCs appealing because they offer limited liability, pass-through taxation, flexibility in management and operations, and have relatively simple statutory requirements. We’ve highlighted the “LLC basics” in today’s post.

Limited Liability Protection

Like corporations and other limited liability entities, limited liability companies offer owners (also referred to as “members”) protection against personal liability. If the owner of a sole proprietorship or general partnership gets sued, then their personal assets  are at risk. But if the owner of an LLC gets sued, the business assets would be at risk, but their personal assets will generally not be subject to the lawsuit.

Pass-Through Taxation

The federal government does not…

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LLC tax structure

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Today's post highlights some important distinctions between corporations and LLCs to help you choose the right entity structure for your company.

It’s important to understand the significant (and sometimes subtle) differences between the various choices when determining the right entity structure for your new venture. Today’s post details some important distinctions between corporations and LLCs.

The Distinction Between State Entities vs. Federal Tax Elections 

For state law purposes, there are two primary entities that the choice of entity generally comes down to: corporations and LLCs. Corporations and LLCs both offer limited liability to owners of the company. This means that (absent extraordinary circumstances) if the business is sued, only business assets are at risk and the ownerss personal assets will be shielded from the company’s liabilities.

For federal tax purposes, there are three primary tax classifications that most companies are organized under: C corporations, S corporations, and…

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Liability shield

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Today’s post highlights three simple questions buyers should consider to protect intellectual property rights when purchasing a business .

When purchasing a business, buyers often overlook one important part of the purchase: formally transferring the seller’s intellectual property rights to the buyer. The most common IP rights include copyrights, trademarks, patents, and trade secrets. Today’s post highlights three simple questions buyers should ask before purchasing a business.

Can you and do you want to transfer the business’ trademarks?

In most purchases, trademarks will be easily assignable from the seller to the buyer. However, in some situations even if the trademarks are assignable, you may not want to acquire them. For example, if the business’ logo infringes on trademark rights of another business, then you wouldn’t want to transfer ownership of the logo and risk being held liable for trademark infringement once…

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Non-disclosure agreement

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Today’s post highlights some of the key considerations to have in mind when finding startup advisors for your company.

Startup advisors can be an extremely valuable resource for early-stage companies. Typically advisors bring startup experience, a large network of entrepreneurs, investors and other types of advisors, and sound business advice for growing your company. In today’s post, we’ve highlighted some of the key considerations to have in mind when considering hiring advisors for your startup:

Are They the Right Fit?

Perhaps the most important consideration is finding a person that understands your business and goals and finding someone that has industry experience and contacts that you can leverage strategically for the benefit of your business. They should also be someone you trust and that you know will give you reliable advice. It also helps if you get along with and enjoy…

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Startup advisors