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In this post we discuss four important legal considerations for every startup.

Today’s post highlights some of the key considerations that founders of any startup company should have in mind as they begin the process of turning an idea into a business. The action items we discuss in this post are simple things to address early on in the company and can have immediate and lasting positive impacts for the company and its founders.

Forming a Corporation or LLC to Limit Personal Liability

One of the first steps the initial partners should take is to form a limited liability entity (either corporation or LLC in most cases) in order to limit the owners’ personal liability. Forming the entity will also open the door to discussing the initial ownership percentages, vesting provisions, and management rights….

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Launch Picture

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In today's blog post, we'll discuss the non-waivable provisions of the Washington Limited Liability Company Act in more detail.

Significant changes to the Washington Limited Liability Company Act went into effect on January 1 of this year. As I wrote in a previous blog post on the Washington Limited Liability Company Act changes, the changes were intended to make the law easier to understand and give members more flexibility in how they want to manage and operate an LLC. Under the old act, the non-waivable provisions were scattered throughout the act. Under the new act, the non-waivable provisions are all listed in one place for convenience— in Section 25.15.018 of the RCWs. In this blog post, we’ll discuss the non-waivable provisions in more detail.

The LLC Act allows members of an LLC flexibility in outlining through the LLC Operating Agreement how…

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Washington Limited Liability Act

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In today's blog post, we discuss the basics of how to complete an entity conversion in Washington state.

In a previous post, we discussed how the entity conversion bill passed by the Washington State Legislature in 2014 allowed companies to complete a conversion (instead of going through a merger) to change a company’s entity structure. You can use a conversion to change your entity structure to a different form (i.e. from an LLC to a corporation) or change your domicile to a different state. We continue the discussion about conversion in this post by going into more detail about the steps to complete a conversion.

Eligible Entities

Washington law allows conversions between domestic limited liability companies (LLCs), corporations, and limited partnerships. Washington law also allows these domestic entities to convert to foreign entities (a foreign entity is an entity incorporated in…

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Entity Conversion

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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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Today we will discuss the frequency and type, notice requirements, and voting protocol of shareholder meetings in Washington State.

As a shareholder in a corporation it is important to know your rights. One of those rights is the right to attend shareholder meetings. Today we will discuss the frequency and type, notice requirements, and voting protocol of shareholder meetings in Washington State.

Washington corporations are governed by the Washington Business Corporation Act, which is codified in RCW 23B. Shareholder meetings are specifically outlined in RCW 23B.07.

Frequency and Type of Shareholder Meeting

The two types of meetings that shareholders attend are “annual” and “special” meetings. RCW 23B.07.010 lays out the requirements for annual shareholder meetings and is summarized as follows:

1) Corporations must hold an annual shareholder meeting;

2) Meetings can be held in or out of state but if the place is not…

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Shareholder Meetings

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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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In today's post, we provide a Washington LLC Formation Checklist that includes the major steps to form your LLC and start doing business in Washington.

The Washington Secretary of State has created a streamlined process for businesses to create limited liability companies. If you’re forming a LLC in Washington, the following Washington LLC formation checklist might be helpful to review to ensure you consider the steps for proper LLC formation:

1) Check the Business Name. Before settling on a business name, you’ll want to make sure that the name is available and conforms with statutory requirements. An easy way to check if your name is available is by running a business search here.

2) Certificate of Formation. Prepare and file the Certificate of Formation with the Secretary of State to “create” the LLC. You can file the Certificate of Formation online here. When you file your Certificate…

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LLC Checklist

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In today's blog post, we discuss the recent changes made to the Washington Limited Liability Company Act.

Earlier this year, the Washington state legislature unanimously passed and the governor signed legislation making changes to the Washington Limited Liability Company Act—the most sweeping changes to Washington LLC law in recent history.

The Washington State Bar Association requested that the state make changes to the Washington Limited Liability Company Act. The bar association’s goal was to make the law easier to understand and more flexible by modifying provisions that the association described as creating pitfalls and unnecessary problems. The Washington state Senate and House eventually passed legislation making those changes, and Governor Inslee signed the law on May 7, 2015. The new changes will go into effect on January 1, 2016.

Some of the major changes to the Washington Limited Liability…

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Limited Liability Company Act

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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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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