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We continue the Understanding Your Commercial Lease series by discussing how commercial leases treat taxes and what tenants can do to improve tax treatment.

Taxes are another important consideration when working towards understanding your commercial lease. The tax provisions of your lease will detail what taxes are required to be paid by the tenant and what taxes are required to be paid by the landlord. The tax provisions will also detail how and when all taxes must be paid. To understand the true costs of your lease, you must understand what taxes you are required to pay and who takes on the risk that tax rates rise or additional taxes are levied.

What taxes will you be required to pay under your commercial lease?

The taxes you are required to pay are generally described in the definition of “Taxes” in the lease. How the definition will be written…

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In this post we discuss the commercial lease letter of intent and why it is important to fully consider even if it is non-binding.

In an earlier post in our understanding your commercial lease series, we discussed the value of hiring a broker and briefly discussed letters of intent. We’ve have had many questions about letters of intent recently, so I am taking a quick detour to address this topic in more detail. I hope this post helps to shed light on what a letter of intent is and why it is an important part of understanding your commercial lease.

What is a commercial lease letter of intent?

A letter of intent (LOI) is a document that includes the important terms of the commercial real estate leasing deal and consolidates those terms in writing prior to the commercial lease being prepared. The letter of intent is designed to…

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Commercial lease letter of intent


Today, we are continuing our series on Employee Equity Explained by discussing stock options.

Today, we are continuing our series on Employee Equity Explained by discussing stock options specifically.

Stock options are contracts that allow an employee to buy shares (this is called “exercising” the option) at a fixed price. Options are different than receiving stock because an option is exactly as it sounds; it’s an option to buy stock upon certain conditions being met, such as vesting (discussed below).

There are two standard types of stock options: Incentive Stock Options (“ISOs”) and Nonstatutory Stock Options (“NSOs”).

ISOs provide the recipient with certain tax benefits but they can only be provided to employees of the company, not independent contractors or non-employee board members. Additionally, only $100,000 in ISOs can be exercisable in any given year. NSOs on…

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Stock Options


Today’s post dives specifically into the definition of “accredited investor” as defined in Rule 501 of Regulation D of the Securities Act of 1933

The definition of accredited investor is a topic we’ve touched on briefly in several posts throughout the years, but today’s post dives specifically into the definition of “accredited investor” as defined in Rule 501 of Regulation D of the Securities Act of 1933. We’ll also point out why it’s important for you to understand who is considered an accredited investor.

Definition under Rule 501

The SEC states that the definition of accredited investor is “intended to encompass those persons whose financial sophistication and ability to sustain the risk of loss of investment or ability to fend for themselves render the protections of the Securities Act’s registration process unnecessary.” The definition of accredited investor under Rule 501 includes several types of individuals and…

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Accredited Investors


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


Issuing employee equity in a startup, or any business, is a great way to compensate and incentivize employees.

Issuing equity to employees in a startup, or any business, is a great way to compensate and incentivize employees. However, employers and employees are often confused about the various types of equity compensation available and the pros and cons of each type of employee equity. In this series of blog posts on employee equity, we will continue our discussion of employee equity compensation plans by detailing the various types of equity that employers can grant and lay out the reasons for choosing one over the other.

When someone receives “equity” in a company, this means that they are receiving stock or future rights to stock in the company. By owning stock in a company, that person will then become a shareholder,…

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Employee Equity


This post discusses Section 4(a)(7) of the Securities Act of 1933 and its impact in potentially making the resale of private stock easier.

Congress recently passed a new securities law exemption (Section 4(a)(7) of the Securities Act of 1933) that eases the limitations and restrictions surrounding the resale of private stock.  Prior to the new law, there were several regulatory hurdles that made the resale of private stock in a company difficult. As we’ve highlighted in prior posts, securities regulations require any sale of stock to be registered with the SEC (a time-consuming, expensive process), unless the sale is “exempt”—which means that the sale falls within one of the exemptions provided for in the securities regulations. (Check out one of our prior posts on securities exemptions and Rule 144 for more background on the regulations specifically surrounding selling stock in private companies as they applied…

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New Law Reduces Hurdles to Resale of Private Stock


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


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


This post in the Understanding Your Commercial Lease series discusses insurance, subrogation, and indemnification.

In this latest post in the Understanding Your Commercial Lease series we’re going to discuss insurance, subrogation, and indemnification. (Subrogation will often be grouped under the insurance provision in your lease.) The insurance, subrogation, and indemnification provisions of your commercial lease allocate risk between the landlord and the tenant (and each of their insurers).


In nearly every commercial lease you will find robust insurance requirements for the tenant that are mandated by the landlord. The tenant is going to be required to pay for insurance that will include general liability insurance, property damage insurance for the tenant’s property, business interruption insurance, automobile liability insurance, worker’s compensation insurance, and then often an umbrella policy. The landlord will often ask the tenant for insurance the…

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Insurance, Subrogation, Indemnification