Business Startup

LLC Basics: Appealing Characteristics of LLCs

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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Business Startup

Entity Structure Considerations When Choosing Between a LLC and a Corporation

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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Business Startup

Uber Driver Is An Employee According to California

The California Labor Commission recently ruled that a San Francisco Uber driver is an employee, not an independent contractor. This ruling, which came to light last Tuesday when Uber filed an appeal, could have major ramifications. The debate over whether on-demand laborers should be classified as employees or independent contractors has been going on for a few years now fueled by the explosive growth of companies such as Uber and Lyft. And regulators in different states are sure to look at this ruling when they have to make a decision on the issue.

The case that was before the California Labor Commission involves a San Francisco driver, Barbara Ann Berwick, who worked for Uber from July to September 2014. She had...

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Business Startup

Incorporating in Washington Versus Delaware: What’s Best for Your Startup?

One of the first steps when forming a company is to decide which state is best to “register” your company. Today’s post highlights some of the reasons why you may want to considering incorporating in Washington versus Delaware.

I heard Delaware was the best state to incorporate my company, is that true?

It is true that Delaware has a specialized court that handles corporate disputes (the “Court of Chancery”) and is recognized as the nation’s preeminent forum for determining internal corporate and other business disputes. Delaware also has friendly corporate statutes and a well-developed, widely understood, and closely followed body of corporate law. But Washington state also offers advantages unmatched by Delaware (and many other states).

Two of these advantages are the simple incorporation...

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Business Startup

Can You Convert Your Company Into a Social Purpose Corporation?

Yes, an existing Washington business entity can convert into a social purpose corporation (“SPC”). In this blog post, we’ll discuss how an existing traditional corporation can become a social purpose corporation.

To convert a corporation into an SPC, the company needs to take a few steps. First, the board of directors has to recommend the corporate action to the shareholders. The action must pass by at least two-thirds of the votes of the voting group entitled to vote on the corporate action. Further, the action must pass by two-thirds of all other shares voting as separate voting groups. Essentially, the SPC conversion statute controls over any existing arrangement in the corporation’s governing documents. So the corporate action to convert to an...

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Business Startup

Why a Repurchase Option Matters to Startups

Most founders are concerned about making sure each of the co-founders are invested in the company. Founders often ask about protecting against a co-founder leaving the company, taking his or her equity, and sharing in the potential future upside value of the startup without continuing to work for that right. To protect against this, startups often have a “repurchase option” to buy back shares from the departing founder.

When Can the Company Exercise the Repurchase Option?

While terms can vary, the shares issued to the founders are often subject to a vesting schedule that requires the founder fulfill certain obligations—e.g. to stay with the company a period of time, achieve certain milestones, or any other creative requirements the founders agree on— in...

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Business Startup

New Seattle Minimum Wage Law Goes Into Effect April 1

Last time we wrote about the new Seattle minimum wage ordinance, we discussed how the International Franchise Association (IFA) filed a federal lawsuit claiming that the ordinance unfairly discriminates against franchisees. The IFA was asking for an injunction to prevent the law from going into effect on April 1. On March 17, federal Judge Richard Jones denied the group’s request for an injunction. Although IFA’s claim still hasn’t been fully litigated, Judge Jones decision regarding the injunction means the law will go into effect on April 1.

What you need to know?

The increase to the $15 minimum wage will be phased in, and April 1 marks the first incremental change.

Large Companies

If your business employs more than 500 people in the United States,...

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Business Startup

Why You Should Consider a Social Purpose Corporation When Choosing Your Business Entity Type

Prior to the emergence of the Washington social purpose corporation (“SPC”) and similar corporate forms in other states, entrepreneurs who wanted to build for-profit companies with specific social values faced a dilemma. They could create a business structured to focus primarily on profits, a corporation. Alternatively, they could create a business focusing on a social mission, a non-profit corporation. But the non-profit corporation could not operate for profit. So if they wanted to be profitable, they couldn’t as effectively capitalize on the socially responsible reputation that non-profits achieved, even if it was an important part of their business identity. However, SPCs can now bridge that gap. In today’s blog post we discuss how an SPC allows a company to more...

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Business Startup

Brewery Law 101: Navigating the TTB

If you are considering opening a brewery, you will need to navigate the Alcohol and Tobacco Tax and Trade Bureau (“TTB”). In this latest post in our Brewery Law 101 series, we outline the general process for fulfilling the TTB requirements.

1) Beer Operation Identification:

One of the most important steps when starting out in the brewing industry is to decide the type of operation you want to build:

Brewery/Brewpub Pilot Brewing Plant Brewery/Brewpub

If you are interested in producing beer, malt beverages, or Saké for sale, operating a brewpub, or wish to alternate brewery premises with another brewery, you fall into this category.

Pilot Brewing Plant

You fall into this category if you wish to establish a pilot brewery either on or off brewery premises for research,...

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Business Startup

News Roundup: Ride Sharing, Startups Cash In, Google Invests in SpaceX, etc.

Here’s a collection of the most interesting legal and business news we found this week:

Ride Sharing

One of the big issues facing Uber has to do with the fact that auto insurance policies for individual drivers generally don’t cover damages from commercial activity, including ride-sharing through applications like Uber and Lyft. In Colorado, USAA and Farmers are now offering ridesharing insurance. Colorado is a natural testing ground for these new types of policies, as Colorado became one of the first states to explicitly authorize ridesharing services in 2014.

Startups & Funding

The big news of the day is Box’s IPO. After a shaky ride through the IPO process, Box’s IPO appears to be an initial success. It is a home run for its...

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