Business Startup

Why an LLC Taxed as an S Corporation is an Attractive Option for Businesses

As we’ve discussed in previous posts, the limited liability company (LLC) entity offers a ton of flexibility when organizing the management and economic structure of the company. Because of this flexibility, the LLC has quickly become the most popular entity to form when seeking limited liability protection for new businesses. Below we’ve highlighted one important consideration when forming your LLC: whether to elect to be an LLC taxed as an S corporation. 

Distinction between LLC and S Corporation

It is important to understand the distinction between an LLC and a S corporation. An LLC is a specific type of limited liability entity that is governed by state statutes and offers the owners (also known as “members”) limited liability protection when conducting business...

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Business Startup

What Your Business Should Know About the New $15/hour Seattle Minimum Wage

Earlier this month, the City of Seattle passed an ordinance that established a $15 minimum wage for employees working in Seattle. In this post, we’ll breakdown the details of the new local law, so you have a basic understanding of how it will affect your business. 

When does the new law take effect?

The ordinance will take effect on April 1, 2015.

How does it affect your Seattle business?

The ordinance provides generally that Seattle businesses must provide their workers with a minimum wage of $15 per hour. In terms of implementation, the ordinance treats certain employers differently, with “Schedule 1 Employer” and “Schedule 2 Employer” designations. Schedule 1 Employers are those who employ more than 500 employees. Schedule 2 Employers are those who...

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Business Startup

Washington State Passes Corporate Entity Conversion Bill

In an effort to streamline the process of converting one business entity to another business entity (e.g. converting your LLC into a corporation), Washington legislators recently passed Senate Bill 5999. Sponsored by Senators Pederson, O’Ban, Kline, and Rain, the bill amends Washington’s Limited Liability Company Act and the Business Corporation Act to allow conversions between Washington LLCs, corporations, and limited partnerships. The bill also allows entities formed in another state to convert into Washington LLCs and corporations.

The bill was signed into law by Governor Inslee on March 27, 2014, and will become law in early July 2014. The bill will be incorporated into the Revised Code of Washington, and the updated RCW should be available online as early as July...

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Business Startup

Washington Social Media Law: New Regulations Your Business May Not “Like”

The Washington social media law landscape changed recently with the passage of a new bill aimed at protecting employees from social media overreach. The new Washington “Social Media Statute” (RCW 49.44.200) presents a few challenges for businesses and entrepreneurs, especially those that may want to gain access to an employee’s personal or a “contested” social media account.  The statute adds new regulations that make it significantly more difficult to monitor an employee or applicant’s personal social media activity. Employers should understand their obligations under this new statute, and what it means for their social media policies.

Prohibited Activities

The statute makes it unlawful for an employer to “request, require, or otherwise coerce an employee or applicant to disclose login information for the...

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Business Startup

What You Should Know About Voluntary, Administrative, and Judicial Dissolution of a Business Entity

As a business owner, you may find yourself in a situation where you either need to dissolve your company, you are being forced to dissolve your company (either by other owners or by the state), or you simply want to know what your potential exits are. This post will explain dissolution in Washington, and how it can affect your business.

In Washington, closely-held corporations may be dissolved in one of three ways: 1) voluntarily, by vote of the shareholders or directors; 2) by administrative dissolution; or 3) by judicial dissolution.

Voluntary Dissolution

To voluntarily dissolve a corporation, generally the corporation’s board of directors may propose dissolution for submission to a vote of the shareholders. Two-thirds of the authorized shareholders then must approve the proposed dissolution....

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Business Startup

Getting Back to the Basics: Choosing the Best Entity For Your New Business (Part 2): LLCs and Corporations

In our first post in this series on choosing the best entity for your new business we explored sole proprietorships and partnerships. Today’s post will highlight two additional business entities: the limited liability company (LLC) and corporation.

Flexibility is Key for the LLC

An LLC is a legal entity in which one or more individuals (“members”) have limited liability for the business’ debts and obligations even if they participate in management of the company. Members of an LLC have great flexibility in structuring the operation and management of their venture through the LLC’s governing document, known as an operating agreement. If the LLC does not draft an operating agreement, its activities will be governed by state statute.

For tax purposes, an LLC is...

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Business Startup

Contingent Contracts: a Valuable Tool When Negotiating Agreements

When you are negotiating an agreement, there are all sorts of ways contract discussions can break down. Often when negotiations become difficult, a contingent contract is a compromise that can lead to a mutually beneficial resolution.

What Is a Contingent Contract?

A contingent contract is an agreement in which the parties to the contract agree to different obligations depending on a future event. A common example is a non-discretionary performance bonus for an employee or manager. A simple provision awarding a non-discretionary bonus might look something like:

If Company Sells X number of units or more of Product Y in 2014, Employee will receive an additional $100,000 in compensation, payable on March 1st, 2015.

In this example, the Company agrees to provide the Employee...

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Business Startup

iVLG News Roundup Week 14 2014: IPO Market Heats Up in Early 2014; Imgur Raises Capital from Andreessen and Reddit; Crowdfunding and the Rule Making Debate

IPO Market Heats Up

The market for initial public offerings seems to be heating up announced the NY Times this week after Grubhub began selling stock publicly. Grubhub’s IPO price raised 40% in the first day of trading but has since waned.  The Grubhub deal, which followed the earlier merger of Grubhub and its one time rival Seamless, was among other notable IPOs this year. Overall, the first quarter of 2014 has been very strong for IPOs and has some talking of a repeat of the dot com bubble era.

Imgur Doesn’t Need Money But Takes $40 million Anyway

Image sharing site Imgur received $40 million in funding from VC firm Andreessen Horowitz despite only 2 months ago saying they didn’t need the...

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Business Startup

iVLG News Roundup Week 13 2014: Facebook Buys Oculus VR; Washington Passes Crowdfunding; Bitcoin Taxation

Facebook Buys Oculus VR; Non-equity Stakeholders Feel Slighted

After raising $2.4 million through a Kickstarter campaign that helped bring their virtual reality headset to real reality, Oculus VR sold to Facebook in a cash and stock deal worth $1.99 billion. The company announced it was joining Facebook because “[t]his partnership is one of the most important moments for virtual reality: it gives us the best shot at truly changing the world. It opens doors to new opportunities and partnerships, reduces risk on the manufacturing and work capital side, allows us to publish more made-for-VR content, and lets us focus on what we do best: solving hard engineering challenges and delivering the future of VR.”

The trajectory the company took to a $2...

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Business Startup

Business Valuation Basics

Entrepreneurs and business owners will generally need to value their business on many occasions during the course of a career. Whether part of a seed investment round, follow-on series investment round, merger or acquisition, partnership or owner dispute, or a partnership or ownership dissolution, you will likely need to fix a value to your business at least once.

Behavioral study indicates that people tend to value that which they are selling higher than they would value the same thing if they were buying. This means that most of the time, and especially when the valuation is forced, the number the buyer proposes and the number the seller will accept are far apart. So you often see business owners and entrepreneurs turning to...

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