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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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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

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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 blog post, we review employer policies regarding parental leave and discuss what businesses can expect in the future.

We’ve been reading the business news surrounding companies increasing the parental leave they offer their employees. In today’s blog post, we take a more in depth review of the trend locally, discuss what businesses can expect in the future, and remind employers to understand applicable law before developing their parental leave policy.

Parental Leave in the News

Washington tech giants Microsoft, Amazon, and Zillow have recently announced plans to increase their parental leave. Microsoft now offers 12 weeks of fully paid parental benefits to all new mothers and fathers. Amazon also introduced a revamped parental leave policy. Amazon will offer birth mothers up to 20 weeks of leave. Amazon has also introduced a shared leave program; employees whose partners do not receive parental leave…

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Parental Leave

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In today's blog post, we discuss how you can dissolve your Washington business entity.

If you’ve decided to move on from the business you’ve started and it doesn’t make sense to sell it, you’ll likely want to dissolve your Washington business. To do so, you’ll need to consider the following steps:

Dissolving a Corporation 

To voluntarily dissolve a Washington corporation, generally the corporation’s board of directors will propose dissolution and submit the proposal for a vote by the shareholders. Two-thirds of the authorized shareholders then must approve the proposed dissolution. The initial directors, incorporators, or board of directors may also dissolve the corporation by majority vote under certain circumstances, like when no shares have been issued.

Following the vote to dissolve, the corporation must file Articles of Dissolution with the Secretary of State to notify the state of the corporation’s intention to…

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Office building door

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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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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