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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Business Startup

Why Do Startup Companies Use Vesting Schedules for Founders?

As a startup founder, you’ve probably heard that your startup’s shares should be subject to a vesting schedule. You may not know why a vesting schedule is important when issuing startup founders’ shares. Today’s post highlights some of the major reasons why a vesting schedule makes sense for most startup companies, including why investors prefer investing in companies that use vesting schedules when issuing stock to the founders.

An  example of why startup companies use vesting schedules for founders Suppose ABC Company was founded by John and Jane. ABC has created a new crowdfunding portal where investors can invest in businesses online. ABC raised a small friends and family round of investment to help launch the company. John and Jane have been...

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Mergers & Acquisitions

Due Diligence | Part 7 | Miscellaneous Issues

We’ve finally arrived at the last post in our due diligence section of our series on the purchase and sale of a business. In today’s post we explore some of the miscellaneous issues you should be aware of during due diligence.

Real Property Issues We’ve mentioned in previous posts that you should review all “material” contracts, which would include all leases, deeds, or other real property-related contracts. However, there are other, lesser known, real property issues that are often overlooked during due diligence. One of these “other” issues is easements and other restrictions on your ability to use the real property as you’d like.

An easement is a right of use over the property of another. For example, you may be purchasing a...

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Business Startup

The Executive Effect: How a Successful Executive’s Exit Impacts a Company

I recently read a New York Times article that discussed investor reactions to a successful chief executive deciding to exit a company. The article discussed how Manchester United’s coach, Alex Ferguson, announced Wednesday that he will retire at the end of the season. As a result, Manchester United’s shares fell nearly five percent Wednesday morning. Today’s post explores the impact of Ferguson’s exit, as well as the general impact of exiting executives.

A Brief Background Manchester United, the English soccer club, raised $232 million in its IPO last year. During the IPO process, there were serious concerns about the club’s financial projections once Ferguson retired. Many believed that the club’s success over the prior two decades was attributable in large part to...

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Contracts

Taking Advantage of the Portability Rules for Estate-Tax Exemptions

Many people avoid the estate planning discussion for a variety of reasons—no one wants to think about dying, many are reluctant to analyze personal financials and assets, and with so many changes scheduled to occur in early 2013, why not just wait? The excuses are never-ending. The bottom line is that at some point we will pass away, and at that time, what will happen to your estate? What are the estate-tax consequences of passing your assets to your loved ones?

Today’s post highlights a way that couples can maximize federal estate-tax savings without costly predeath estate planning. The IRS issued guidance in June for an estate-tax law that Congress passed in late 2010.

The Problem Currently, an individual’s estate is exempt from...

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Business Startup

Deferred Compensation

Deferred compensation is compensation to employees or independent contractors that is paid after the income is earned. Examples of deferred compensation include stock options, retirement plans, agreements to defer salary or bonuses, severance agreements, and deferred payments in connection with covenants not to compete.

Qualified Deferred Compensation Plans Under qualified deferred compensation plans, contributions by employers are not taxed to the employees at the time of the contribution. The full amount of the untaxed contribution can be invested. Employers get an immediate deduction for contributions to qualified plans, even though the employee is not taxed at that time. Eventually benefits from qualified plans are distributed, and are generally subject to taxation at this point. However, distributions can be “rolled over” to IRA’s...

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Contracts

Best Practices for Hiring and Managing an Independent Contractor

Today, the use of independent contractors is becoming more and more prevalent. As jobs began to disappear in 2008, unemployed professionals decided to jump into the freelance waters and try their luck. As business try to stay lean, they have substituted a large staff of employees with independent contractors from a variety of industries. The nature of independent contractors involves work done outside the office, which can be difficult to oversee. Today’s post is aimed at giving you tips for how to manage your independent contractors.

Take Time to Hire the Right Person Many of issues that business owners face when working with independent contractors can be avoided by taking more time during the hiring process. Instead of hiring the first seemingly...

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Business Startup

The Latest Attempts to Detect, Prevent, and Remedy Employee Misclassification Abuses

In late 2011, the US Department of Labor (DOL) and the Internal Revenue Service (IRS) signed a Memorandum of Understanding that aimed to improve the two agencies’ efforts to put an end to the business practice of misclassifying employees in order to avoid providing employment protections. In addition, labor commissioners and other key agency players in seven states (Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah and Washington) have signed similar memos with the DOL’s Wage and Hour Division, as well as the Employee Benefits Security Administration, Occupational Safety and Health Administration (OSHA), Office of Federal Contract Compliance Programs, and Office of the Solicitor.

Detect, Prevent, and Remedy Misclassifications The memorandum of understanding comes as part of the DOL’s Misclassification Initiative to detect, prevent, and remedy employee misclassification. The ultimate goal...

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Business Startup

Incentive Stock Option Basics

If you’re looking for a way to incentivize employee performance in your company without having to hand out hefty salaries and bonuses, you may want to consider incentive stock options (ISOs). Often referred to as qualified (or statutory) stock options, ISOs are a type of employee stock option that provide employees with non-cash compensation in the form of stock options. Today’s post will examine some of the key features of ISOs, as well as the basic requirements to be a qualified ISO.

Tax Benefits of Using ISOs Perhaps the most significant benefit, especially from the employee’s perspective, of using ISOs is the tax benefit. An employee who exercises the option to purchase stock does not have to pay ordinary income tax on...

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