Yes, Your Startup Needs to Have Its Own Insurance.  Here’s Why.

Yes, Your Startup Needs to Have Its Own Insurance. Here’s Why.

Business Formation, Corporations, Insurance, Limited Liability Company
Rarely a month goes by that a new founder or business owner I’m meeting with asks me some version of the following: “But we already formed a corporation (or LLC), why do we need liability insurance?” or “Aren’t my personal assets protected as it is [by the legal formation of the company]?” In this blog post, I’ll try an answer those questions, explain the specific types of insurance that a new startup should consider, and how to get started. Doesn't legal formation of my business protect my personal assets? Well, yes and no. First off, let me be absolutely clear-- operating any business under a validly formed legal entity is one of the first things you should be doing as an entrepreneur who’s about to actually market and sell goods…
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Using Your Home Address as Known Place of Business in Arizona

Using Your Home Address as Known Place of Business in Arizona

Business Formation, Corporations, Entity Formation
Startup founders who have just launched their business are usually focused squarely on developing their MVP and are not quite at the point where they need office space or want to take on the expense of an actual lease. These business owners will frequently ask our Phoenix startup law practice if they can use a home address (usually that of the company owner or a shareholder) as the known place of business for their Arizona corporation? First of all, the usual caveats. This post deals strictly with Arizona law and requirements. You should always examine the applicable law of your state of formation or consult an attorney practicing there. For purposes of this article, we also are focusing on Arizona domestic corporations. Now, let’s take a look at what Arizona…
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Is An S-Corporation Right for Your Startup?

Is An S-Corporation Right for Your Startup?

Business Formation, Corporations, Entity Formation, Equity Incentives, Foreign Corporation, Start-Up
In my Phoenix emerging business law practice, I’m regularly asked to incorporate a client’s startup company. However, I’m often met with a founder's blank stare or “Um…” when I ask them if they wish to be considered a C or an S-corporation. Let me remind the reader that I am not a CPA or tax attorney and that you should always (and I mean always!) discuss your and your co-founders' specific tax situation and business and capital raise goals with your CPA or tax advisor before making a Subchapter S election for your startup. Aren't all corporations just...well, corporations? Not exactly. When you incorporate your startup company, for Federal taxation purposes anyway your new corporation will be treated by default as what is known as a "C" corporation (based on…
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What Should Par Value for My Startup’s Shares Be Set At?

What Should Par Value for My Startup’s Shares Be Set At?

Business Formation, Corporations, Entity Formation, Start-Up
Not that kind of Par. Founders who are incorporating their startup initially are usually faced with the question of what to set the “par” value of the business’ stock. This is a question I'm regularly asked about as a Phoenix Startup attorney. In this post, we look at what par value is, why it remains important, and what you might want to set it at initially. What's a Stock's Par Value? While most of us who golf (or try to anyway) are familiar with the concept of "par" on the golf course, when it comes to corporations, par has a very different meaning. It is a common misconception of startup founders is that par equates to market value. Although this can be true, it usually is not. Put simply, par…
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How Many Shares Should My Startup Authorize when Forming?

How Many Shares Should My Startup Authorize when Forming?

Business Formation, Corporations, Start-Up, Stock Options
Historical Stock Securities by pictavio via Pixabay As a Phoenix attorney that has represented a number of local and out of state startups, I can tell you that one of the Top 10 questions I get is some variation of, “How many shares should the startup company authorize at formation?” How many shares is my Startup required to authorize? First off, at least here in Arizona where I practice at least, there is no law or regulation that requires a startup to have a minimum or maximum number of shares that need to be authorized or to founders or set aside in an equity incentive program. With that said, there are practical and operational limits, which we explore in this post. Typically, with technology-oriented startups at least, I recommend that…
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