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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Should I Exchange Equity for Freelancer or Contractor Services?

Should I Exchange Equity for Freelancer or Contractor Services?

Entity Formation, Equity Incentives, Start-Up, Stock Options
As a Phoenix emerging business attorney, I am often asked by startup founders whether it is a good idea or not to give equity in exchange for the services of a freelance developer, designer, or [insert type of vendor here] or to just pay for their services outright? I have been asked this question enough that I finally found it to be blog-worthy.  While every situation is different and must be examined individually, the following are my accumulated thoughts on the subject from both the legal and business perspective.  All things being equal, I almost always recommend finding a way to pay the services and own any deliverables outright in order to preserve your equity.  I say this for a number of reasons: Newton's First Law of Startup Companies OK,…
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