Insight Michael Moradzadeh · October 21, 2009
The United States Court of Appeals for the Second Circuit, in a September 10, 2009 ruling, held that an employer can be held liable for discriminatory hiring decisions made by its independent contractors. The case involved an independent contractor acting on behalf of the employer, telling the plaintiff that “they were looking for someone younger”.
The Second Circuit ruled that, even if the hiring decision is made by the authorized independent contractor, the employer was still responsible for the discriminatory hiring decision by the independent contractors. In a worse scenario, even if the independent contractor does not have the actual authority but the applicant thought that it did (“apparent authority” in legal terms), the employer is still liable.
Considering the harsh economy and fewer job opportunities these days, employers should be more cautious since the job applicant is more inclined to sue if he/she cannot get the job. Employers should avoid asking job applicant questions such as race, religion, national origin, gender and age, etc during the interview process; when entering into the independent contractor contract, it is a good idea to add an indemnification clause asking the independent contractor to indemnify the employer for any liability arising from the hiring process conducted by the independent contractor.
Insight September 17, 2009
If you are a company with operations in both the United States and Israel, you should be aware of several very important U.S. and Israeli Tax issues when you engage in cross border operations. I have set forth below several of the main issues. This list is not exhaustive and only reflects briefly the main tax issues. Other issues such as employment, banking, intellectual property rights, custom duties etc. will be addressed in other communications.
Insight September 08, 2009
Oracle’s takeover of Sun Microsystems is facing the European Union’s competition regulator’s investigation, and the prospect of Google’s ambition of building a digital library is still unclear because some publishers and writers reckon the accessibility of large volume of online books will damage their economic interests. While small tech companies and start-ups are worrying about their sources of capital and the outlet of their products, the big tech companies are also undergoing tough scrutiny from both the governments and their competitors.
Oracle’s deal is a typical M&A deal among two tech companies in order to complement each other and expand their market shares, and it is not uncommon to trigger the anti-trust examination. Google’s “monopoly” is sort of untraditional, since the platforms of the competition are not overlapping: one from the physical word, i.e., the physical books, and the other is from the virtual word, i.e., the books on the internet.
I do like Google’s fantastic idea of making millions of books digitally available to the general public, and do admire its ability of making it true. While creation is the life of a tech company; having a good idea and making it good is the key to the success of a tech company, no matter it is only a startup or a giant.
Insight September 03, 2009
So, you have this great idea, you are sure that it is going to be at least the next Google/Monster/Microsoft/Facebook. Now what?
Well, having a great idea is just the first step (and some say the easiest one) in a long long journey towards establishing your own living and kicking business. Since this platform of blogging requires us to divide this experience into small, 300-500 words sections, I find it to be a great opportunity to try to attack different aspects of starting up a new business one small piece at a time.
When Barak and I decided to “become serious” with the idea of www.Meijob.com, our first step was to sit and write down a business plan that we could present to potential investors. But how do you start writing a business plan? What is the “must have” information? How are we going to translate the storm in our heads into words and numbers?
Insight September 02, 2009
On September 1, 2009, Ebay announced that it would sell 65% of Skype, an internet calling service to a group of investors which includes Silver Lake, a private-equity fund, and a venture-capital firm started recently by Marc Andreessen, founder of Netscape. The price was $1.9 billion in cash, higher than previously expected. Skype was purchased by Ebay in the year of 2005 and was targeted to strengthen the communication between buyers and sellers of Ebay.
The situation is not uncommon in the mergers of the technology companies. As early as in 2000, analysts had already pointed that the problem in the corporate alliance is especially rife in the tech industry, where executives working quickly on “internet time” often rush deals before assessing whether the companies fit well together. In order to determine whether the two companies match each other, merely prior transaction due diligence is not enough.
Reasons why some acquisitions fail, among other things, might be the unfitness of the technology developed by the acquired company to the acquiring company, corporate cultural clash, and disenchanted key employees of the acquired company who finally left the company. A competent law firm or lawyer can add value to the companies by doing adequate intellectual audit and designing an employment package to detain the key employees.
Insight September 01, 2009
Lots of young entrepreneurs in Silicon Valley these days hope to begin their business, let people know their companies, and furthermore, draw the attention of venture capitalists, who will devote money to their new enterprise.
Something that an entrepreneur must keep in mind is something that he must give up to VCs when getting money from them – most commonly stock of the new company. Generally, a venture capitalist asks for “preferred stock” from the entrepreneurs; the owner of preferred stock enjoys shareholder rights superior to the shareholders of common shares.
Most types of preferred stock are designed to convert into common stock (for example, one share of preferred stock converts into five shares of common stock), either at the discretion of the investors (voluntary conversion) or when some preset threshold is reached (automatic conversion, for example, in a public offering scenario). Thus, the conversion condition, time of conversion (voluntary or involuntary), and the conversion rate, is always one of the most fiercely argued clauses in the investment negotiations between VCs and entrepreneurs.
Of course, another major issue to consider before seeking venture capital is the loss of control of your company. When VCs invest, they want to make sure their investments are secure, so they often require a seat on the board of directors and certain voting rights. This means an entrepreneur effectively has a new boss. This can be a good thing since VCs often add experience and credibility to the company. However, this often causes power struggles between the entrepreneur and the venture capitalists.
Insight September 01, 2009
The IRS has now implemented a special approved penalty framework for resolving the civil side of offshore voluntary disclosures and this approved penalty framework is effective till September 23, 2009 at which time the IRS intends to re-evaluate the approved penalty framework. Under the approved penalty framework, the taxpayer has to file correct or amended tax returns for tax years 2008 back to 2003.
Insight Michael Moradzadeh · August 28, 2009
Clean Tech is generally considered to include multiple advanced technologies in four economic sectors: energy, waste, materials, and transportation. These technologies break down in categories such as energy generation and storage, water and wastewater, air and environment, etc. There is no clear-cut definition for a “Clean-Tech” Company, but as shown by its name, a clean-tech company should be a company equipping its core business with clean technology. As a related concept, Clean-tech Law contemplates a diverse set of legal issues related to the commercialization of clean technology, and the more traditional legal areas of clean technology law include intellectual property, patent law, licensing, litigation, and federal state legislative and regulatory issues.
Insight Michael Moradzadeh · August 19, 2009
S-Corporations are corporations that elect to be treated as pass-through entities by the IRS. In order to qualify for S-Corporation status a corporation needs to satisfy several conditions, including the following: 1) all shareholders must be residents of the United States; 2) the corporation may only have one class of shareholders and may not have more than 75 shareholders; and 3) the company’s shareholders must be any of the following: individuals, estates, certain trusts, certain partnerships, tax-exempt charitable organizations, and other S corporations (but only if the other S corporation is the sole shareholder). This means S-Corporations may not be owned by other C-Corporations, LLCs, or foreign residents. If any of the requirements are not met at any time, the corporation automatically loses its S-Corporation status and will be treated as a a C-Corporation.
Insight Michael Moradzadeh · August 19, 2009
Whenever a corporation or limited liability company does business (i.e. enters contracts or agreements) in a state other than the state in which they are domiciled, they are required to do a foreign filing in that state. For example, if a business is incorporated in Delaware, but has an office and/or employees based in California, that business needs to do a foreign filing in California. In such a situation the corporation will need to pay franchise taxes in both Delaware and California.