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Entries tagged “Startups And Emerging Companies”

The tax benefits of making an S-Corporation Election?

Insight Michael Moradzadeh Michael Moradzadeh · January 31, 2010

Many small business owners incorporate their businesses not only for legal protection, but also to reduce owners’ payroll taxes through S-Corp tax election with the IRS. One advantage of an S-Corp is that it gives business owners the ability to reduce their self-employment taxes. Any small business owner who has not made an S-Corp election and uses Schedule C for their personal tax return for 2010 is subject to both employer and employee FICA and Medicare payroll taxes at 15.3% up to $106,800, 2.9% Medicare for Schedule C net income greater than $106,800, and California SDI for 1.1% up to 93,316. If a business owner pays himself/herself a “reasonable salary”, the rest of the net income is not subject to these payroll taxes.

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Venture Capital Survey of the Silicon Valley in 2009 Third Quarter

Insight Michael Moradzadeh Michael Moradzadeh · November 16, 2009

Dow Jones VentureSource is one of the most popular nationwide venture capital date reports in the United States. VentureSources published its latest data on the development of venture capital investments in the third quarter of 2009. Below are some overviews observed by VentureSource.

  • With 616 venture deals and $5.1 billion invested, Q3 is a 6% drop over Q2;
  • IT investment barely outpaces health care;
  • Web2.0 investments surpassed the software sector for first time on record;
  • Medical device investments nearly match biopharmaceuticals;
  • Corporations investing instead of acquiring, commitments to VC-backed firms surpasses 2008 total;
  • $5 million median deal size on par with Q1&Q2, but still lowest since 1999.

It is undeniable that the investments and fundraising by venture capitalists remained at low levels in 3Q’2009, but there is room for optimism as the economy is picking up slowly and Nasdaq continued to improve. In addition, with regard to the largest U.S. deals overall in 3Q’2009, eight deals are conducted in California, such as Facebook, Tesla Motors, and Pacific Biosciences of California, etc.

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New Legal Trap for Employers in Hiring Independent Contractors

Insight Michael Moradzadeh 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.

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No Smooth Road for Tech Giants

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.

 

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Choosing Values for Your New Startup

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?

 

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What do entrepreneurs give up to VCs?

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.

 

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Clean Tech Companies in Obama’s Administration

Insight Michael Moradzadeh 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.

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What is a foreign filing?

Insight Michael Moradzadeh 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.

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Where should I form my entity?

Insight Michael Moradzadeh Michael Moradzadeh · August 19, 2009

This can be a very complex question. If you are looking to grow the company and get outside investment, then you should probably form an entity in Delaware. If your entity will have real estate holdings Nevada might also be a good option. Otherwise, it might make the most sense to simply form the entity in the state where you will be conducting most of your business.

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Non−competition Agreements

Insight Michael Moradzadeh Michael Moradzadeh · August 01, 2009

Can a part-time employee hold another job while working for you? Can he or she work for a direct competitor a year after he involuntarily leaves his employment? Does this change if he owns part of your business? What if the competitor is anywhere in the world instead of in the samecounty? Different states have different laws regarding the strictures that will be enforced once a worker leaves your company. These laws are affected by the stability of the economy. It is important for your company’s future and stability, that you take full advantage of whatever protections the applicable law affords.

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