The High-touch Legal Services® Blog…for Startups!

© 2009-2020 Dana H. Shultz

How can I Invest More Money in My Corporation?

Photo of a check with a pen on top of it

This post is based on a Quora question in which a user who already had invested money in his corporation wanted to know how he can invest an additional amount. My answer, reproduced below almost verbatim, starts by summarizing the steps for an initial equity investment.

Let’s assume you did your startup paperwork properly: The board of directors approved issuing some or all of the corporation’s authorized shares to you in exchange of payment of certain consideration; you deposited that consideration into the corporation’s bank account; the secretary recorded your share ownership on the corporation’s share transfer ledger and issued a share certificate to you.

(more…)

WSJ: Rent a Desk, Rather than an Office

wsj.com logo

In an article yesterday (Can’t Afford an Office? Rent a Desk for $275), the Wall Street Journal observed that use of shared workspaces – renting a desk in an open space, rather than renting an office – is increasing throughout the United States.

Such resources have been used for many years by technology startups here in the San Francisco Bay Area. The article specifically cited Plug and Play Tech Center in Sunnyvale (which is exploring expansion to other cities).

(more…)

Can an Undocumented Immigrant Form a Corporation?

U.S. Citizenship and Immigration Services Logo

This post is based on a question that I answered on OnStartups.com. The short answer is “Yes, an undocumented immigrant can form a corporation.” The rest of this post is adapted from the full answer that I provided.

You can form a corporation – no problem. I have helped dozens of foreign clients (non-citizens, no social security number) go through that process.

(more…)

Printing Legends on Share Certificates – Why and How

Sample Share Certificate to illustrate printing legends on share certificates

Sample Share Certificate with Legend from Attorneys Corporation Service, Inc.

Last year, I wrote about the importance of a corporation’s placing appropriate legends on share certificates (Why Do We Need a Corporate Records Book?) and likewise for limited liability company membership certificates (Should My LLC Issue Membership Certificates?). This post provides more details about why legends are required and how to print legends on share certificates. (Although I am using corporation-specific terminology, the considerations are similar for LLCs.)

When including legends on share certificates for clients, one of the most important states that the shares have not been registered under state or federal securities laws.  (I have the company that provides the certificates include it when the certificates initially are printed.) The reason: To put the shareholder on notice that, under applicable securities laws, the shares cannot be transferred unless certain circumstances are satisfied. Here is an example:

(more…)

LLC Accounting – Allocations vs. Distributions

Accountant's green and white ledger page, symbolixing LLC accounting practices

An entrepreneur who was trying to prepare a limited liability company (LLC) Operating Agreement on his own (apparently using someone else’s as a template) was puzzled by the concept of “sharing losses”. I could tell right away that he was not familiar with two fundamental concepts of LLC accounting: Allocations vs. distributions.

Before going further, I need to make two disclaimers:

  1. This post is not about taxes.
  2. The following discussion is extremely simple, addressing only the most basic considerations. One of the great things about LLCs is that the members can agree to make allocations and distributions in any way they desire to meet their business needs. As a result, LLC accounting can be far more complex than the following might suggest.

(more…)

Attention Entrepreneur: Have You Planned Your Estate?

I frequently talk to individuals who are about to start new businesses. Sometimes, our conversation reveals that the nascent entrepreneur is:

  • Age 30-something,
  • Married, and
  • Parent of a young child, or has a first child on the way.

When I learn this, I immediately ask, “Have you done any estate planning?” The answer invariably is “No.”

(more…)

MarketWatch: Europe’s Start-ups still Drawn to the Valley

Logo for MarketWatch, which published an article about Europe's start-ups

An article, “For Europe?s start-ups, Silicon Valley still calls”, was published yesterday by MarketWatch, part of The Wall Street Journal Digital Network. It discusses why the tech entrepreneurs behind Europe’s start-ups continue to flock to the San Francisco Bay Area.

The article’s theme:

Divided by geography, language, regulation and, in some cases, just old-fashioned cultural prejudice, the region has struggled to shed fully its image as a place where men and women with ideas are born, but where they do not necessarily stay, prosper or secure funding.

(more…)

In which State should My Startup Incorporate?

Quora logo

This post about the state in which a startup should incorporate brings together points I have made in earlier posts (please see below) and is based on a comment I made on another Quora participant’s answer.

I admit to having a point of view that differs from that of many other lawyers. However, as explained toward the end of this post, my point of view results directly from the types of clients that I serve.

(more…)

You May Not Need a Lawyer (Yet)

U.S. Small Business Administration logo

A few days ago, a first-time entrepreneur contacted me, asking that I advise him on such issues as employees vs. independent contractors, equity compensation, and the like. As we exchanged e-mails, however, I could see that there were fundamental business issues to which he had not given sufficient consideration. (more…)