It’s that time of year again: Tax season. In addition to the headache of personal income taxes, entrepreneurs have to deal with business taxes. Around this time each year, as sure as the sunrise, I get calls and messages from irate founders of new startups who received franchise tax bills from the State of Delaware for an insane amount like $75,000. Why on earth would startup lawyers like me recommend that new companies incorporate in Delaware if they’re going to get fleeced by the tax collector? Read more
Articles by Antone Johnson
Path, a high-profile San Francisco social media startup, ignited a firestorm this week with the revelation that its mobile application uploads users’ entire iPhone address books to the company’s servers without their knowledge or permission. The practice, discovered by Singapore developer Arun Thampi, provoked outrage within the user community and was broadly condemned by the tech business press. Jon Mitchell at ReadWriteWeb wrote that the upshot of Path CEO Dave Morin’s initial response was “We did it first, and we’ll ask you for permission in a little while.” The company quickly apologized on its corporate blog and, as I write this, plans to push out an updated version of the iPhone app to quell users’ privacy concerns. Read more
I’ve gotten on my soapbox before about the importance of forming a business entity as soon as there’s a new product or business worth protecting. The most common messes encountered in my startup law practice involve founding teams that somehow never got the formation done right, including the contributions and assignments of intellectual property to the new company and the related issuances of stock to founders and other contributors. As they say, an ounce of prevention is worth a pound of cure, so let’s drill down and look at the places where things can go right or wrong. Read more
One of the best values a young entrepreneur can absorb early on is the value of learning from mistakes, both your own and those of others. I’m constantly amazed at the extent to which experienced entrepreneurs and angels are willing to share their accumulated knowledge and wisdom, including some painful battle scars, with others. This bedrock of Silicon Valley culture is a prerequisite for the whole phenomenon of venture accelerators. It’s the radical opposite of the prevailing culture in established or contracting industries, where all things proprietary or innovative are jealously guarded and information is shared on a “need-to-know” basis. This spirit of “coopetition” is one of the things I truly love about the startup community. Read more
Given that 2011 is already behind us, I’d like to take a brief time-out from the usual legal and financial wonkery to wish you and your loved ones a Happy New Year. Many thanks to David Rose, Ilana Grossman, Justin Stanwix, and the whole Gust team for making the Gust Blog such a valuable platform and resource for entrepreneurs and angel investors. I’m proud to contribute to the effort and always enjoy reading what the other authors have to say.
Last month we covered the basics of intellectual property (IP) for startups, including a simple taxonomy, some common issues and related documents for entrepreneurs to use when forming a new startup. I’d like to take a step back and discuss the significance of IP as a component of the overall value that founders intend to create as they grow the company. The questions that arise most with respect to any category of IP at the earliest stages include: Read more
So you’ve chosen a name for your startup, product, or both. Having covered all the bases to ensure that your corporate name is available, the domain name can be acquired, and the name doesn’t infringe any existing trademarks (as we discussed last week), now is a good time to look at the categories of intellectual property (IP) that are relevant to most startups. Read more
Having taken stock of the main legal documents and actions involved in forming and operating a new startup, let’s crack open the “case” (disregarding the warnings about voiding your warranty) and examine a few of the steps, documents and key decisions to be made in getting a new startup ready for business.
Most startup lawyers have checklists (at least in their heads) and will interview a new client to gather a wide range of relevant information before moving forward with business entity formation, documentation and so forth. Sometimes this is done in the form of a questionnaire. I prefer a hybrid approach because founders come from all kinds of backgrounds, and while some may have a strong point of view on every question in the startup questionnaire, others want or need more guidance in answering the questions that call for decisions to be made. Read more