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The Misleading Attractiveness of S Corp Elections

Investors prefer investing in Delaware C Corps which don’t allow founders to take personal tax losses for early expenses. Many founders are tempted to make an S-Corp election which allows a pass-through tax treatment similar to an LLC. While that could be a small short term gain in the early days, it can jeopardize a much larger tax free gain in the future ($10M+) . Most typical startups should avoid tinkering with their tax treatment; if it really seems important it is best to tap in a professional.
Ryan Nash
RYAN NASH , COO , GUST LABS, INC.
22 Mar 2024

Understand the Funding Process and What Investors Want to See

Some very small businesses—particularly those that offer the professional or personal services of a single individual—can be launched and grown with few or no resources other than human time and talent. But most businesses require some money before they can be started—to pay for software, buy tools or equipment, lease office space, or pay for the time worked by employees or outside contractors. Since most entrepreneurs are not independently wealthy, and since, as we saw in Chapter 13, banks won’t lend money to startups, it is often necessary to raise funds by exchanging an ownership interest in your business (known as equity) for money. The people on the other side of the table who are willing to make that exchange are investors, and their interests, motivations, and capabilities cover a very wide range, both in the amount of money they can provide and the stage your company needs to be at when they invest.
David S. Rose
DAVID S. ROSE , FOUNDER AND CEO , GUST INC.
5 Mar 2024

Don’t Panic! Your pre-revenue startup doesn’t owe $85,165 in Delaware Franchise Taxes

It’s Delaware Franchise Tax Season! If you’re incorporated in Delaware and you’re staring at a terrifying notice with the number $85,165.00 on it, don’t panic. It’s very likely that your startup only owes $400. Read on for details on how to refigure your bill, easily file your report, and reduce your stress in future years.
Peter Swan
Peter Swan , CEO , Gust INC
14 Feb 2024

Startup Strategies: The Strategic and Financial Significance of Intellectual Property

Startups are often at the forefront of innovation, developing new technologies, products, and services that disrupt traditional industries and bring fresh ideas and approaches that drive technological advancements. In that regard, startups often rely heavily on their ideas, and the unauthorized replication of those ideas may result in a loss of control over the unique aspects of a startup’s offerings. A collection of studies spanning over 20 years of data published earlier this year by the European Patent Office (EPO) and European Union Intellectual Property Office (EUIPO), (Report), examined the role of intellectual property rights in a startup’s success.
Moses & Singer LLP
Stephanie M Smith & Milton Springut , PARTNERS , Moses & Singer LLP
1 Feb 2024

Using Copyrighted Works in AI Training Data May Infringe Even if the AI Output Doesn’t

Thomson Reuters Enterprise Centre GmbH v. Ross Intelligence Inc., decided in the federal District Court in Delaware on September 25, 2023, asks the question whether a company can train its AI on a competitor’s copyrighted works in order to help it compete? What if the AI output does not infringe the competitor’s copyrights? The answer so far is “maybe,” but that the answer is not “no” adds to the hazards of using copyrighted works as training data. Thomson Reuters v. Ross is a trial court decision denying summary judgment on the points at issue, and is therefore not a definitive declaration of law. However, by denying summary judgment on copyright infringement to the AI builder and user, the decision opens the door to the kind of lengthy, expensive and uncertain litigation that could deter builders and users of AI from using copyrighted works as training data.
Moses & Singer LLP
David Rabinowitz & Milton Springut , PARTNERS , Moses & Singer LLP
17 Jan 2024
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