Term Sheets: Binding & Non-Binding

Guest post by Teresa Daggett First, let’s get the terminology of term sheets out of the way. Whether the document that outlines your deal is called a “term sheet,” a “memorandum of understanding” or a “letter of intent,” these terms mean essentially the same thing. We will use “term sheet” in this article, but the … Continue reading Term Sheets: Binding & Non-Binding

Venture Capital Office Hours with Voyager Capital

UW students and faculty interested in startups can talk monthly, face-to-face, with a venture capital investor and startup attorney.  Randall Lucas of Voyager Capital and I hold open office hours the first Wednesday of each month at the University of Washington. Who comes to see us?  A wide range, from skateboard-toting sophomores who have coded … Continue reading Venture Capital Office Hours with Voyager Capital

RSUs: The Tax Problems in the Startup Context

Restricted Stock Units (RSUs) are not a good choice of equity compensation for a startup. RSUs work great for big public companies, like Amazon or Microsoft. And sometimes RSUs can work great for private companies. But it has to be a really unique private company for RSUs to make sense. Examples would be a company ramping … Continue reading RSUs: The Tax Problems in the Startup Context

Warrants: The Tax Story

By Dan Wright of Clark Nuber and Joe Wallin Warrants can be confusing from a tax point of view. There are a couple of reasons for this. But the primary reason is probably because how a warrant is taxed is driven by the factual circumstances under which it was issued. Was it issued as part … Continue reading Warrants: The Tax Story

How to Share Equity

By Nikki Piplani and Joe Wallin If you are a startup company founder, one of the first questions you will have will be about sharing equity with your early hires. Once you start asking, you will hear plenty of advice about this. You will hear— “Be generous”. You will also hear— “Worry about dilution”. The concerns … Continue reading How to Share Equity

ISOs: Annual Tax Reporting Requirement

If your company has had employees exercise incentive stock options (“ISOs”), you are required to report certain information to the IRS and the optionee about the exercise. ISO Tax Reporting There is no income or employment tax withholding required on the exercise of an ISO. But there is an annual tax reporting obligation to the … Continue reading ISOs: Annual Tax Reporting Requirement

Immediately Exercisable ISOs: The Problems

By Joshua Levy and Joe Wallin A lot of companies, including a large portion of Silicon Valley startups, grant new hires immediately exercisable ISOs (incentive stock options) with the expectation that many will exercise their options “early” for favorable tax treatment. In fact, employees are often given a kit with all the paperwork, including everything … Continue reading Immediately Exercisable ISOs: The Problems

Rule 701 Math: The 15% of Shares Test

If you are administering a private company stock option plan, you need to do what is referred to as “the Rule 701 math” before every grant of stock options or equity awards. What is “the Rule 701 math”? Rule 701 contains a set of mathematical limitations on how many shares of stock you can offer service providers … Continue reading Rule 701 Math: The 15% of Shares Test

Rule 701

What is Rule 701? And if you are a startup or emerging company, why do you need to know about it? Rule 701 is a federal securities law exemption for issuing equity to employees, contractors and advisors. You need a securities law exemption or registration statement in place to issue securities, and so finding and complying … Continue reading Rule 701