Startup Financing
Articles about financing for startups
21 MayState Equity Crowdfunding?
The startup community has been awaiting the launch of equity crowdfunding, authorized by last year’s JOBS Act and which will be made fully legal upon the adoption of necessary rules and regulations by the Securities and Exchange Commission. But given the fact that the previous SEC administration essentially delayed work on equity crowdfunding rules, as [...]
Read More ...10 MayImportant Terms in a Convertible Debt Term Sheet
The following are some of the common terms found in convertible debt term sheets: – Interest, Payment Dates, and Maturity: The term sheet should set the interest rate and the dates on which interest shall be paid — typically, interest is capitalized into the principal. Additionally, a maturity date should be set, one that is [...]
Read More ...23 AprHow Taxes Are the Elephant in the Room for Equity Compensation
Tax liabilities often dictate the form of equity compensation startups give to their founders/managers and key employees. In general, companies have two options for equity compensation: stock options and stock grants. As a rule of thumb, startups tend to select the former of those options. Often it is tax considerations driving this choice — grants [...]
Read More ...12 AprStartup Stock Value
Startup stock value is an important issue to be mindful of, particularly when it comes to taxes. If someone receives stock for less than its fair market value, they receive a taxable gain. Therefore, when issuing common stock, whether it be the initial purchase by the founders during incorporation, or even with employee equity compensation, [...]
Read More ...02 AprOnline Angel/VC Platforms Get No-Action Letters from the SEC
Entrepreneur Danielle Morrill recently blogged about The Funders Club and AngelList, online angel/VC platforms that connect startups and investors and arrange investment, receiving no-action letters from the Securities and Exchange Commission staff (you can read the full text of the letters at the hyperlink). “What are no-action letters?”, you may be asking yourself. Securities issuers, [...]
Read More ...29 MarGoing S-corp? Stop and Think for a Moment!
If you’re organizing your business as a corporation, you have the option of electing taxation under Subchapter S of Chapter 1 of the Internal Revenue Code. Subchapter S allows for what is known as “pass-through” taxation — the profits and losses of the business are “passed through” to its owners (members or shareholders), who are [...]
Read More ...22 MarAccredited Crowdfunding
Although equity crowdfunding for the masses is not technically legal yet, there is another type of equity crowdfunding that is already legal, and beginning to pickup steam. As the title of this post suggests, this type of equity crowdfunding involves crowdfunding with accredited investors. There are two rules that permit accredited investor crowdfunding. The first, [...]
Read More ...08 MarGeting the Crowd to Equity Crowdfunding
Startup lawyer Joe Wallin recently opined about the apparent disconnect between the new equity crowdfunding exemption and federal and state securities laws’ prohibition against general solicitation (e.g., being able to publicly announce the fact that your company is selling its securities). Existing crowdfunding programs like those on Kickstarter and IndieGoGo become wildly successful precisely because [...]
Read More ...22 JanA Caution When Fundraising from Non-accredited Investors
Rule 506 is one of the more popular exemptions from securities registration that emerging companies use to raise money. While Rule 506 is popularly associated with accredited investors, the rule also allows investment by a limited number of non-accredited investors. However, in offering securities to non-accredited investors under Rule 506, issuers also trigger a responsibility [...]
Read More ...04 DecEquity Crowdfunding Stumbling Block May Have a Solution
One of the biggest criticisms I’ve brought up regarding the equity crowdfunding provisions of the JOBS Act is that it requires funding portals to verify the eligibility of investors — namely, that they have not exceeded their investment limitations under the Act. I’ve said that such a requirement would be impossible for funding portals to [...]
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