Legal and Practical Advice – Starting a Business

transcript

LEGAL AND PRACTICAL ADVICESTARTING A BUSINESS

BUSINESS ADVICE- FROM START UP TO SALE 2016 SERIESPremier date: February 10, 2016

business advice- from start up to sale 2016 series

legal and practical advice – starting a business

Premier Date: February 10, 2016

WE WOULD LIKE TO TAKE THIS OPPORTUNITY TO THANK OUR SPONSORS

meet the facultyPANELISTS

Paul Clinkscales Sunburst Digital Inc.Peter Feinberg Hoge FentonTrisha Lotzer Lotzer Law Group, PCMatt Schiff Sugar Felsenthal Grais & Hammer

MODERATOR Michael Schwarzmann

Crowe Horwath LLP

Practical and entertaining education for business owners and executives, accredited

investors, and their legal and financial advisors. For more information, visit

www.financialpoise.comDISCLAIMER: THE MATERIAL IN THIS PRESENTATION IS FOR INFORMATIONAL PURPOSES ONLY. IT SHOULD

NOT BE CONSIDERED LEGAL ADVICE. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE WHAT MAY BE BEST FOR YOUR INDIVIDUAL NEEDS.

about this webinarThere are many decisions to be made when a business is started, from the corporate formalities (LLC, Partnership, S Corp, C Corp, Non-Profit) to protecting turf and keeping the copycats away. Hiring and incentivizing employees, utilizing confidentiality agreements, sharing ownership (and getting it back), handling adversity, and borrowing money (friends and family, angel investors, secured lenders) are among the issues that commonly need to be addressed. This webinar provides a basic overview of things to be aware of and consider, and shares some best practices with regard to them. 6© 2016 DailyDAC, LLC d/b/a/ Financial Poise™

about this seriesGreat companies fail for lots of reasons that have nothing to do with the product or service they are selling. Turning an idea into a business is hard, often because the creative entrepreneur with the great idea does not have the same level of skill, training, experience, and passion in the other critical areas required to make a product into a successful company.

These areas include knowing how to attract and retain people, understanding accounting and finance, and being able to negotiate various contracts - including potentially a contract to buy a competitor or, ultimately, to even sell the business. This Financial Poise webinar series covers some of these topics, as always, in plain English.

As with all Financial Poise webinars, each episode in the series is designed to be viewed independently of the other episodes, and listeners will enhance their knowledge of this area whether they attend one, some, or all of the programs. 7© 2016 DailyDAC, LLC d/b/a/ Financial Poise™

episodes in this series

EPISODE #1 Legal and Practical Advice – 2/10/2016Starting a Business

EPISODE #2 Legal and Practical Advice – 3/9/2016Negotiating a Commercial Lease

EPISODE #3 Legal and Practical Advice – 4/13/2016Roadmap to Selling your Business

EPISODE #4 Legal and Practical Advice – 5/11/2016Roadmap to Buying a (Competing) Business

Dates above are premier dates All webinars also available On Demand through West LegalEd Center and Vimeo

Types of BusinessesThe type of business or product shapes the emphasis and priorities.

• Product (Software / App. vs Drone)• Service (CPA vs Gardner)• Retail• Wholesale • Licensor • Barriers to Entry (Commodity or Specialized

Expertise)

Understand Your AdvantageBe critical and honest in your SWOT analysis.

• What makes this business better than competitors• Can competitors adapt to compete? How long will

that take? How much will it cost them?• How large is the customer segment (# and $)?

Think about your exit• Sell to a competitor?• License? Franchise?

Market Entry ConsiderationsMap out the steps to success against your passion and abilities.

• Are you better at running a business than starting one?

• Is there an existing business you can improve?

• Is your product suited to be a stand alone company? Is it an add on to a competitor (you can partner / acquire)?

Know Before You GoGeneral Business Considerations.

• Business Plan with Forecast & Cash Flow

• Personal Commitment required (time and money)

• Partner / Co-Founder / Family members involved?

AdvisorsProfessional help – when and who.

• Legal• Human Resources• Bookkeeping & Taxes• Insurance• Marketing• Communications / Public relations

Business Structures

There are many legal structures. Which one is right for you depends upon your business.

• Sole Proprietor • Partnership • LLC • Corporation (C-corp. & S-corp.)

Sole Proprietor

Advantages and Limitations of a Sole Proprietorship.

• Control• Ease of Formation• Single tax entity (no double taxation)• Personal Liability for business debts

Partnership

Advantages and Limitations of a Partnership.

• Informal Management & Growth• Ease of Formation• Single tax entity (no double taxation)• Personal Liability for business debts

Corporation

Advantages and Limitations of a S and C corporation.

• Structure• Filing Requirements• No Personal Liability• Taxation Differences• Corporate Formalities

Limited Liability Company

Advantages and Limitations of a Limited Liability Company.

• Similar to a Corporation• Limited Personal Liability• Fewer Corporate Formalities• Operating Agreement• Ownership Transfer Requires Consent

Financing your Business

You need money. Amount and Duration of capital need may dictate appropriate sources of funds.

Who will fund losses? Do you need to draw a salary?

• 401(k) & Home Equity • Friends and Family • Banks • Angel Investors • “Shark Tank”

Personal Guarantees

Be prepared to pledge personal assets, regardless of corporate structure.

• Investors want commitment from entrepreneur• Lenders want alternative source of recovery

Limiting Guarantee Exposure• Pledge a particular asset (home)• Cap liability at a percentage of Loan

Hiring and incentivizing employees

Considerations when hiring:

What Role to Fill• CEO / CTO needed to guide development?• Core competency or necessary evil

Buy or Rent• Consultants / temporary employees• Can you outsource • Big firm or small firm experience

Employment Considerations

Manuals and Records are important and frequently overlooked – plan carefully to avoid pitfalls that can drain cash at critical growth junctures.

• Handbooks, policies and postings• Worker Classifications & workplace safety• Benefits, PTO, EEO and related considerations• Risk Management, insurance, and ADR

Compensation Components

You decide to hire. How to think about compensation.

Cash is King!

• Fill your blind spot• Will employee provide strategic value?• Product specialist or back office necessity?• Cash, equity or both?

Expertise or Contributor

Goals of hiring change over time.

• Do you want sounding board for product development?

• Do you want fresh ideas or an order taker?

• Is there a gap in your skill set?

• Corporate officers and Board of Directors

Legal Contracts

Documenting the relationship to protect your business.

• Employment / Independent Contractor Agreement

• Proprietary Information Agreement• Invention Agreement• Non-Compete Agreement• Intellectual Property Agreement

Protect Your Idea

Protecting the Secret Sauce – Intellectual Property Considerations.

• Intellectual Property Considerations• What makes your product special• What don’t you want competitors to know

• Utility Patent? • Trademark?• Copyright?• Trade Secret?

More About The Faculty: MICHAEL SCHWARZMANN

Michael.Schwarzmann@crowehorwath.comMichael Schwarzmann is a Director at Crowe Horwath LLP. Michael has over 20 years’ experience providing advisory services to lender groups, companies, bondholder groups, unsecured creditors committees, and other stakeholders on financial, operational and strategic issues affecting underperforming, stressed, and distressed companies. Michael ‘s advisory and consulting work experience focuses on assisting distressed companies, revitalizing underperforming businesses, marketing troubled companies and advising their creditor constituents. In addition, he is a licensed bankruptcy attorney.

Michael has assisted clients in developing and evaluating business and turnaround plans, analyzing financial and operational performance, and formulating successful workout, restructuring or bankruptcy strategies to preserve or improve asset values for stakeholders. Michael’s industry experience includes: health care, manufacturing, agricultural, construction, restaurants and franchising, energy, travel, and investment banking.

He has experience in identifying and implementing positive near term and long term change for clients, including identifying opportunities, negotiating with constituents, and building consensus where possible. 27© 2016 DailyDAC, LLC d/b/a/ Financial Poise™

More About The Faculty: PAUL CLINKSCALES

paul@edresources.comMr. Clinkscales has various interests and roles as a seasoned executive, leader and business advisor. He currently serves as CFO, Director and part owner of Sunburst Digital Inc., a private K-12 educational digital content company; a Managing Member and part owner of LearnPad Group, a global education technology company; a Director of Aesir Media Group, a global specialty niche television, film and gaming concern; and as a special situations business consultant to select start-ups and middle market companies.

Mr. Clinkscales started his career with Price Waterhouse Coopers. Over the past 30 years, he has held various general business, accounting and finance roles in numerous industries such as cable, insurance, technology, software, media, education and real estate, including three years living in Europe serving as Finance Director for a private global technology company. He has successfully led mergers, acquisitions and company liquidity events as well as private debt and equity capital activities.

More About The Faculty:

PETER FEINBERGpeter.feinberg@hogefenton.com

Peter Feinberg has almost 25 years’ experience representing primarily middle market companies in all aspects and many sectors of merger and acquisition transactions. Mr. Feinberg has successfully closed well over 100 merger and acquisition transactions, representing buyers and sellers, public and privately held companies, multinational firms, family owned businesses and private equity firms. He practices in Silicon Valley at Hoge Fenton Jones & Appel, a more than 60 year old, 40+ attorney firm. He has previously been a partner at Thelen Reid & Priest and Ferrari Ottoboni and has worked in house at NetApp and Clorox.

More About The Faculty: D

TRISHA LOTZERtrisha@idealtransitions.com

Ms. Lotzer's expertise as an entrepreneur as well as her eighteen years of experience as a corporate and healthcare attorney make her an exceptional resource for business clients and healthcare practice owners. She began her career in corporate and healthcare law with in-house counsel positions at the University of California San Francisco Medical Center and Mercer Transitions and Advisors before launching her own companies, the Lotzer Law Group, PC and Yogattorneys, LLC in 2008 and Ideal Transitions, Inc. in 2011. The Lotzer Law Group is dedicated to achieving exceptional results and solutions for business owners, doctors, dentists, veterinarians, optometrists, nonprofits and first-time entrepreneurs and provides business valuations, practice appraisals, brokerage and business transition consulting services including buyer and seller-side representation, mergers, “business divorce” and dissolutions. Trisha is an attorney licensed in California (1998) and Arizona (2007), an SBA designed attorney, a certified mediator and a contributing expert for publications including Entrepreneur.MD, Financial Poise and Physicians Practice Journal. You can read more about Trisha and find articles and resources at www.lotzerlaw.com. 30© 2016 DailyDAC, LLC d/b/a/ Financial Poise™

More About The Faculty: D

MATT SCHIFFmschiff@sugarfgh.com

Matthew B. Schiff leads the Labor & Employment group at Sugar Felsenthal Grais & Hammer. Matt represents management in defense of claims of discrimination retaliation, harassment, workers' compensation and employment torts. He counsels clients in all aspects of employment and labor relations.

Matt is an experienced litigator who has tried many cases and argued appeals of workers' compensation and related matters. He also counsels and litigates wage and hour disputes and assists his clients in protecting their trade secrets and enforcing non-compete and non-solicitation agreements.

Matt has tried numerous jury and nonjury cases on behalf of employers before state and federal courts and agencies on behalf of public and private sector clients.

Matt assists his clients in developing employee handbooks and contracts. He negotiates collective bargaining agreements and helps his clients with contract administration.

BMC Group’s SmartRoom™ is an award-winning virtual data room to manage M&A due diligence, financial transactions, and legal documents, and for sharing confidential corporate information in an ultra-secure online workspace. The solution offers simple, intuitive navigation with greater support at a lower cost.

Visit www.bmcgroup.com 32

Visit www.eisneramper.comEisnerAmper. Let's Get Down to Business®

EisnerAmper LLP is a leading full-service advisory and accounting firm, and is among the largest in the United States. We provide audit, accounting, and tax services, as well as corporate finance, internal audit and risk management, litigation services, consulting, private business services, employee

benefit plan audits, forensic accounting, and other professional advisory services to a broad range of clients across many industries. We work with high net worth individuals, family offices, closely held businesses, start-ups, middle market and Fortune 500 companies. EisnerAmper is PCAOB-registered and provides services to more than 200 public companies and to thousands of entities spanning the hedge, private equity, brokerage and insurance

space in the financial services marketplace. As companies grow we help them reach their goals every step of the way. With offices in New York (NY), New Jersey (NJ), Pennsylvania (PA), California (CA), and the Cayman Islands, and as an independent member of Allinial

Global, EisnerAmper serves clients worldwide.

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Important Notes

• THE MATERIAL IN THIS PRESENTATION IS FOR GENERAL EDUCATIONAL PURPOSES ONLY.

• IT SHOULD NOT BE CONSIDERED LEGAL, INVESTMENT, FINANCIAL, OR ANY OTHER TYPE OF ADVICE ON WHICH YOU SHOULD RELY.

• YOU SHOULD CONSULT WITH AN APPROPRIATE PROFESSIONAL ADVISOR TO DETERMINE WHAT MAY BE BEST FOR YOUR INDIVIDUAL NEEDS.