13 May 2010

Key issues for emerging companies


Key Issues for Emerging Companies

Withers Bergman has a long history of representing entrepreneurs and emerging companies.  Based on the breadth and depth of our experience in representing entrepreneurs and emerging companies, as well as investors in these ventures, we have identified the following “Top 10” list of questions that the founding group of every early stage company should consider:

Do I have a business plan?

Having a properly crafted business plan provides a roadmap for the development and growth of your company and will be important in attracting financing.

Are my personal assets protected?

The formation and maintenance of the proper organizational structure for your new business is critical to protecting the founders’ personal assets – particularly for founders with significant assets outside of the new venture.

Does my organizational structure maximize income tax benefits?

The manner in which your new business is structured, financed and operated will significantly affect the tax impact on founders and investors.  Operating as either a taxable or “pass-through” entity is the most obvious way you can affect the tax effects of your business. 

Are my proprietary business assets protected?

Initially, you should assess whether you should retain ownership of your intellectual property or transfer it to the business and whether you should file patents, copyrights or trademarks (domestically and internationally) to protect intellectual property.  It is also important to develop confidentiality, non-competition and work-for-hire agreements for use with your employees, potential customers, suppliers, business partners and investors to protect intellectual property rights. 

How do I retain and incentivize my employees?

Developing and implementing appropriate compensation structures, including equity-based incentive plans, is important to a growing company’s ability to attract and retain the talented employees.  Founders will need to understand the impact of compensation structures on their own interests and the expectations of investors.

Do I have a strategy to commercialize my product?

Developing the right strategy to commercialize particular products and services can be critical to your company’s success and future prospects – is a licensing, sale or services model, or some combination thereof, best suited to generate revenues while protecting business assets?

Are my economic interests protected as my company grows?

The appropriate ownership structure and compensation arrangements with the founders will evolve as the company grows and brings on financial partners.  It is important that these relationships be monitored over time to insure that the founders’ economic interests are appropriately documented and protected.  Issues relating to valuation of the company and dilution of the founders’ economic interests also require careful attention.

How do I retain control when bringing in outside investors?

Protective and control provisions typically included in agreements with angel, venture capital, and other early-stage investors address the investors’ legitimate interests.  While conforming to the expectations and demands of professional investors, it is possible to negotiate those agreements so as to enable the founders to retain the management autonomy and flexibility a successful company requires. 

Do I have proper financial controls and record-keeping?

Financial and record-keeping controls and procedures and corporate governance policies will be important in attracting investors and other financial partners.  It is important that your financial and record-keeping controls and procedures and corporate governance policies are appropriate for your company.

Do I have a long-term exit strategy and have I planned to maximize the value of that strategy for the benefit of my future generations?

While the entrepreneur is appropriately focused on the near-term business goals of the emerging company, it is important to give some attention to possible exit strategies and business succession.  In order to best protect those closest to you, it is also important to implement a strategy to pass the business or the wealth generated by the business to future generations.

Withers Bergman takes a team-oriented, multidisciplinary approach to advising entrepreneurs and emerging companies, combining our legal expertise in areas such as corporate, securities, tax and employment law.  Your dedicated team of Withers Bergman attorneys will deeply understand your business and the dynamics of the founders and management, enabling us to be a strategic and trusted advisor to your company through each stage of your new venture. 

Finally, because Withers Bergman appreciates the needs of emerging companies, we offer flexible fee arrangements for certain early-stage ventures.

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