Introduction to Entity Formation for Venture-Focused Entrepreneurs November 2016 CT Entrepreneurs Meetup November 14, 2016 Presented by: Ben Wiles bwiles@uks.com (860) 548-2657 @BenWilesCT

When to form an entity? When you will be entering into your first contract with a “third party” When you bring on a co-founder When you accept outside investment For SBIR/STTR grant purposes When you undertake activities that may result in liability

When type of entity? Corporation (“C-corporation”) Favored by “institutional investors” Favored on the West Coast Subject to “double taxation” Standardized structure, formalities, management Difficult to convert from a corporation to an LLC Limited liability company (LLC) “Pass through” tax treatment Favored by some individual “angel investors” (Relatively) easy to convert to a corporation Infinitely customizable (this is both good and bad!)

Founder equity issues Founder vesting Remember the 83b election! Consider Repurchase Rights and Buy-Sell Agreements Should migrate from the “back of the envelope” to formal documentation sooner rather than later

What about incentive equity? Corporation (“C-corporation”) Equity incentive plans Options, restricted stock grants Limited liability company (LLC) Profits interests plan Interest option plan

Formation - intellectual property considerations Each founder should (probably) contribute all IP owned by them (as of the date of their receipt of founder equity) to the company Each founder should contribute all IP they produce going forward to the company Nondisclosure and noncompetition obligations for founders are also often appropriate

Questions? Ben Wiles bwiles@uks.com (860) 548-2657 @BenWilesCT DISCLAIMER: The materials and information have been prepared for informational purposes only. This is not legal advice, nor intended to create or constitute a lawyer-client relationship. Before acting on the basis of any information or material, readers who have specific questions or problems should consult their lawyer..