1. Why an LLC is Right for Your First Start-up.
UTSA CITE Technology Entrepreneurship Boot Camp, October 7, 2017
Joe Struble

2. Liability Protection Contractual liability shield like a corporation.
Respect the LLC formalities by executing documents on behalf of the company to enable the liability shield.
You are always personally liable for your own bad acts. No liability shield for fraud, tax evasion, criminal acts, abuse of entity form (personal piggybank) that you take part in.

3. Management – Manager managed, Less formal than a corporation
Managers manage the company day-to-day
Officers with defined leadership positions – CEO, CTO, CFO
Members own the equity in the company

4. Tax – Short-term Economic Flexibility
LLC taxed as a “disregarded entity,” if only one owner, or a “partnership,” if more than one owner.
A tax disregarded entity or partnership is a pass through entity: startup losses and profits pass through to owners.
Alternative income streams from early stage participants? Consider the ability to pass through losses in partnership taxation

5. Tax – Long-term Economic Flexibility
Movement of IP or other assets? LLC flexibility, non-taxable in many circumstances vs. C-Corp always a taxable event
Ability to convert an LLC taxed as partnership to C- Corp or S-Corp taxation likely with no taxable consequences, but maybe not if negative capital accounts

6. Equity & Incentives: The Limit is Economic Substance
Describe member’s equity as Units not Stock or Shares
Voting and Non-Voting classes of units
Vesting or Restricted Units
When issuing new equity remember to book up capital accounts and make the 83(b) election. A CPA can help.

7. Beyond Entity Form – Securing Assets and Expectations
Founders Agreement – assignment of existing IP
Employment Agreement – ongoing assignment of IP
What are the Service Requirements?
Voting Control and Thresholds
Who has Management Control?
What is the Exit Plan?

8. Investor Driven C-Corp Alternatives
Qualified Small Business Stock?
C-Corporation + 5 yr hold required for investors = 0% tax on gain (IRS Section 1202); Requires analysis
Crowdfunding or other equity offering?
Far too complex to cover here: Lots of disclosures required, accounting requirements and securities law implications

9. Questions? Joe Struble 210.250.6148 joe.struble@strasburger.com
Disclaimer: The info in this presentation is no substitute for personal legal advice.