Sure I can go to Gusto and they can do payroll for me, but they don't do taxes. They don't do insurance. They don't do bookkeeping. And so on.


Legal Concepts

This section is dedicated to Delaware C Corp.


Corporation: corporation is a type of company. Company is a generic term used to refer to a business, and does not imply any specific type of legal entity.

Ownership: determine rights to vote, dividends, and money get when acquired or IPOs

Certificates of incorporation (articles of incorporation, charters, COI): document you file with a state in order to incorporate a corporation (See Here)

Not all companies are corporations, and you can only incorporate corporations (not LLC)

Fun facts about company name:

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Security: include stock, stock options, convertible notes, safes, etc.

Post-money evaluation ensure earlier investor remain their percentage on the same round: (?)

Assume a company has never received any investment and has a fully-diluted capitalization of 10 million shares, excluding conversion of safes. If someone invests $1 million through a safe with a regular $20 million valuation cap, the safe will never convert into less than 500,000 shares. Immediately prior to the preferred stock financing, this would represent ~4.8% of the fully-diluted capitalization after the safe conversion (500,000 divided by 10,500,000).

Now suppose someone else invests another $1 million through an identical safe. That safe will also never convert into less than 500,000 shares. Immediately prior to the preferred stock financing, each safe would represent ~4.5% of the fully-diluted capitalization after the safe conversion (500,000 divided by 11,000,000). The first safe converts into a lower percentage as a result of the second safe (and vice versa).

If these safes had post-money valuation caps instead, each safe would be unaffected by the other. If the second safe were never issued, the first safe would convert into 526,316 shares (as calculated in the prior example). This would represent 5% of the fully-diluted capitalization after the safe conversion (526,316 divided by 10,526,316). If the second safe was issued, then each safe would instead convert into 555,556 shares, which would still represent 5% of the fully-diluted capitalization after the safe conversion (555,556 divided by 11,111,112).

Share, Stock, and Equity: they are the same

Stock: Ownership of Delaware corporations is represented by shares of stock

The following are also terms commonly used to refer to stock plans:

Stock option plans Employee stock option plans (ESOPs) Equity incentive plans The term stock plan, as used in the context of startups, does not typically refer to:

Employee stock ownership plans (ESOPs) Employee stock purchase plans (ESPPs) These other types of plans have a very specific meaning, and are not commonly used by startups. Note that employee stock option plans and employee stock ownership plans share the same acronym, confusingly.

Contracts: Usually, the board authorizes CEO to enter into contracts, representing the corporation. Directors cannot unilaterally bind the corporation to a contract, although all the directors acting together can. In practice, this is almost never done.

Entire Process:


Choice of Entities

Delaware C Corp:

Wyoming C Corp: crypto and blockchain-friendly environment

Difference between Corps and LLC

Limiting liabilities for entities:

There are personal liabilities even with entities: - un-paid wages and wage taxes - not paying witholding tax - sign personal guarantees - using personal credit card


Some startup attorneys have concerns that if founders purchase their shares right before a financing, the fair market value of those shares may be higher due to the imminent financing. These startup attorneys advise startups to incorporate as soon as possible in order to avoid any possible questions about the fair market value. However, other startup attorneys argue that the fair market of the shares sold to founders at formation is still likely at or near par value, even if a financing occurs shortly afterwards. These startup attorneys point out that investors don't want to invest in an empty corporation, they want to invest in a corporation run by the founders and that owns the intellectual property created by the founders. The corporation is arguably not run by the founders until they purchase shares and appoint themselves as officers. In addition, any intellectual property developed by the founders won't belong to the corporation until the founders transfer it, which typically happens when they purchase their shares.


Fully-Diluted Capitalization: total number of "used shares"

There is no single definition of fully-diluted capitalization. For example, un-issued shares reserved for issuance under a stock plan can be excluded from a fully-diluted capitalization. This is commonly done when the fully-diluted capitalization is being calculated in connection with the acquisition of a startup, since startups typically do not issue equity following an acquisition.

Angel Investing

Investing Progression

Investing Progression

Investor Look At:

Angel Investor sheet:

Angel Investor networks: angels go together to invest

Angels are turning into micro VC funds these days

Angel Investment Process

Angel Investment Process

Due diligence: assessing company (6 weeks ~ 3 months)

Expectation: 50% failure after investing, 25% gives 10x~30x return

ROI for different forms of investments

ROI for different forms of investments

Impact of Time in Due Diligence

Impact of Time in Due Diligence

Safe: no protection for investor

Convertable Note: debt instrument

Talking to Early Stage Investors

Market Size:


Market Assessment

Market Assessment

Things to expect

Traction and validation is key!

MVP definition

MVP definition

Beta Testing

Beta Testing

Traction Requirement

Traction Requirement

Investor are not looking for the right solution anymore. Since knowledge is relatively cheap due to Internet, traction is the key now.

Terminology and Expectation in Sillicon Valley

Terminology and Expectation in Sillicon Valley

Type of investors:

Things to do between pre-seed and seed

Things to do between pre-seed and seed


Resources: labor, material, energy, property, equipments, capital

Requirements to obtain capital: the reason why we need accounting

Accounting, Finance, Economics: things required for pitching

Sample balance sheet

Sample balance sheet

Sample income statement: costs above line, profit below line

Sample income statement: costs above line, profit below line

Sample cash flow statement

Sample cash flow statement

Three financial statements:

Above notes taken from Here

Leger (GL): quickbooks (industry standard) provide service to keep leger to track everything

The Chart of Accounts (COA): how transactions are organized into multiple revenue streams. The organization may be different depends on who you share this to (investor, acquiring)

Chart of Accounts Code

Chart of Accounts Code

Example Chart of Accounts

Example Chart of Accounts

Employment Contracts

Things to consider:

Employee vs Contractor Classification


Note that IRS have criteria for determining whether someone is an employee or consultant:

The extent to which the services rendered are an integral part of the principal's business.
The permanency of the relationship.
The amount of the alleged contractor's investment in facilities and equipment.
The nature and degree of control by the principal.
The alleged contractor's opportunities for profit and loss.
The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
The degree of independent business organization and operation.

Facts that provide evidence of the degree of control and independence fall into three categories:

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no "magic" or set number of factors that "makes" the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.

Various states also have their own criteria as well.

minimum wage: minimum wage is a cash standard, so companies can’t use stock or options to satisfy this requirement

Founders must pay themselves. Federal law has an exception for employees that own 20% or more of a business, which can apply to many founders if certain conditions are met. However, not all states with minimum wage laws have a corresponding exception. For example, California's minimum wage laws do not have such an exception.


Payroll Tax

Don't do payroll yourself.


C Corp:

Employee vs Contractor (consultant) Issue:

Equity and Vesting

Equity assignment: well, be fair

Vesting consideration:

Vesting acceleration: number of trigger only refer to number of events, not exact terms. Vesting acceleration is uncommon and should only be used with caution.

Operation consideration:

Type of Equity: all of them are taxable (30 days tax-efficient)

Typical allocation in stock plan: Using the standard 10,000,000 authorized shares

83(b) Elections:

Employee hired at later time with vesting schedule also need 83(b) Elections.

Startups can either sell shares of restricted stock or give them to people for free. - sell: if sell shares below their FMV, the recipient must include the difference between the purchase price and the FMV as taxable income. - free: the recipient must count the FMV of the shares as taxable income.

Capital Contribution from Founders:


Employee wants:

Employer wants:

insurance consideration:

International Entrepreneur

Standard Stuff

F1: student visa

Practical training


EB1-A: Employment-Based Immigration: First Preference EB-1 (Extraordinary Ability, Researcher, Multinational manager or executive)

O1: Individuals with Extraordinary Ability or Achievement



International Entrepreneur Parole

It's not a immigration status

1st 30-month grants of IEP:

2nd 30-month grants of IEP:

Cannot pay extra 2.5k to get approval or deny within 15 days


There are fees (Formation, Certified Copy, Foreign Qualifications, Certificate of Good Standing, Amendment, Dissolution) for incorporation and is different for each state. See Here. Generally, book-keeping and tax-filling could be more expensive than state-fee.


State Fee

You must pay annual and one-time state fee

State LLC LLC Filing Fee LLC Annual/Biennial Fee
Alabama LLC $200 $50 minimum (every year)
Alaska LLC $250 $100 (every 2 years)
Arizona LLC $50 $0 (no fee and no information report)
Arkansas LLC $45 $150 (every year)
California LLC $70 $800 (every year) + $20 (every 2 years)
Colorado LLC $50 $10 (every year)
Connecticut LLC $120 $80 (every year)
Delaware LLC $90 $300 (every year)
Florida LLC $125 $138.75 (every year)
Georgia LLC $100 $50 (every year)
Hawaii LLC $50 $15 (every year)
Idaho LLC $100 $0 (however, an information report must be filed every year)
Illinois LLC $150 $75 (every year)
Indiana LLC $95 $31 (every 2 years)
Iowa LLC $50 $30 (every 2 years)
Kansas LLC $160 $50 (every year)
Kentucky LLC $40 (sorry, I said $90 in the video) $15 (every year)
Louisiana LLC $100 $35 (every year)
Maine LLC $175 $85 (every year)
Maryland LLC $100 $300 (every year)
Massachusetts LLC $500 $500 (every year)
Michigan LLC $50 $25 (every year)
Minnesota LLC $155 $0 (however, an information report must be filed every year)
Mississippi LLC $50 $0 (however, an information report must be filed every year)
Missouri LLC $50 $0 (no fee and no information report)
Montana LLC $35 $20 (every year)
Nebraska LLC $100 $13 (every 2 years)
Nevada LLC $425 $350 (every year)
New Hampshire LLC $100 $100 (every year)
New Jersey LLC $125 $75 (every year)
New Mexico LLC $50 $0 (no fee and no information report)
New York LLC $200 $9 (every 2 years)
North Carolina LLC $125 $200 (every year)
North Dakota LLC $135 $50 (every year)
Ohio LLC $99 $0 (no fee and no information report)
Oklahoma LLC $100 $25 (every year)
Oregon LLC $100 $100 (every year)
Pennsylvania LLC $125 $7 (every year)
Rhode Island LLC $150 $50 (every year)
South Carolina LLC $110 $0 (no fee and no information report, unless LLC is taxed as an S-Corp )
South Dakota LLC $150 $50 (every year)
Tennessee LLC $300 $300 (every year)
Texas LLC $300 $0 for most LLCs (however a No Tax Due Report and Public Information Report must be filed every year)
Utah LLC $54 $18 (every year)
Vermont LLC $125 $35 (every year)
Virginia LLC $100 $50 (every year)
Washington LLC $200 $60 (every year)
Washington DC LLC $99 $300 (every 2 years)
West Virginia LLC $100 $25 (every year)
Wisconsin LLC $130 $25 (every year)
Wyoming LLC $100 $60 minimum (every year)

Source: Here

C Corp

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