TiE Open House Event Ashitha discussed those legal strategies that every startup should be mindful of while launching your product in international markets. These issues range from corporate structuring to securities compliance, option plans to equity issuances and IP strategy to labor laws. Take away’s from the session: Learn about the top 10 legal mistakes that start-ups can avoid. Specifically relevant to Indian entrepreneurs looking to enter the US market. Presentation by Ashitha Bhagwan @ TiE Open House on September 25, 2013

1.
©
Ashitha
Bhagwan
TOP LEGAL MISTAKES
STARTUPS ENTERING THE US MARKET
SHOULD AVOID
SEPTEMBER 25, 2013
IRS
Circular
230
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requirements
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IRS,
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the
Internal
Revenue
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or
(2)
promoCng,
markeCng
or
recommending
to
any
other
person
any
transacCon
or
maEer
addressed
herein.
Ashitha
Bhagwan
abhagwan@rroyselaw.com
Linkedin:
h-p://www.linkedin.com/in/ashithabhagwan
TwiEer:
@ashithabhagwan

2. 2
10.
Failing
to
iden/fy
the
right
market-­‐entry
strategy
Market
Entry
Op@ons
Third
Party
Presence
Sales
Rep
Distributor
OEM/VAR
Franchise
Direct
Presence
Branch
Office
Subsidiary
©
Ashitha
Bhagwan

3. 3
9.
Choosing
the
wrong
en/ty
structure
EnCty
Form
Liability
Flexibility
TaxaCon
S
Corpora@on
Limited
Liability
Formal
but
flexible
capital
structure
Pass
through
C
Corpora@on
Limited
Liability
Formal
but
flexible
capital
structure
Double
taxa@on
LLC
Limited
Liability
Very
flexible
Pass
through
Partnerships
General
Partners
–
unlimited
liability
Can
be
flexible
One
level
of
tax
Liability
shield
Delaware
is
not
right
for
everyone
Credibility
©
Ashitha
Bhagwan

4. 4
8.
Failure
to
establish
intellectual
property
strategy
Trademarks
Copyrights
Patents
Trade
Secrets
Jurisdic@on
specific
Privacy
Policy
and
Terms
of
Use
Inven@on
assignments
Prior
Employer’s
IP
ownership
©
Ashitha
Bhagwan

5. 5
7.
Viola/ng
Employment/Labor
Laws
Minimum
Wage
Laws
apply
to
startups
Employee
v.
Independent
Contractor
classifica@on
Post-­‐
termina@on
restric@ve
covenants
©
Ashitha
Bhagwan

6. 6
6.
Not
complying
with
Securi/es
Law
Sale
of
Securi@es
Accredited
Investors?
State
and
Federal
Securi@es
filings
Broker
Dealer
Registra@on/
Exemp@on
available?
©
Ashitha
Bhagwan

7. 7
6.
Not
complying
with
Securi/es
Law
Failure
to
comply
with
securi@es
laws
Injunc@ve
relief
Rescission
of
securi@es
Criminal
prosecu@on
Fines
©
Ashitha
Bhagwan

8. 8
5.
Lack
of
tax
planning
409A
83(b)
Deferred
CompensaCon
Plan
©
Ashitha
Bhagwan

9. 9
4.
Lack
of
adequate
corporate
structure
resul/ng
in
entrenched
management
Tag
along
rights
Drag
along
rights
Lack
of
vesCng
schedule
Buy
sell
agreements
Using
%
while
spliWng
up
equity
Right
of
First
Refusal
Using
stock
as
currency
Veto
rights
©
Ashitha
Bhagwan

10. 10
3.
Not
using
the
right
equity
compensa/on
structure
75
-­‐85%
Founders/
Common
Stock
15
-­‐25%
Op@on
Plan
Typical
Equity
Structure
Issue
opCons
when
valuaCon
is
low
to
realize
a
return
on
investment
Establish
vesCng
schedules
for
opCon
grants
OpCons
are
securiCes,
and
have
to
comply
with
securiCes
laws
409A
compliance
-­‐
mandatory
for
opCon
plans
©
Ashitha
Bhagwan

11. 11
2.
Failure
to
ensure
compliance
with
FCPA
and
immigra/on
laws
Check
the
immigraCon
status
of
all
founders:
if
sponsorship
is
required
by
the
startup,
you
need
good
immigraCon
counsel.
AnC-­‐bribery
laws
apply
to
all
U.S.
persons
and
certain
foreign
issuers
of
securiCes
Also
applies
to
foreign
firms
and
persons
who
cause
a
corrupt
payment
to
take
place
within
the
United
States.
©
Ashitha
Bhagwan

12. 12
1.
Subs/tu/ng
legal
counsel
with
online
incorpora/on
services
Check
State
law
enforcement
Templates
could
=
missing
provisions
Obtain
ownership
documents
Get
legal
counsel
in
the
beginning
Hire
a
lawyer
but
do
your
homework!
Business
permits,
State
qualificaCons
and
county
permits
©
Ashitha
Bhagwan

13. 13
Ashitha
Bhagwan
abhagwan@rroyselaw.com
Ph:
650-­‐521-­‐5740
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