Roger Royse discusses the most common legal mistakes made by entrepreneurs and startups. This presentation will focus on issues related to business formation, fundraising, employment, intellectual property, tax, and technology.

1. Roger Royse
Founder, Royse Law Firm
rroyse@rroyselaw.com
650-813-9700
www.rroyselaw.com
LEGAL ISSUES FOR
STARTUPS

2. USING AN
EMPLOYER’S
FACILITIES
Avoid using your employer's facilities or equipment to work on your startup or
outside project.
California Labor Code § 2870
- Employee’s Time
- No Employer Facilities
- Not Related to Employer’s Business
- Doesn’t Result From Work Performed for Employer

3. LACK OF
DOCUMENTATION
Document everything, including contracts, employment agreements, and
transactions.
Common Issues:
- Equity Ownership
- Loans or Contributions
- Vesting

4. LACK OF
VESTING RESTRICTIONS
It's generally a good idea for founders to agree to vesting restrictions.
Therefore, if someone leaves, the company can buy back "unvested" shares.
- Founder Vesting
- Single vs. Double Trigger
- Advisor Vesting
- LLC Profits Interest Vesting
Tax:
- 83(b) election
- Vesting Imposed on Financing
- Vesting Imposed on M&A

5. INADEQUATE
TAX PREP
Many decisions, like choosing a business structure, can have a significant
impact on your tax situation.
- Choice of Entity (C Corp, S Corp, LLC)
- QSBS
- VC + Tax Exempt Investors
- Tax Sensitive Investors
- Passive Activity Losses
- At Risk
- LLC Conversions

6. IGNORING
LABOR LAWS
Startups still need to follow federal and state labor laws. Bootstrapping doesn't
give you a free pass.
- Dynamex Case
- AB-5
- IRS + EDD
- Workers’ Compensation
- Class Action Lawsuits

7. FAILING TO
PROTECT IP
It's important to protect your intellectual property from employees, consultants,
and/or competitors
- PIAIA or CIAIA
- Broadly Drafted Invention Assignments
- Federal Defend Trade Secrets Act
- Provisional Patents

8. INFRINGING UPON
TRADEMARKS
Research existing names and logos.
Brand your company strategically and legally.

9. VIOLATING
409A
409A Penalties: 20% plus tax and interest
1. Stock Option Pricing
2. Deferred Salary
409A Requirements: Nonqualified Deferred Compensation
Payable on separation from service, disability, death, fixed time or schedule
change of ownership or control, unforeseeable emergency

10. FAILING TO
COMPLY WITH
SECURITIES LAWS
Avoid the hefty consequences associated with state and federal securities law
violations.
- SAFES + Convertible Notes
- Blue Sky Filings
- Form D
- Crowdfunding: The Reg CF Problem
- ICOs, STOs, IEOs + Tokens

11. CHOOSING THE WRONG
LAWYER
Not all lawyers are startup experts.
Find an experienced attorney who understands the unique challenges faced by
startups.

12. CONTACT US:
149 Commonwealth
Suite 1001
Menlo Park, CA 94025
Silicon Valley | San Francisco | Los Angeles | Orange County | Beijing
www.rroyselaw.com
(650) 813-9700
@royselaw