From using an employer's facilities to ignoring labor laws, here are the top ten legal mistakes that could kill your startup.

1. © 2020 Haynes and Boone, LLP
© 2020 Haynes and Boone, LLP
Top Ten Legal
Mistakes That Could
Kill Your Startup
IdeaToIPO
Roger Royse, Partner
Haynes and Boone, LLP
Palo Alto, CA
November 17, 2020

2. © 2020 Haynes and Boone, LLP© 2020 Haynes and Boone, LLP
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
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3. © 2020 Haynes and Boone, LLP© 2020 Haynes and Boone, LLP
LACK OF DOCUMENTATION
Document everything, including contracts, employment agreements, and
transactions.
Common Issues:
 Equity Ownership
 Loans or Contributions
 Vesting
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4. © 2020 Haynes and Boone, LLP© 2020 Haynes and Boone, LLP
LACK OF VESTING RESTRICTIONS
It's generally a good idea for founders to agree to vesting restrictions.
 Founder Vesting
 Single vs. Double Trigger
 Advisor Vesting
Tax:
 83(b) election
 Vesting Imposed on Financing
 Vesting Imposed on M&A
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5. © 2020 Haynes and Boone, LLP© 2020 Haynes and Boone, LLP
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 and At Risk Limitations
 LLC Conversions
 State Tax
 Foreign founders
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6. © 2020 Haynes and Boone, LLP© 2020 Haynes and Boone, LLP
IGNORING LABOR LAWS
Startups must follow federal and state labor laws
 AB-5 and AB 2257
 IRS + EDD
 Workers’ Compensation
 Class Action Lawsuits
 California
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FAILING TO PROTECT IP
Protect your intellectual property from claims of ownership by employers,
employees, consultants and competitors
 PIAIA or CIAIA
 Broadly Drafted Invention Assignments
 Federal Defend Trade Secrets Act
 Provisional Patents
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8. © 2020 Haynes and Boone, LLP© 2020 Haynes and Boone, LLP
INFRINGING UPON TRADEMARKS
 Trademark may be your most valuable asset
 Research existing names and logos.
 Brand your company strategically and legally.
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9. © 2020 Haynes and Boone, LLP© 2020 Haynes and Boone, LLP
VIOLATING 409A
Section 409A of the Internal Revenue Code is an expensive gotcha’
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
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10. © 2020 Haynes and Boone, LLP© 2020 Haynes and Boone, LLP
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
 Potential criminal liability
 Crowdfunding: The Reg CF Problem
 ICOs, STOs, IEOs + Tokens
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11. © 2020 Haynes and Boone, LLP© 2020 Haynes and Boone, LLP
CHOOSING THE WRONG LAWYER
 Not all lawyers are startup experts.
 Find an experienced attorney who understands the unique challenges
faced by startups.
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12. © 2020 Haynes and Boone, LLP© 2020 Haynes and Boone, LLP
CONTACT US
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Roger Royse, Partner
Haynes and Boone, LLP
+1.650.687.8820
Roger.Royse@haynesboone.com

13. © 2020 Haynes and Boone, LLP© 2020 Haynes and Boone, LLP
DEAD ON ARRIVAL BOOK
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Dead on Arrival: How to Avoid the
Legal Mistakes That Could Kill Your
Start-Up.
This book outlines the legal mistakes
that start-up companies and their
lawyers make on their way to success
and how to avoid making those
mistakes. Some of those mistakes can
be rectified, but many will result in your
start-up company being Dead on
Arrival when it looks for financing or
acquisition opportunities. Knowing
what those mistakes are and how to
avoid them is essential to starting and
building a successful company. This
was published in 2012 and is available
in both print and audio formats.

14. © 2020 Haynes and Boone, LLP