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Nine tips on how to SetUp your StartUp

Information courtesy of Tom Pai at Ravix Group

Tom Pai (tpai@ravixgroup.com)

  1. Open a bank account with a bank that understands StartUps (SV Bank, BridgeBank, Square 1, etc.)
  2. Hire Your Team. Get help and be aware of legal issues. Use law-firm templates to hire people. Make sure you are in compliance with employee law.
  3. Use A Payroll Service and/or HR Service e.g. ADP, PayCycle, TriNet, ADP TotalSource
  4. Get Business Insurance: General Liability & Property. Product/Service Liability. Directors & Officers (D&O)
  5. Track your Business with GAAP Accounting: Define a Reporting Format; Treatment of R&D Expenses; Revenue and Expense Recognition Methodologies
  6. Pay Taxes: Federal & State Income Taxes. Sales Taxes (vary by State). Payroll Tax. Misc. Taxes (SF Payroll, Use Tax). Deduct laptops as a business expense (don’t amortize them as assets.)
  7. Acquisition: Be aware of Liquidation Preferences negotiated during investment.. Be aware of the issus of selling to a public company for stock. (e.g. restrictions on selling stock in a public company. Also tax implications such as capital gains versus earned Income.)
  8. Raising Capital: Consider the appropriate groups at the appropriate stage of the company:
    • Individual Angels: $25K – $100K
    • Super Angels/Early Stage VCs ($50K – $2MM)
    • VCs ($3MM+)
    • Venture Debt ($2MM+ IF you have VCs and good revenue)
  9. Provide Equity Compensation Appropriately: Stock Options vs. RSAs. Establish “fair value” of stock. Use 409a valuation ($4-8K) to set fair value. Provide employees option of 83(b) election


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