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Lecture 18: Legal and Accounting Basics for Startups

startupclass.samaltman.com

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Re: Lecture 18: Legal and Accounting Basics for Startups

#21

Post by cperciva »

gamblor956 wrote: post #16
cperciva wrote: post #3

Around 33 minutes in, "working for free is against the law". Is this just a case of requiring a peppercorn? If not, how do $1/year salaries work?

No, it's a matter of labor law. An employee that does not own a "substantial" amount of the company they work for must be paid at least minimum weekly salary, which varies from state to state. In NY, the minimum salary is $600/week. In California, the minimum weekly salary is 2x the state minimum wage ($9/hour) for 40 hours/week, or $720. "Substantial" in this context depends on the facts and circumstances. Generally…

OK, but wouldn't founders have "substantial" ownership? Yet the implication was that even founders had to be paid minimum wage.

Re: Lecture 18: Legal and Accounting Basics for Startups

#22

Post by mikeyouse »

sparky_z wrote: post #19
gamblor956 wrote: post #16

Earlier quoted context omitted.

No, it's a matter of labor law. An employee that does not own a "substantial" amount of the company they work for must be paid at least minimum weekly salary, which varies from state to state. In NY, the minimum salary is $600/week. In California, the minimum weekly salary is 2x the state minimum wage ($9/hour) for 40 hours/week, or $720. "Substantial" in this context depends on the facts and circumstances. Generally…

> In California, the minimum weekly salary is 2x the state minimum wage ($9/hour) for 40 hours/week, or $720. As somebody who knows basically nothing about any of this, I found this statement confusing. Don't minimum wage employees break this rule by definition? So what subset of "employees" does the rule apply to?

The distinction is Salary vs. Hourly, or more specifically, Exempt vs. Non-Exempt (Software Engineers / Founders are definitely Exempt, which mandates that they're paid at least 2x the minimum wage in California).

The difference between the two:

http://career-advice.monster.com/salary-benefits/salary-info...

And California-specific regulations:

http://www.calchamber.com/california-employment-law/Pages/ex...

Re: Lecture 18: Legal and Accounting Basics for Startups

#23

Post by nickcronin »

A great article and some interesting tools listed. We have been working with a lot of startups to help them get proposals from lawyers and accountants at ExpertBids.com. Think of it as a elance / odesk for lawyers and accountants. Any suggestions anyone has for continuing to help startups find the right professional for legal and accounting work would be much appreciated.

Re: Lecture 18: Legal and Accounting Basics for Startups

#24

Post by rajens »

As someone who's never personally raised any VC, but has been in the startup space for a while...I thought they did a really good job on making things easily to understand as an introduction to VC. I also liked their insights into the value of advisors, investors, and board members, and particularly, what requests are considered legitimate/illegitimate.

You can check out my top quotes from the lecture summarized here: https://medium.com/@RajenSanghvi/59-quotes-from-kirsty-natho...

Re: Lecture 18: Legal and Accounting Basics for Startups

#25

Post by Spooky23 »

lukasm wrote: post #9

Pretty good bang per minute ratio. If company is a Delaware company, does it mean I have to pay myself Delaware min-wage?

No, minimum wage is based in where work is performed. There was an NPR report not long ago about a shopping mall that sits in two towns -- there is a significant wage delta in each side of the mall!

Re: Lecture 18: Legal and Accounting Basics for Startups

#27

Post by joshu »

cperciva wrote: post #21
gamblor956 wrote: post #16

Earlier quoted context omitted.

No, it's a matter of labor law. An employee that does not own a "substantial" amount of the company they work for must be paid at least minimum weekly salary, which varies from state to state. In NY, the minimum salary is $600/week. In California, the minimum weekly salary is 2x the state minimum wage ($9/hour) for 40 hours/week, or $720. "Substantial" in this context depends on the facts and circumstances. Generally…

OK, but wouldn't founders have "substantial" ownership? Yet the implication was that even founders had to be paid minimum wage.

for what it's worth, at my last startup I paid myself zero salary (as CEO/founder with significant ownership) and neither lawyers nor accountants squawked.

Re: Lecture 18: Legal and Accounting Basics for Startups

#29

Post by bradleybuda »

calcsam wrote: post #11
7Figures2Commas wrote: post #4

The first slide is ironic. "Keep it simple" by forming a Delaware corporation is advice constantly repeated in some circles and it's simply asinine. The simplest option for founders is to incorporate in the state in which they reside/plan to conduct business as they are going to have to file as a foreign entity in that state anyway. The retort is "But investors won't invest in my California LLC!" The first fact this…

Sure, if you're planning to run a lifestyle business do whatever you want. But if you're not, consider when you have an interested potential investor who's mulling over your business model and asks offhandedly, "So you're a Delaware C-Corp, right?" and you answer with this. Then he thinks: "if they didn't even get this right, what else have they missed?" And you lose the deal.

As someone who has pitched many investors, sometimes successfully, I can tell you that nobody ever asked about the incorporation status of my company until well after the deal was agreed to. Investors care about you, your team, your traction, and your product. Everything else (including some terrible incorporation and accounting mishaps) can and will be fixed if your company is good.

I would be more suspicious of a founder that spends too much time getting their incorporation just right - for businesses that are going to raise institutional capital, that's really the least of your concerns.

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