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Start

So, you’re ready to turn your idea into a business. You have the business plan and generally know the path forward, except you aren’t entirely sure what legal matters you should address. Here is an overview of a handful of initial matters you likely will want to consider: 

Should I form an entity?  Yes, assuming your business – like most businesses – will interact with anyone other than yourself. An entity enables you to have co-owners, receive investment capital, employ others, grow the value of your business, and if you observe certain formalities, an entity may help protect your personal assets from your business liabilities. 

Which type of entity?  This decision will depend on some knowns and some guesses about the future of your business, including your financing plans, who your co-owners and investors are likely to be, the employees you’ll hire, and tax considerations, among other factors. That said, of the many entity types, the most common forms for startups are the limited liability company (LLC) and the corporation. 

The LLC provides significant flexibility for ownership and management structuring as well as favorable “pass-through taxation” (i.e., the company does not pay tax on its income; only the owners do), however, the LLC is subject to potentially complex partnership tax rules and may subject owners to self-employment tax rules.   

As to the corporation, there are two distinct types: the “S-corporation” or “C-corporation.” The primary difference is that the S-corporation benefits from pass-through taxation (similar to the LLC), whereas the C-corporation itself pays tax on its income, and then, if it distributes the post-tax cash to its owners, the owners also pay income tax (so-called “double taxation”). So, why wouldn’t everyone choose the S-corporation over the C-corporation? Although both the S-corporation and C-corporation have the same governance structure, the S-corporation has strict limitations on who the owners can be (i.e., mostly individuals, a few trusts, but no other entities, such as Venture Capital (VC) funds or the like) and it may only have one class of stock (i.e., it cannot have preferred stock and common stock, often required by certain investors). In contrast, the C-corporation has no such limitations on who the owners are or the equity capital structure, and virtually all public companies are C-corporations and many traditional VC funds can only invest in a C-corporations. 

Money

One day your business will make more money than it spends, or at least that’s the goal!  Until then, you’ll need capital. If you’re able to (and desire to) fund your company yourself, great, you can skip this section. But, if you’re like most startups, you need money from others, below are a few pointers as you navigate the funding landscape:

“NO DILUTION” please!  Many founders know they need money, but understandably want to avoid diluting their ownership or ceding control of their baby. But, if your idea cannot be taken to market without capital, then investors may be essential. In other words, owning 60% of a valuable company is almost always better than owning 100% of company worth zero because it never got off the ground!

What type of funding is available?  Like anything, there is a “market” for money. You are competing with many others for investors’ money. Most investors have their own “rules” regarding investments they can or cannot make – for example, they may have investment criteria regarding industry or sector, the management team, the maturity of the company, whether they’ll invest via debt or equity, the terms required for each investment, etc. An investor will evaluate not only the specifics of the opportunity you present to the investor (such as the product-market fit, management team, business plan, risks, and possible returns), but also how your specific opportunity measures against the many other opportunities presented to the investor.

What are the different forms of investment?  Generally speaking, an investment will be made either in the form of “debt” or “equity,” although with the advent of “crowdfunding,” a donation alternative also may exist. Briefly, these options are...

People

Ok, you have your idea, money, and a plan. Now, or soon, you need to add a critical ingredient – a team of people – to make it all happen. Adding “human resources” triggers many legal considerations, and here are a handful of tips to consider: 

The hiring process. Initially, employees may be friends or family, but they also may be former colleagues or strangers. Regardless, you should adopt standard operating procedures for engaging all human resources. Everyone is happy now, but misunderstandings, false expectations, or bad memories can quickly erode relationships and value. So, remember these three basic steps:

Background. Determine if you desire to, or are legally required to, conduct background checks, proof of the right to work in the US, or other pre-employment checks…and, of course, make sure the background checks are conducted legally and are properly documented!

Offer letter. Use a written offer letter (that the employee countersigns) that sets the basic employment terms: “at will” employment (i.e., either party can terminate employment at any time and for any or no reason), the employee’s role, wages and benefits, any other agreements (e.g., NDA/IP Assignment) the employee must sign, any policies with which the employee must comply, and confirmation that the employee is not restricted from working with you due to any restrictive covenants with former employers.

NDA/IP Assignment. Every employee should sign an NDA/IP Assignment, by which the employee confirms that he or she is not bringing third parties’ IP to the company, agrees to keep business information confidential and not use it other than for your business purposes, agrees IP and other work product produced for the business or on business time/equipment are owned exclusively by your company, and agrees to notify future employers of these restrictions. Failure to do so may result in your company not owning its IP or being able to protect its critical information and assets.


IP

For some, the identity and value of their intellectual property is obvious. For others, it’s not as clear. Either way, you should be aware of the basic contours of the “IP landscape," so you can identify IP, develop an IP strategy, and maximize the value of your IP. Here’s a brief overview:

Confidentiality. Information and ideas are core to your business. The value of your business and its advantages over competitors may depend on you possessing your special information and ideas, while your competitors don’t. Thus, you should have all employees, contractors, and any other person or entity that may receive your ideas or information sign a proper NDA before receiving access to such information. Keep in mind, there really isn’t a “form NDA” – the NDA needs to be customized based on the relevant circumstances surrounding the disclosure.

Strategic decision: keep it secret v. make it public? Although not every idea is patentable, when you have an invention that may be patentable, you will need to carefully and critically decide whether you seek patent protection (which means you’ll disclose your invention publicly in exchange for the potential issuance of a patent covering your invention) or keep your invention private by employing careful confidentiality practices. 

Patents. Simply put, if you have an invention that meets the various criteria for a patent, and the US Patent & Trademark Office (USPTO) issues you a patent, then you receive the right to prevent others from practicing the technology covered by your patent for a period of time. This can be a highly valuable asset, but you should be aware of some of the burdens and costs inherent in the patent process and with patent ownership. There are strict deadlines for filing patent applications, so this protection is not available to everyone who has a valuable invention. Filing and prosecuting a patent application can take years and it can be expensive. Applications are scrutinized carefully by the USPTO and are not granted routinely. If your patent application is unsuccessful, you will not benefit from patent protection, and meanwhile, all the details of your invention are irreversibly exposed for all to see.  If you are successful in obtaining a patent, to truly prevent others from practicing the invention covered by your patent, you’ll have to enforce your patent in a legal proceeding, which can be extremely expensive. 


Manage

Day-to-day management of your company will be driven largely by business drivers and market forces, rather than legal matters. Nevertheless, here is a laundry list of common issues your company may encounter or may consider addressing along the way: 

Corporate “good housekeeping.” As mentioned in “Start,” you should have a board of directors (or other governing body) and owner meetings as required by law and your entity documents, and you should record minutes of those meetings. Your board should carefully review and approve matters prescribed by law for board approval. Note that such review and decisions are subject to a host of so-called “fiduciary duties.” 

Contracts. Throughout the course of your company’s life, it will enter many contracts. Often when receiving goods or services from others, you’ll be asked to sign their contracts, but when you are selling your product or service, you likely will want your own form of contract. The purpose of contracts is to clearly explain the parties’ intentions and to allocate commitments, responsibilities, and risks between the parties. So, be sure you clearly understand, in advance, exactly what you are signing. While startups often have less negotiating leverage than their counterparties, you should still negotiate business and legal terms that are critical to your business and long term value and viability.

Web policies. If you have a web presence, be sure your terms of use, privacy policy, and any other policies accurately reflect your business practices and comply with current laws. 


Exit

While some entrepreneurs start companies with no intention of ever selling their business, many will start a company with the aim of one day selling their company or taking it public – the so-called “exit event.” Whether or not you currently plan on an eventual exit event, and whether that day is near or into the distant future, you may find these few tips helpful:

Timing. Your business plan may anticipate the precise time of your exit event. However, as is more frequently the case, it can be hard predict when  the “right time” to sell will be. Very often circumstances within and outside your control combine to define the right time to sell, including your business success, growth and value, the debt and equity markets, the unique factors and forces driving potential buyers of your business, etc. 

Types of exit events. The exit event can take several different forms, based on a host of factors. These factors include, among others, your entity type, characteristics of your ownership and whether you want to sell 100% of your company or want to retain some ownership, your company’s assets and tax characteristics, who your buyer is, debt and equity markets, company liabilities, and the terms of your licenses, registrations, and contracts. In short, it’s impossible to predict what type of exit event you’ll ultimately undertake, but it is clear that you can optimize your exit event – valuation and structure – by being mindful of an exit event along the way, from forming and organizing your company, to managing your business, to basic organization of business records, to how ordinary course business decisions are made, among various other actions.

Ben Abell

Ben Abell works with companies in all stages of growth, but his passion for startups began right out of law school.  Following his clerkship at the Colorado Supreme Court, Ben acted as the Executive Director of Startup Colorado, an organization which focuses on strengthening and expanding the startup ecosystem in Colorado’s Front Range.  During this time, he also worked with the Entrepreneurship Initiative at the Silicon Flatirons Center as a Research Fellow.

His work at DGS begins with helping clients with the formation and structuring of their business. He also works with later-stage companies with mergers and acquisitions, commercial transactions, intellectual property, and legal issues around privacy and data security. Many of his clients come from the tech world, but he also works with companies in the hospitality, restaurants, healthcare, and manufacturing industries.

Off the Clock

Ben takes full advantage of life on the Front Range. He enjoys trail running, snowboarding, cross-country skiing and generally anything that involves the mountains.

Ryan Arney

Ryan Arney counsels his clients throughout the lifecycle of their business – from formation and funding to M&A and exit. As a trusted advisor, he has worked with countless entrepreneurs to help grow their businesses.  In addition to corporate counseling, Ryan assists clients with development, protection, and commercialization of intellectual property and other technology assets, including branding, software development and commercialization and a host of other technology issues.

Ryan’s drive to help grow Colorado's technology industry has led him to be a member of the Planning Committee of the Rocky Mountain Intellectual Property & Technology Institute, a member of the Silicon Flatirons Advisory Board, and judge for the Colorado Technology Association’s APEX Awards.

Off the Clock

Ryan loves his time with family, traveling, playing basketball (even with his ineffective cross-over dribble) and golf, and mentoring entrepreneurs. 

 

Zach Detra

Zach Detra’s transactional work covers a range of industries, but he has a strong foothold in the tech, manufacturing, and aviation markets. He has helped startup companies from business formation to exit and everything in between. He regularly handles mergers and acquisitions, counsels clients on key commercial contracts and also has significant experience with private equity and debt financings.  Given Zach’s areas of industry expertise, he is often called on for international transactions involving technology transfers, joint ventures, supply arrangements, and mergers and acquisitions, in a multitude of jurisdictions spanning every continent (other than Antarctica). 

Off the Clock

Zach’s admiration for music (but lack of musical talent) led him to serve on the Board of Trustees of the Colorado Symphony. When he’s not on the clock, he loves spending time with his wife and their two young kids, playing squash, and tinkering with, when not driving, sports cars.

Pantea Garroussi

Pantea Garroussi helps her clients make the most of their intellectual property. She advises entrepreneurs on day-to-day business operations related to acquiring, and commercializing IP rights, and on commercial contracts – both of which are the lifeblood of technology startups. She negotiates complex transactions with clear, cutting insight, and innovates in structuring novel transactions to accommodate emerging technology and business models.  

Pantea brings extensive experience, solutions-oriented negotiations, and creative problem solving to contract disputes and infringement claims. As an outside general counsel to many clients, her counseling approach is informed by an understanding of her client’s overall business objectives, values, and culture. This frequently involves structuring contracts intended to facilitate long term business relationships, and resolving disputes with contract partners while preserving future business prospects.

Off the Clock

In her free time Pantea enjoys traveling, cooking, and home improvement.  As a life-long city girl and urban hiker, Pantea is thrilled to explore new neighborhoods, architecture, shops and eateries in our dramatically transforming and vibrant city.   

Otto Hanson

Otto started working with startups right out of business school in 2009, when a young Silicon Valley company hired him as its Director of Business Development.  He wrestled with the suite of issues typical faced by most startups, struggling to implement big ideas on modest budgets.  Otto later led a ski glove company in Boulder, Colorado, and has mentored and consulted with dozens of other startups. 

When Otto’s ski glove company got hit with a trademark dispute by a competitor, he learned how one legal issue can cause a fragile young company to close its doors.  Otto became a lawyer so that he could learn how to help businesses avoid these pitfalls, and he is passionate about doing it in a way that strikes a balance between the needs for efficiency and effectiveness. 

Off the Clock

Outside of work, Otto enjoys being with friends, mountain biking, skiing, snowboarding, kayaking, hiking, tennis and chess.  

Kenzo Kawanabe

Nothing can slow down a new company quite like a lawsuit, but Kenzo Kawanabe has a reputation of helping his clients protect themselves and get back on track.  Whether its IP litigation or a licensing dispute, Kenzo vigorously works on his clients’ behalf.  He has worked with entrepreneurs and companies across a number of sectors from software and technology to pharmaceutical and energy. He handles bet-the-company litigation, including matters where hundreds of millions of dollars are at stake.

No matter the business, starting a company means taking certain risks and Kenzo can help navigate the legal disputes along the way.

Off the Clock

As a Colorado native, Kenzo is active in the Denver and greater Colorado communities.  He has served in countless leadership positions at nonprofits and other civic organizations including on the Boards of the Denver Foundation and Boettcher Foundation.  When he’s not hard at work, Kenzo enjoys traveling with his wife and two daughters, or spending time at home with his family and their giant dog Fozzie.

 

Jason Lynch

Partner

Jason Lynch uses his experience as a trial lawyer to reach practical solutions to business disputes for venture capital firms, entrepreneurs, and the companies they run. 

Currently, Jason is representing an LA-based technology company in a dispute over a $6 million spin-out and sale of IP. In another recent case, Jason worked to defend a development-stage technology company in New York State Court in a dispute with an investment bank over the terms of an M&A engagement. 

Off the Clock
Jason works on a number of pro bono matters that seek broad community and social impact. Recently, he served a co-lead counsel in obtaining a landmark settlement with the State of Colorado in a federal civil rights lawsuit over provision of competency evaluations to pre-trial detainees.
 
When he’s not representing his clients, spends time with his family, and he serves as the Chairman of the Board of the Temple Grandin School, a school for students with Asperger’s and similar learning profiles.  Since moving to Colorado from New York in 2007, Jason is still chasing his elusive goal of 20 ski days in a season. 

Jonathan Marks

One of the many considerations when starting a business is how to compensate your executives, and Jonathan Marks is one of the most well-known attorneys in the state that dedicates his practice to these types of agreements. Attracting talented employees is key to any company’s growth, and Jonathan has a knack for drafting compensation arrangements, including employment contracts, offer letters, bonus plans, stock options, and other agreements.

Beyond the executive level, Jonathan works with companies designing, drafting and amending all types of benefit plans and arrangements, including qualified retirement plans, health and welfare plans, and other fringe benefit arrangements. When it’s time to exit, he can also help with negotiating these types of agreements as part of a merger or acquisition transaction and can also help with tax planning issues that result from the exit.

Off the Clock

Outside of the firm, Jonathan can be found cheering on his kids at the lacrosse field, hockey rink, or swimming pool. Sometimes, he and his wife can actually find a babysitter so they can remember why they got married at the turn of the century. 

Trent Martinet

Trent Martinet can assist with anything IP or technology related. When it comes to entrepreneurial businesses and startups, Trent’s sweet spot is identifying, protecting and commercializing all intellectual property and technology a company develops. If your business creates something, you likely have IP or technology that needs to be properly identified, protected, and eventually licensed or sold.

Trent helps identify IP and technology that needs protection through carefully crafted IP audits and disclosure practices. He advises clients on trademark, patent, copyright and trade secret protection matters. Trent manages trademark and patent portfolios and related domestic and foreign trademark and patent prosecution activities.

He regularly helps clients with complex IP and technology licensing and transfer agreements, both in-bound and out-bound as well as IP or technology development and research agreements. Trent assists clients with complex commercial transactions such as distribution, supply and sourcing matters, information technology and SaaS transactions, and technology and software purchase and sale transactions. He also represents clients in software license audit compliance and defense matters, and cybersecurity, data breach and risk management matters. Trent’s previous work life as a software developer provides him with a distinct advantage when working on software and technology related matters.

Off the Clock

When he’s not lawyering, Trent also serves on the board of directors of KidsTek, a nonprofit dedicated to increasing the technology literacy of students at Colorado's highest-needs schools. He is also very active in the Colorado Technology Association. Trent loves spending time with his wife Niki and two young sons Noble and Niko. He also enjoys exercising, golfing, and watching sports.

Brett Painter

Startups and tech companies have unique employment issues, which often are overlooked until a problem arises.  Brett actively works with clients on preventive maintenance in an effort to anticipate and address employment claims before they turn into a lawsuit.  From drafting employment policies, confidentiality agreements, and non-compete agreements to setting up proper employee classification in the wage and hour context, Brett has worked with companies of all sizes to plan for the future of their workforce and reduce legal risk.  When legal proceedings are unavoidable, Brett has extensive experience representing clients in court and before administrative agencies.

Brett takes a practical approach to solving legal problems, and he does so in an efficient way.  He appreciates that his clients don’t have unlimited budgets to spend on lawyers, and he makes a conscious effort to keep fees down without compromising the quality of the legal services he offers.  

Off the Clock

Brett stays busy attending various activities of his two teenage kids.  He also enjoys running, mountain biking, and skiing when time permits.  Brett was born and raised in Colorado.

Matt Perkins

Matt Perkins has been legal counsel to entrepreneurs, business owners, management teams and investors for over 20 years. He specializes in advising founders, management and investors through every phase of a company’s lifecycle – from startup and growth to exit. Matt and his team serve as outside general counsel for dozens of clients in various industries, including many technology companies.  Prior to becoming an attorney, Matt was a Certified Public Accountant with Deloitte in Los Angeles where he worked in the audit and tax groups.  With over 20 years’ experience, Matt currently focuses on mergers, acquisitions, dispositions, private equity and debt transactions, mezzanine and senior lending, restructurings, and technology licensing and transfers, as well as material commercial contracts.

Off the Clock

Matt and his wife, Denise Vega, have three children.  Matt enjoys travel, sports of every kind, including golf, scuba diving, sailing and hiking, and he loves live music (especially at Red Rocks!)

Michael Snider

Michael Snider knows tax and is the kind of person you want as a trusted advisor when starting a business. Tax issues come into play from incorporation to exit and can have lasting ramifications. Michael advises clients on the most tax-efficient structures for day-to-day business, mergers and acquisitions, equity compensation for founders and key employees, and investments. He regularly works with startup companies to address U.S. and foreign tax issues arising when those companies are looking to expand abroad or bring on foreign investors.

Off the Clock

Having lived much of his life in Atlanta and Houston, Michael now enjoys taking advantage of the outdoor activities Colorado has to offer with his wife, two children and two Labrador retrievers.  He also enjoys traveling, watching football (especially the Denver Broncos and Georgia Bulldogs), and playing golf.

Emily Wasserman

Emily Wasserman works with companies to navigate and resolve legal disputes.  As a former consultant, Emily understands the importance of developing solutions that make sense from a business perspective, and uses her experience to help companies achieve these kinds of results.

Emily’s work includes working with clients to resolve various contract and licensing disputes. 

Off the Clock

Emily is a Denver native and a bit of an endurance sport junkie.  A typical weekend involves long trail runs or skis through the mountains.  She is also an accomplished triathlete.  In 2015, she qualified for and raced the Ironman World Championships in Kona, Hawaii.