So, you are an entrepreneur and want to start your own business (or you are an attorney, accountant, or other professional advisor working with one). One of the first decisions required is to choose a legal structure for the business. What factors should be taken into consideration prior to selecting a legal structure? Does a sole proprietorship, partnership, limited liability company or corporation (C- or S-corp) make the most sense? This webinar focuses on business formation and the pros and cons to the different legal structures, and includes tips on how to keep one’s personal assets safe from the claims of future creditors of the business. To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/forming-the-business-2019/

2. Practical and entertaining education for
attorneys, accountants, business owners and
executives, and investors.
2

3. The material in this webinar is for informational purposes only. It should not be considered legal,
financial or other professional advice. You should consult with an attorney or other appropriate
professional to determine what may be best for your individual needs. While Financial Poise™
takes reasonable steps to ensure that information it publishes is accurate, Financial Poise™
makes no guaranty in this regard.
While Financial Poise is happy to make this PowerPoint freely available to all, the reader is
cautioned that it was created for use as part of a webinar that featured an extensive verbal
discussion of the topics addressed in the PowerPoint. It was not designed to be read by
itself. Financial Poise webinars can be purchased at www.financialpoise.com. You may also
receive offers for free webinars by subscribing to Financial Poise's DACyak, a free weekly
newsletter.
DISCLAIMER
3

4. MEET THE FACULTY
MODERATOR:
Chris Cahill Lowis & Gellen LLC
PANELISTS:
Leslee Cohen Hershman Cohen LLC
Kurt A. Oreshack Breakwater Law Group
Nick Petit Vamonde
4

5. ABOUT THIS WEBINAR
So, you are an entrepreneur and want to start your own business (or you are an attorney, accountant, or
other professional advisor working with one). One of the first decisions required is to choose a legal
structure for the business. What factors should be taken into consideration prior to selecting a legal
structure? Does a sole proprietorship, partnership, limited liability company or corporation (C- or S-
corp) make the most sense? This webinar focuses on business formation and the pros and cons to the
different legal structures, and includes tips on how to keep one’s personal assets safe from the claims of
future creditors of the business.
This webinar is delivered in Plain English, understandable to you even if you do not have a
background in the subject. It brings you into an engaging, even sometimes humorous, conversation
designed to entertain as it teaches. And, it is specifically designed to be viewed as a stand-alone
webinar, meaning that you do not have to view the other webinars in the series to get a lot out of it.
5

6. ABOUT THIS SERIES
Most startups are not destined to become billion dollar unicorns. Most, in fact, will fail and most of those that survive will
never be more than small businesses. Whether and to what extent a startup will be successful depends on many factors. One
set of factors is the foundational pillars on which the company is built, and includes things such as the company’s capital
structure, financial controls, human capital, market niche, and marketing functions. This series explores each of these topics,
giving startups and their advisors useful tools and insight into how they can build a foundation for success.
As with every Financial Poise Webinar, each episode is delivered in Plain English understandable to investors, business
owners, and executives without much background in these areas, yet is also valuable to attorneys, accountants, and other
seasoned professionals. And, as with every Financial Poise Webinar, each episode brings you into engaging, sometimes
humorous, conversations designed to entertain as it teaches. Each episode in the series is designed to be viewed independently
of the other episodes so that participants will enhance their knowledge of this area whether they attend one, some, or all
episodes.
6

7. Dates shown are premiere dates; all episodes will be available on demand after
their premiere date.
EPISODES IN THIS SERIES
Episode #1 The Very Basics - Forming the Business January 22, 2019
Episode #2 Raising Capital- Negotiating with February 19, 2019
Potential Investors
Episode #3 Human Resources-101: Finding, March 19, 2019
Negotiating With & Retaining Potential Hires
Episode #4 What Every Founder/Entrepreneur Must Know April 16, 2019
7

8. Episode #1: The Very Basics - Forming the Business
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 8

9. INTRODUCTION
• So…you’ve decided to start a business!
• Which means you have asked and answered the following questions:
✓ What problem am I solving?
✓ Who is my competition?
✓ How am I different than my competition?
• What now?
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 9

10. FORMING AN ENTITY
• What’s the first thing a new business owner should do?
✓ Form an entity
• Why form an entity?
✓ Limited liability (capped vs. unlimited)
▪ With: The business owner is only at risk for the amount of their
investment and none of the other obligations of the business
▪ Without: The business owner is responsible for all of the business’
liabilities
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 10

11. FORMING AN ENTITY (cont’d)
More Reasons to Form an Entity:
• Interaction with third parties
✓ Credibility with financing or other sources
✓ May be demanded by third parties as a means of reducing potential
liabilities
• Flexibility and structure for management and control
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 11

12. FORMING AN ENTITY (cont’d)
What happens if you do NOT form an entity?
• 1 person = sole proprietorship
• 2 or more people = general partnership
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 12

13. TYPES OF LEGAL ENTITIES
• The two most common forms of legal entities are:
✓ Corporations
▪ C or S-Corps
✓ Limited Liability Companies (or LLCs)
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 13

14. CORPORATIONS
• Corporations
✓ There are two variations on the corporation (based on the way they are
treated for tax purposes)
▪ C-Corp
➢ Unless you plan to raise venture capital or go public, you’ll likely
want to stay away from the C-Corp…it’s earnings are taxed twice!
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 14

15. CORPORATIONS (cont’d)
▪ S-Corp
➢ Not subject to double taxation (pass-through entity)
➢ Restrictions include (1) only individuals can be shareholders, (2)
no more than 100 shareholders, (3) only U.S. persons can be
shareholders, and (4) funds can only be divided between the
shareholders “pro rata”
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 15

16. CORPORATIONS (cont’d)
• Both types of corporations are owned by their shareholders, whose
ownership is evidenced by share certificates.
• Likewise, both types of corporations are largely managed by boards of
directors, with day to day responsibilities handled by their officers.
• For both types of corporations, liability is generally limited, subject to
adequate capitalization and following corporate formalities, to the amount
of the shareholders’ investments in the corporations
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 16

17. WHY CHOOSE C CORP OVER S CORP?
Given that S corporations generally have a single level of taxation, why would
any company want to be a C corporation?
• S corporations have strict limitations on who can be their shareholders
(generally, only citizens or resident aliens and most notably, generally
not other business entities, although another S corporation may be
permissible) and how many shareholders they can have (not more than
100)
• C corporations are generally better for fundraising, because they can
have more than one class of stock, which is typically demanded by
professional investors and must be used for public companies
• C corporations permit their shareholders to defer taxes until earnings
are actually distributed
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 17

18. OTHER TYPES OF CORPORATIONS
• Professional Corporations
✓ Available, and typically mandatory, if forming a corporation, for certain
professions (lawyers, doctors, accountants, etc.)
✓ May not be able to limit individual liability, at least for malpractice
actions, even if using
• Statutory close corporations
✓ Limitation on number of shareholders (35)
✓ Flexible management structure such that a shareholder with much less
than majority ownership may be able to control management
✓ Fallen into disfavor in the LLC era?
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 18

19. OTHER TYPES OF CORPORATIONS (cont’d)
• Non-profit corporations
✓ No profits distributed to shareholders
✓ Limitations on purpose, use of funds, etc.
• Co-operative corporations (consumers, agricultural, etc.)
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 19

20. LIMITED LIABILITY COMPANIES (LLCs)
• LLCs offer, as their name suggests, limited liability like a corporation,
taxation like a S corporation or a partnership, and do not have the
restrictions on ownership of a S corporation
• LLCs offer a flexible management structure such that they can either be
operated by one, some or all of their members (the LLC equivalent of
shareholders) or a manager or managers, who may or may not be members
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 20

21. LIMITED LIABILITY COMPANIES (cont’d)
• LLCs are formed by the filing of a certificate (or articles) of organization.
• Their primary governing documents, which are not mandatory but are
highly advisable, are known as operating agreements
✓ Operating Agreements are similar to bylaws but often include additional
provisions of governance and share transfer which may be included in a
shareholder agreement of a corporation.
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 21

22. LIMITED LIABILITY COMPANIES (cont’d)
• LLCs have become extremely popular for the advantages and flexibility
they offer.
• However, because of their relative newness and largely contractual nature:
✓ LLCs offer less certainty, to both their members and outside entities
dealing with them, than do corporations.
✓ While LLCs are permitted to grant stock options, have more than one
class of stock and do not generally have limitations on who can become
members, there is enough haziness on these issues such that
professional investors will generally prefer a C corporation
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 22

23. SUMMARY OF PRIMARY ENTITY CHOICES
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 23

24. FUNDING YOUR BUSINESS
• Sources of Financing
✓ Bootstrap
✓ Friends & Family
✓ Government
✓ Angel Investors
✓ Venture Capitalists
✓ Commercial Banks
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 24

25. FUNDING YOUR BUSINESS (cont’d)
• Types of Financing
✓ Debt (where you borrow money from a lender that you’ll eventually pay
back plus interest)
▪ Pros
➢ Relatively inexpensive form of financing
➢ Control how capital gets allocated (some lenders impose certain
restrictions)
➢ No impact on the operations of the business
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 25

26. FUNDING YOUR BUSINESS (cont’d)
▪ Cons
➢ Reduces cash flow (diverts capital to principal and interest
payments)
➢ Reporting requirements
➢ Potential personal guarantee
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 26

27. FUNDING YOUR BUSINESS (cont’d)
• Types of Financing
✓ Equity (where you sell ownership in your business in return for capital)
▪ Pros
➢ No diversion of capital (i.e., no principal or interest payments)
➢ Right investors bring more than capital (experience, industry
connections)
▪ Cons
➢ Relatively expensive form of capital
➢ Giving away ownership and possibly control of your business
➢ Raising equity can be a long process
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 27

28. FUNDING YOUR BUSINESS (cont’d)
• Types of Financing
✓ Convertible Debt (a loan (a debt obligation) that can be turned into
equity (or stock ownership))
▪ Pros
➢ Avoids setting a valuation (eliminates the risk of a “down round”)
➢ No impact on the operations of the business
▪ Cons
➢ Reduces cash flow (diverts capital to principal and interest
payments)
➢ Giving away ownership and possibly control of your business
➢ Requires extensive documentation
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 28

29. FUNDING YOUR BUSINESS (cont’d)
• Select documents necessary to raise financing
✓ Business Plan
▪ Executive Summary
▪ Management Team + Board of Directors (Advisors)
▪ Market Size
▪ Financial Projections
✓ Business Formation Documents
✓ Confidential Information Memorandum (CIM)
✓ Contracts
▪ Employment Agreements
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 29

30. RISK MANAGEMENT
• Corporate counsel
• Business licenses & registrations
• Internal controls / policies & procedures
• Insurance
✓ D&O
✓ Key Man
✓ General Liability
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 30

31. BUILDING A TEAM
• Board of Directors vs. Board of Advisors
• Resources needed (by function)
✓ Business Development
✓ Operations
✓ Finance & Accounting (including Tax)
✓ Legal
✓ Human Resources
• Employee vs. independent contractor (IC)
• Focus on revenue generation (infrastructure lags revenue)
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 31

32. EXTERNAL PROFESSIONALS
• Corporate counsel
• Accountant / bookkeeper
• Auditor
• Insurance broker
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 32

33. BUSINESS DEVELOPMENT
• Start Early!
• Business Development vs. Marketing
• Who is responsible for revenue?
• In your head or preferably in a working document
✓ Goals
✓ Business Development Strategy
✓ Implementation Plan
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 33

34. LESSONS LEARNED
• Do something you like and are passionate about
• Understand the problem you are solving, why that problem exists and will
customers/clients pay you for the solution
• There are not enough hours in a day – prioritize those tasks that are the
highest and best use of your time
• Building infrastructure should lag revenue (i.e., capital should be allocated
to revenue generating assets)
• Hire smart, talented employees because you are only as good as your team
(if you’re the smartest guy in the room, you’re in the wrong room)
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 34

35. ABOUT THE FACULTY
CHRISTOPHER CAHILL
ccahill@lowis-gellen.com
Christopher Cahill is Head of the Bankruptcy and Restructuring Practice Group at Lowis & Gellen LLP, in
Chicago. He advises businesses on relationships with vendors, customers, and lenders, to maximize market share,
return, and liquidity. He also litigates on behalf of secured creditors, trade creditors, and in chapter 11 cases and
advised more generally on corporate restructuring, including workouts, loan forbearance, assignments for the
benefit of creditors, UCC Article 9 foreclosure sales, and avoidance litigation.
Mr. Cahill also publishes and speaks frequently on commercial insolvency and commercial transaction issues. He
is an Executive Editor of Commercial Bankruptcy Litigation, 2d Edition (Jonathan P. Friedland, Elizabeth
Vandesteeg & Christopher M. Cahill eds., 2019), a comprehensive treatise that is updated annually and published
by Thomson Reuters. In addition, Mr. Cahill is the host of Financial Poise Radio, a weekly interview and
commentary podcast for investors and other market participants, with 100 episodes and counting.
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 35

36. ABOUT THE FACULTY
LESLEE COHEN
lcohen@hershco.com
Leslee Cohen, Principal at Hershman Cohen, concentrates her transactional practice in securities law, corporate finance and general
corporate law. She counsels a variety of entities, from small entrepreneurs and start-up companies to large established businesses, across
many industries from real estate to technology in connection with private placements of both equity and debt securities, including venture
capital, private equity and “friends and family” investments. Leslee also structures, negotiates and documents significant business
transactions, including mergers and acquisitions, tender offers, joint ventures and other business combinations and financial
transactions. In addition, she handles general corporate matters including commercial contract drafting and review, stockholder and
limited liability company agreements and structuring, business restructurings, employment and consulting agreements, and equity
incentive plans and agreements, on behalf of a diverse group of clients. Leslee’s practice encompasses Securities and Exchange
Commission (SEC) compliance for microcap public companies and committees of their boards of directors, providing counseling
regarding disclosure and regulatory obligations under the Securities Exchange Act of 1934 and the requirements of the Sarbanes-Oxley
Act, including corporate governance, ethics and executive compensation issues. Leslee also represents broker-dealers and investment
advisors in connection with securities law issues.
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 36

37. ABOUT THE FACULTY
KURT A. ORESHACK
ko@breakwaterlawgroup.com
Kurt is a corporate and securities associate in our San Diego office. Kurt specializes in the representation of emerging
growth companies throughout their lifecycles. He has significant experience in corporate formation and governance
matters, initial public offerings and mergers and acquisitions, regularly practicing before the United States Securities and
Exchange Commission and the Financial Industry Regulatory Authority.
Kurt represents a wide variety of technology companies including biotech, cleantech, consumer internet, software,
telecommunications, and entertainment technology industries, as well as a number of leading venture capital firms.
Kurt joined Gunderson Dettmer in 2011 after practicing in the San Diego office of Luce, Forward, Hamilton & Scripps
LLP where the San Diego Daily Transcript recognized him as one of the top young attorneys in San Diego.
Kurt received his J.D., cum laude, from the University of Notre Dame where he was the Production Editor for the Notre
Dame Journal of Law, Ethics and Public Policy. He received his B.A., Honors, magna cum laude, in Philosophy from
Loyola University Chicago. Kurt is admitted to practice in California and Arizona.
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 37

38. ABOUT THE FACULTY
NICK PETIT
nick@vamonde.com
Nick is an experienced entrepreneur and proven leader that couples business strategy and disciplined execution with
enabling and emerging technologies. As CMO of VAMONDE, Nick inspires a multi-talented team leading growth and
shaping the future or travel and cultural discovery. VAMONDE is a SaaS platform that is transforming how our most
important cities and cultural institutions leverage new technology and rethink marketing.
Nick is a growth-oriented executive delivering high-impact results across strategy, operations, and business development
for technology and business services firms. He’s a 3X entrepreneur, Big 4 leader, innovation executive, part-time butcher,
traveler, painter, and Peace Corps veteran.
Nick serves on the board of directors for G-PAC - Gun Violence Prevention PAC.
© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 38

39. The material in this presentation is for general educational purposes only. It has been prepared
primarily for attorneys and accountants for use in the pursuit of their continuing legal education and
continuing professional education.
While Financial Poise is happy to make this PowerPoint freely available to all, the reader is
cautioned that it was created for use as part of a webinar that featured an extensive verbal discussion
of the topics addressed in the PowerPoint. It was not designed to be read by itself. Financial Poise
webinars can be purchased at www.financialpoise.com You may also receive offers for free webinars
by subscribing to Financial Poise's DACyak, a free weekly newsletter.
IMPORTANT NOTES
39© 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™

40. If you have any questions about this webinar that you did
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42. About Financial Poise™
www.financialpoise.com
DailyDAC LLC, d/b/a Financial Poise™ provides continuing education to
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42