One of the more important tax decisions founders of early-stage companies will face is whether or not to make an election under Section 83(b) of the Internal Revenue Code for stock awards or other acquisitions of shares subject to vesting. By making this decision promptly upon acquiring the shares, founders can avoid missing the 83(b) filing deadline and protect themselves from significant tax consequences down the line. Below, we have set out six of the most commonly asked questions by our clients:

1) What is a Section 83(b) election?

Section 83(b) of the Internal Revenue Code allows founders, employees and other service providers to accelerate the time for determining taxable income on restricted stock awards or purchases subject to vesting. A Section 83(b) election is made by sending a letter (a sample form can be found here) to the Internal Revenue Service requesting to be taxed on the date the restricted stock was granted or purchased rather than on the scheduled vesting dates.

Founders that decide to make an 83(b) election need to do so promptly to ensure that they do not miss the 83(b) filing deadline. An 83(b) election must be filed with the IRS within 30 days after the grant or purchase date of the restricted stock. The last possible day for filing is calculated by counting every day (including weekends and holidays) starting with the day after the grant date.
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Article prepared by and republished courtesy of our DLA Piper Trusts and Estates colleagues.

Earlier this month, the US Treasury issued proposed regulations that, if finalized, will significantly increase the transfer tax cost of transferring interests in family-controlled entities to other family members, both during lifetime and upon death. These regulations relate to how the value of the transferred interest is determined for gift, estate and generation-skipping transfer tax purposes. Under current law, well-established valuation methods permit the application of discounts for the lack of control and lack of
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From our colleagues William H. Hoffman and Cisco Palao-Ricketts

Due to high competition to attract employee talent and to improve employee recruiting and morale, several private companies in the technology sector have recently altered typical stock option terms to extend the exercise period of vested stock options following termination of employment.

This new trend carries with it a complex set of considerations for employers that we examine in more detail here.
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Deciding on the name for your to-be-formed company can be a stressful process given the seemingly endless number of possibilities and the limited legal requirements. Whether you have brainstormed a robust list of potential names and are having difficulty taking the final plunge, or are just now starting your search for the perfect name, we believe the practical considerations and legal overview below may be helpful to both new and experienced entrepreneurs alike when it comes to navigating the name selection process.

What is a corporate name?

The commonly used term “corporate name” is a bit of a misnomer, as certain state naming requirements apply to non-corporate entities as well. As most entrepreneurs are likely aware, entities must adopt an official name at formation that complies with certain state-specific legal requirements.  While the requirements for legal names tend to vary in minor ways state-by-state, there are two basic requirements that will need to be considered regardless of the entity’s state of incorporation:

  1. A corporate name must always include an expressly authorized “suffix” (often referred to as an “entity designator” or “entity indicator”) indicating the company’s entity type and limited liability status; and
  2. The proposed corporate name must be distinguishable from those of existing entities in such state of incorporation.

Though the focus of this article is on corporations and limited liability companies (which are by far the two most prominent entity structures used for aspiring venture-backed startups), it is important to keep in mind that certain name-related legal requirements can apply to other entity types as well.
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The US Department of Commerce announced that it will begin accepting applications for Privacy Shield certifications beginning on August 1.

For US organizations collecting personal data from the EU, the past year has been an anxious one, as the European Court of Justice invalidated the EU-US Safe Harbor program in October 2015 and the terms of a far-reaching General Data Protection Regulation (GDPR) have been promulgated to replace the EU’s 1995 Data Protection Directive. Among other things, one of the major impacts of the GDPR – when it takes effect in May 2018 – is that it will apply to US businesses that sell to, make services available to or somehow target data subjects in the EU – even if those US businesses have no operations or affiliates in the EU. With the GDPR looming, the issue of cross border data transfers and the significance of the Privacy Shield program for US businesses are likely to become even more relevant.
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The pace of innovation and adoption in technology – fast and getting faster – has long presented a stark contrast to the deliberate pace of change in the law. That contrast is greater than ever today, as entrepreneurs and established tech companies alike accelerate the time to market and the speed of global expansion. With that as a backdrop, DLA Piper’s Global Technology Summit, scheduled for September 27-28, 2016, at the Rosewood Sand Hill in Menlo Park, California, is expecting record attendance, and representatives from major tech players such as
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Despite a recent cooling in the overall investment climate, the number of active U.S. venture investors in Canada has more than doubled over the past five years. This migration north coincides with a climb in overall venture investment activity in Canada, increasingly challenging pricing on U.S.-based deals and a lower Canadian dollar, which depreciated extensively over the same period. According to PitchBook, more than one-third of all venture-backed deals in Canada in 2015 involved foreign capital, and the number of deals that U.S. firms have participated in have more than tripled over the past five years from 44 in 2010 to 143 in 2015.

Canada 2016 VC


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The SEC has updated the net worth threshold for “qualified clients” from $2.0 million to $2.1 million, effective August 15, 2016.

Section 205 of the Investment Advisers Act of 1940, as amended (the “Advisers Act”) generally prohibits a registered investment adviser from entering into an advisory contract that provides for compensation to the adviser on the basis of a share of capital gains upon or capital appreciation of funds of an advisory client.  This prohibition on “performance-based fees” prohibits compensation arrangements commonly used in fund vehicles, such as “carry”
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From our colleagues Edward J. Johnsen, Wesley G. Nissen, David A. Goldstein, Jay Coogan and Robert B. Weiss

The Securities and Exchange Commission has announced that a private equity fund advisory firm and its owner have agreed to pay more than $3.1 million to settle charges that include engaging in brokerage activity and charging transaction-based fees without registering as a broker-dealer. In so doing, the SEC appears to have rekindled the fire under a long-simmering issue regarding the kinds of services that private fund advisers can provide
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On May 11, President Barack Obama today signed the Defend Trade Secrets Act (DTSA) into law.  The law is effective immediately.  The DTSA provides a federal claim for misappropriation of trade secrets. Until now, trade secrets have been protected only at the state level, with most states (other than New York and Massachusetts) adopting their own version of the Uniform Trade Secrets Act (UTSA).

You can read more about the details of the new law here in an overview by our colleagues Victoria Lee, Rajiv Dharnidharka and Katherine Cheung
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