California Enacts New Law Limiting Use of Independent Contractors

California Governor Gavin Newsom signed Assembly Bill 5 into law in September, which establishes a new approach to the use of independent contractors in business.

 Newsom wrote that AB5 “will help reduce worker misclassification — workers being wrongly classified as ‘independent contractors’ rather than employees, which erodes basic worker protections like the minimum wage, paid sick days and health insurance benefits.”

The Bill, which received strong support in Sacramento, has vocal opposition from many companies like Uber, Lyft, and DoorDash that utilize independent contractors for their on-demand services.  However, the law impact extends far beyond the gig economy and is likely to affect virtually all businesses in California. 

Codifying the Dynamex “ABC Test”

The new legislation adopts the California Supreme Court’s opinion in Dynamex Operations West, Inc. v. Superior Court, The Court’s “ABC test” requires that an employer establish three factors to justify an independent contractor classification:  

  1. the worker is free from control and direction over the performance of the work, both under the contract and in fact;

  2. the work provided is outside the usual course of the business for which the work is performed; and

  3. the worker is customarily engaged in an independently established trade, occupation or business (hence the ABC standard).

If someone is classified as an employee, they are entitled to protections such as minimum wage,  workers’ compensation if injured on the job, unemployment insurance, and paid leave. Misclassifying an employee as an independent contractor can result in fees and penalties, back taxes and other forms of liability.

Exemptions Under AB5

The new law includes exemptions to the test for certain fields and certain relationships, including the following professions: licensed insurance agents, certain licensed health care professionals, registered securities broker-dealers or investment advisers, direct sales salespersons, real estate licensees, commercial fishermen, workers providing licensed barber or cosmetology services, and others performing work under a contract for professional services, with another business entity, or pursuant to a subcontract in the construction industry. 

If an exemption applies, the old “Borello test” will apply, which focuses on whether a company has “control or the right to control the worker both as to the work done and the manner and means in which it is performed.”

Under AB5, “professional services” includes a wide range of services including marketing, human resources administration, travel agent services; graphic design; freelance writing, photography, and many others.

Finally, the bill includes additional miscellaneous exemptions that include real estate licensees, people in the construction industry, and individuals who operate as a sole proprietorship in a “business to business” relationship.

Next Steps

Many startups and emerging companies utilize independent contractors as they build prototypes, MVPs, and assemble a core team while getting the company off the ground. Now is the time for companies to review their independent contractor relationships to determine whether the can show that the law’s “ABC test” applies or if an exemption is valid, triggering the “Borello test.”  Please contact us to learn more. 

Additional Resources

Disclaimer

Please note the foregoing is not intended to be an exhaustive summary of AB5 or the steps to be taken to become compliant and is not intended as legal advice.  For customized recommendations and guidance concerning your independent contractor relationships, please contact us directly.

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

Delaware Affirms Key Oversight Function of Directors in Highly Regulated Industries

In an opinion issued this summer, the Delaware Supreme Court recently affirmed that corporate directors in highly-regulated industries must exercise adequate oversight over safety and compliance matters as part of their fiduciary duties of care and loyalty. 

The decision presents an opportunity for food and drug makers and others whose products raise safety concerns to review their corporate governance practices to improve oversight, enhance safety, and protect management from legal exposure. 

Background of the Case

The case, Marchand v. Barnhill, involved shareholders’ claims against Blue Bell, the fourth-largest ice cream maker in the country, whose products were contaminated by a listeria outbreak in 2015, causing  three deaths and a massive product recall. 

As a result of the outbreak, Blue Bell laid off one-third of its workforce and was forced to accept a highly-dilutive capital infusion to keep operations going. 

The court’s legal opinion focused on two issues: first, whether directors holding a majority of the board’s votes could impartially consider the shareholder’s claims that management breached its duties in connection with the outbreak; and second, whether the board of directors breached its fiduciary duties by failing to adequately oversee the safety of Blue Bell’s food-making operations.

As the court noted in its opinion, Blue Bell operated as a single-product food manufacturer, and “food safety was essential and mission critical.” The company was “required to comply with regulations and establish controls to monitor for, avoid and remediate contamination and conditions that expose the Company and its products to the risk of contamination.” Yes according to the complaint:

  1. No board committee existed to address food safety;

  2. The company had no regular process or protocol that required management to keep the board informed of food safety matters;

  3. The company did not have a schedule for the board to consider food safety on a regular basis; and

  4. While management received reports with compliance red flags, no evidence existed to suggest these were disclosed to the board. 

Summary of Key Holdings

The Marchand decision had two principal holdings.

Directors Must Exercise Informed Oversight of Safety and Compliance

The Court held that because “no system of board-level compliance monitoring and reporting existed at Blue Bell,” directors breached their duties under the court’s precedent, which required them to make a good faith effort to oversee company operations.

Key to the court’s determination were the facts that the Blue Bell board did not put in place “a reasonable system of monitoring and reporting about the corporation’s central compliance risks.” According to the Court, the board’s lack of effort resulted in it not receiving official notices of food safety deficiencies for several years until the outbreak in 2015.

Crucially, while the company management had systems in place to ensure compliance with regulations, the court emphasized this does not absolve a board of directors from its independent obligation to exercise oversight of those efforts.

Director Independence

The court also found that a director’s deep and longstanding relationship with Blue Bell’s founding managers was sufficient to call into question that director’s ability to impartially assess the shareholder’s claims. 

According to the Court, the lack of director independence turns on whether a director may feel “subject to [an] interested party’s domination or beholden to the interested party.”  

While monetary considerations are important to this analysis, the “law cannot ignore social nature of humans.” Because of the deep business and personal relationship between the director and management, the Court held that reasonable doubt existed as to whether the director could “impartially or objectively assess whether to bring a lawsuit.”

Evaluating Next Actions 

For companies in highly regulated industry like food and drug manufacturing, Marchand is a call to action to ensure board-level oversight of safety and compliance functions. What’s critical in this regard is that the board is regularly apprised of material information relating to safety and compliance and that the Board actively review that information and respond to it with appropriate oversight.    

While every company and board must determine for itself what constitutes appropriate oversight, examples of governance practices to this effect might include the following:

1.     Establish a board committee responsible for regulatory and compliance risks;

2.     Create processes and protocols requiring company management to inform the board of safety compliance developments, practices and risks;

3.     Maintain a quarterly schedule for the board to review and discuss regulatory and compliance risks; and

4.     Keep detailed minutes of board discussions regarding regulatory and compliance matters.

The Marchand opinion also underscores the value of independent directors to effective corporate governance.  As company operations mature, it’s important that its board include perspectives that are independent of incumbent management to better enable healthy and impartial oversight.

 

 

 

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

How To Turn Strong Performers Into Effective Leaders

Francesco Barbera and Scott Woodhill, Senior Director of Talent Optimization at Adroit Consulting, discuss a common challenge faced by founders: how to help strong technical performers become equally skilled as managers and leaders.

For obvious reasons, strong technical performers (for example, an ace salesperson or software developer) are often elevated into managerial and leadership roles though they may not have the skills or competencies needed in their new role.

The results can be hugely disruptive and costly.

In this conversation, Scott offers some key insights on how to approach this all-too-common challenge.

Some thorny questions we address: - Can leadership be learned? If so, how? And how do you know if training will be effective? - What can leaders do to help others become leaders?

We hope you find the discussion valuable. For follow-up questions, Scott can be reached at scott.woodhill@myadroit.com.

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

Why Do So Many Startups Incorporate In Delaware - And Should I?

Most emerging growth and publicly-traded companies in the United States are organized as Delaware corporations. While Delaware isn’t the best choice for all business incorporations, there are a number of very good reasons to incorporate a high growth startup in Delaware. Below are a few of the key benefits:

  • Efficiency. In the United States, each of the 50 states has its own set of corporate laws. For businesses with national reach, it is impracticable for stakeholders and their legal or other advisors to learn the laws a new state. Delaware has become a kind of de factor “national” corporate law jurisdiction to solve this problem. Investors and other stakeholders and their advisors tend to be well-versed in Delaware corporate law, and widely-used legal forms and precedent are based on Delaware law. All of this facilitates negotiation, increases efficiency, and reduces cost.

  • Flexibility. Delaware’s general orientation in corporate law is to respect the decisions of the principals forming the company. California, by contrast, takes a more paternalistic approach, imposing requirements by statute that Delaware leaves up to the parties themselves. For example, a Delaware corporation with 3 or more shareholders can have a single director on its board, whereas the same corporation formed in California must have at least 3 directors. California mandates class-based shareholder votes in certain circumstances, whereas Delaware generally allows the parties to determine when such votes are required. Delaware’s more deferential approach provides founders and other stakeholders with more protection and flexibility to negotiate terms that make sense for the business.

  • Deference. All states require corporate directors and officers to manage companies consistent with the fiduciary duties of care and loyalty. But Delaware’s interpretation of these fiduciary standards is generally more deferential to management, reducing legal risks.

  • Predictability. As businesses grow in complexity, clarity in the legal rules governing their operation become essential. Delaware has a well-developed body of corporate law providing corporate directors and officers unparalleled guidance in understanding and discharging their obligations and navigating complex governance matters, like takeover defensive measures, acquisitions, executive compensation, proxy issues, interested party transactions, shareholder voting matters, and so forth. Delaware law is also widely studied and written about by academics and practitioners, providing even more guidance and clarity.

  • Administration. The Delaware Secretary of State, which handles the administration of corporate filings, is responsive, flexible and highly skilled. It’s possible to have a business filing returned from the Delaware Secretary of State within an hour, to give a trivial example that turns out to be really helpful amidst critical business transactions. (California’s Secretary of State, by contrast, is bureaucratic and unresponsive.) Further, Delaware has dedicated courts charged with the administration of its corporate laws, providing a reliable adjudicatory body with deep expertise in corporate matters to preside over business disputes.

  • Taxation. In the U.S., business taxes are mostly based on a company’s physical location, not its state of incorporation, so contrary to a popular misconception, incorporation in Delaware will not, for example, help California-based business avoid California state income taxes. But Delaware does take a hands-off approach to state-level taxation that is helpful to businesses incorporating there.

Is Delaware Right For My Startup?

Naturally, the decision in the case of any particular business should be based on individual considerations in consultation with your legal and tax advisors.

That said, Delaware is a good choice if you are building a growth company that will seek funding from an institutional or geographically-broad base of investors, have a larger number of shareholders with varying interests, and/or involve operations and stakeholders in many jurisdictions.

If that is not the planned trajectory of the business, or if it’s not yet clear, incorporating in your home state may be the right choice, at least for the time being. If necessary, it is possible to convert your company into a Delaware entity at a later time, though doing so can becomes more arduous once a company has grown in complexity.

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

LLC or Corporation? Choosing the Right Entity for Your Startup

One of the first questions to address during the startup process is whether to incorporate as a limited liability company (LLC) or corporation. Both entities provide the benefit of liability protection and the ability to issue equity to investors and service providers.

But these entity type have different strengths and weaknesses depending on the specifics of your business.

Below are the key factors when choosing between these two corporate forms:

  • Taxation. LLCs are taxed as pass-through entities, which means they are not taxed at the entity level. This enables the distribution of profits to owners on a tax-free basis. Of course, owners still have to report the profits on their personal tax return but the LLC itself does not pay tax on those profits. Likewise, this enables the pass-through of losses, which, especially in the early stages of a business, can be advantageous to founders who are bootstrapping or raising capital through debt and have other income to offset. Some of these advantages can be secured through a corporation electing to be taxed as an “s corporation.” But maintaining that election comes with restrictive requirements - such as limits on the classes of stock and shareholders - that aren’t suitable for growth-oriented companies. Corporations, on the other hand, enable the carry-forward of losses and the issuance of qualified small business stock, which have significant tax advantages. In short, analysis of the tax implications can involve a wide range of considerations particular to your business plans and objectives.

  • Capital Raising. Many institutional investors are prohibited from investing in pass-through vehicles like LLCs or have strong preferences against them. For this reason, companies planning to seek institutional growth capital often incorporate as or convert into corporations.

  • Equity Compensation. Both LLCs and corporations can issue equity to service providers but corporations can generally do so more efficiently. While LLCs can issue options, they cannot issue incentive stock options, which are tax favored options for employees. Because LLCs are generally taxed as partnerships, when they issue equity interests to team members, they must issue K-1s to recipients and maintaining capital accounts for them. The tax complexities can multiply quickly.

  • Flexibility. While corporations are highly efficient, LLCs are highly flexible. The governance and ownership structure of an LLC is largely determined by the contract among its owners, giving the parties latitude to accommodate different business needs and scenarios.

  • Legal Predictability. Corporations are the most well-established legal form for the conduct of business. Corporate governance matters and the legal principles that apply to them are well developed, providing important predictability and guidance in the conduct of a business.

For emerging growth companies with the clear intention to raise institutional capital and scale with large teams, formation of a c-corporation is almost always the most efficient and effective legal entity for the job.

For others, the choice of entity can be a more complex and nuanced decision. We always advise making the choice of entity decision in consultation with legal and tax advisors based on the specific plans for your business.

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

A Summary of Delaware Public Benefit LLCs

Benefit LLCs are a new entity choice in a handful of states, including Maryland, Oregon, Pennsylvania, and Utah. In 2018, Delaware joined this burgeoning group of states.

While the trend is young, Delaware’s adoption of this new entity is important. More companies call Delaware home than any other state, and it’s often an influential first mover with changes to its corporate framework, with other states following suit.

Similar to a public benefit corporation, Delaware defines a public benefit LLC as a for-profit limited liability company that’s “intended to produce a public benefit or public benefits and to operate in a responsible and sustainable manner.”[1] And like the corporation version, these LLCs must have a Public Benefit that reflects a positive effect--or reduction of negative effects--of an “artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature.”[2]

This statutory framework allows the company to balance financial interests with the public benefit stated in its governing documents. And within the framework of a limited liability company, it offers entrepreneurs and founders the ability to utilize the flexible structure of an LLC and taxation benefits while aligning the company to public-focused mission.

This is valuable virtue signaling. It lets investors, advisors, employees, and customers know about the socially-conscious mission enmeshed into the framework of the business. It also creates ease for investors to assess the business because of new statutory requirements, including a mandatory statement every other year that reports on the company’s promotion of its stated public benefit. The statement must include:

  • the objectives the company has established to promote the public benefit;

  • the standards for measuring its progress;

  • factual information based on those standards; and

  • an assessment of the company’s success in meeting its objectives.[3]

If you’d like to learn more about Benefit LLCs to discover if this is a beneficial move for your business, we’d be happy to go through this new framework with more depth to determine if this will help you generate the impact you seek.

This article was written by our emerging companies associate, Chris Jones. You can reach Chris via email.

_____

[1] § 18-1202(a).

[2] § 18-1202(b).

[3] § 18-1205.

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

Preparing for California's New Consumer Privacy Act

The California Consumer Privacy Act of 2018 (“CaCPA”) was signed into law by former Governor Brown in June 2018.  CaCPA was passed quickly by the California legislature in the wake of the Facebook/Cambridge Analytica revelations, the General Data Protection Regulation (“GDPR”) in Europe, and a proposed California ballot initiative that would have been much more difficult to amend.  

Even if your business has taken steps to comply with GDPR, the CaCPA imposes additional obligations and responsibilities and provides new rights for California consumers.  These new requirements require immediate planning and action in anticipation of the law’s effective date on January 1, 2020.

The following is a brief summary of the law’s key provisions and steps that affected businesses should consider taking in consultation with legal counsel.

BUSINESSES SUBJECT TO CACPA

CaCPA applies to for-profit entities that do business in California and either (i) generate annual gross revenue in excess of $25 million; or (b) receive or share personal information of more than 50,000 California consumers; or (c) derive at least 50 percent of its annual revenue from selling the personal information of California consumers. A “California consumer” for purposes of CaCPA is a natural person (not a corporation) who is a California resident, whether the individual is currently inside or outside of California. 

In addition to businesses already subject to CaCPA, emerging growth companies with growth projections or business models that are likely to render them subject to CaCPA in the future should consider implementation of technical architecture and internal processes and procedures to facilitate for eventual compliance.

EXPANDED RIGHTS OF CALIFORNIA CONSUMERS UNDER CACPA

Under the CaCPA, California consumers have been given a broad set of rights with respect to the collection of their personal information, including the following:

·       The right to know the categories of personal information a business has collected about that consumer;

·       The right to know the categories of sources from which the personal information is collected;

·       The right to know the business or commercial purpose for collecting or selling personal information;

·       The right to know the categories of third parties with whom the business shares personal information;

·       The right to access the information which has been collected and used during the twelve months preceding the request;

·       The right to have the information deleted (subject to certain exceptions); 

·       The right to opt-out of the sale of personal information;

·       For consumers between the ages of 13 and 16, the affirmative obligation to obtain an opt-in for the use and sale of personal information; and

·       The right to be protected against discrimination in price and quality of goods for exercising the rights under the CaCPA.   (Note: This provision means that a consumer cannot be denied goods or services or charged a higher price if the consumer exercises their privacy rights.  However, the CaCPA also allows your business to charge different prices or provide different levels of service “if the difference is reasonably related to value provided by the consumer’s data.”  Companies should therefore proceed with caution and in close consultation with legal counsel when implementing differential pricing or offerings based upon the collection of personal information.)

EXPANDED DEFINITION OF PERSONAL INFORMATION

Significantly, the definition of “personal information” under CaCPA is broader than similar U.S. laws and generally mirroring the definition of personal data under the GDPR. 

Under CaCPA, personal information “means information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household.” 

The list of items which constitute personal information goes beyond names, addresses and Social Security numbers and includes IP addresses, on-line identifiers, geolocation data, internet or electronic network activity information such as search history and inferences drawn from that information used to create a consumer preference profile. 

EXPANDED REMEDIES IN THE EVENT OF SECURITY BREACHES

One major new development under CaCPA is a private right of action for security breaches.  Under the CaCPA, any California resident whose unencrypted or unredacted personal information has been exposed due to a failure to maintain appropriate security can bring an action against the business.  A class action is possible if enough plaintiffs wish to aggregate their claims.   Although there are procedural steps which a plaintiff would have to go through before bringing an action, failure to adequately secure personal information under CaCPA may result in significant liability for California businesses.

CaCPA also imposes monetary fines and penalties in cases of intentional violations of the CaCPA of up to $7,500 per violation.

WHAT STEPS SHOULD YOUR BUSINESS TAKE?

The CaCPA is undergoing amendment as regulators, the business community and consumer groups seek to resolve the ambiguities and inconsistencies resulting from the swift passage of the CaCPA.   However, given the increasing visibility of privacy issues, we anticipate many if not most of the law’s general requirements, as well as a general orientation of enhanced vigilance towards consumer data, will remain intact.  

In light of the significant potential liabilities associated with the CaCPA, growth companies engaging California consumers, including those projected to be but are not yet subject to CaCPA, will need to carefully plan for, establish and maintain safeguards, policies and procedures to ensure compliance with CaCPA and related laws.

Following are actions that businesses should consider taking in consultation with privacy counsel:

·       Review and Update Your Privacy Policy.  The CaCPA requires increased privacy disclosures at or before the point of collection to consumers to explain the categories of data to be collected and the purpose for which the categories of information will be used. These disclosures must be updated every 12 months.

·       Review and Update Your Website.  In addition to a link to your privacy policy, the CaCPA mandates that your business provide a “reasonably accessible and clear and conspicuous link” to the consumer’s opt out right on your website’s homepage.  This link must be entitled “Do Not Sell My Personal Information.”  Under this portion of your website, you must explain to the consumer that they have the right to opt out of the sale of their personal information and provide them with the means to do so (generally in the form of an “opt-out button”.) This link also must provide certain other required information about their privacy rights;

·       Review and Update your Terms of Use.  Your on-line Terms of Use often incorporate your Privacy Policy and set forth the terms and conditions on which your business provides its services.  The Terms of Use may also need to be revised to ensure compliance with the CaCPA.

·       Provide One or More Means for Consumers to Submit Requests.  You must provide, at a minimum, a toll-free telephone number for consumers to call to submit their requests for information under CaCPA.

·       Establish Consumer Information Request Response Procedures.  Your business must respond within 45 days to verifiable consumer requests for information and provide the requested information free of charge not more than twice in a twelve-month period.   You must develop a standard procedure to review, analyze and respond to consumer access requests.

·       Establish Data Collection Tracking Procedures.  You must put processes in place to track the information your business collects so that you can timely respond to requests for information and opt-out requests.  As stated above, the look-back period for an access request is 12 months.  Since the CaCPA will come into active effect on January 1, 2020, we are already within that 12-month period.   Many companies who have invested in developing IT infrastructure to track data collection and consumer requests in order to comply with GDPR will also need to develop mechanisms to track to comply with CaCPA.   If you did not need to worry about GDPR, you may need to worry about CaCPA and put those processes into place now.

·       Train Your Team.  Your team is an important part of the compliance effortThe new law requires that your team be familiar with the new requirements so that personal information and relevant consumer inquiries are handled quickly and properly.

Our experienced data and privacy counsel is available to assist in your compliance efforts and provide advice and recommendations for complying with CaCPA as well as other applicable data privacy and security laws.  Please contact us if we can help.

DISCLAIMER

Please note the foregoing is not intended to be an exhaustive summary of the CaCPA or the steps to be taken to become compliant and is not intended as legal advice.  For customized recommendations and guidance concerning your California Consumer Privacy Act compliance, please contact us directly. 

This article was written by our data and privacy counsel, Lori Ross. You can reach Lori via email.

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

Getting the Most from Your Annual Meeting

Since we’re talking about yearly responsibilities, now’s a good time to start thinking about your company’s annual meeting.

The Basics of the Annual Meeting

Delaware – and most states – requires an annual shareholder meeting. For Delaware corporations, an annual meeting must be held every 13 months. It’s pragmatic to hold them just after the end of the fiscal year to review the previous year’s financial performance and to new director and officer information to be available for the state’s annual report filing on March 1st.

These meetings can be held in person, virtually, or through a hybrid format. Companies can also meet its statutory requirements through a written consent in lieu of a meeting. Make sure to check with your bylaws to ensure your company’s own requirements are satisfied.

Turning Your Annual Meeting Into a Memorable Event

Typically, these affairs are centered on the election of directors, which is the statutory baseline for all companies.

For some large companies, like Berkshire Hathaway, the annual meeting is a major production. Berkshire’s annual meeting infuses Omaha with vibrancy as shareholders from across the globe descend on the otherwise sleepy Midwest city.

Dubbed the “Woodstock for Capitalists,” the annual meeting is the best show in town, filling the 17-thousand seat CHI Health Center to the brim. Another 20-thousand plus are on-hand elsewhere in town for the spillover sales and networking that happens over the four-day weekend.

People fly in from Shanghai, Cape Town, and New York City; they drive in from all corners of the US. They bring their babies, their parents, their neighbors, their friends. They are professional asset managers for whom the long weekend is a four-day sprint of deals and networking, and semi-retired Omahans whose grandparents entrusted their money back in the 1960s to a bright young local fund manager named Warren Buffett and as a result made their descendants extremely rich.
— Quartz

Warren Buffett, and his right-hand man Charlie Munger, are legend, no doubt. And their acumen and charm is on display for the crowd. Each year, they riff, unscripted, on the company, financial markets, the economy, and more over Cherry Coke and boxes of See’s peanut brittle. 

It’s a unique spectacle to be sure. Your startup’s annual meeting may not have the same fanfare, but Buffett’s event does offer some ideas that can make any annual meeting an occasion to look forward to.  

Here are three broad, simple takeaways from the Oracle of Ohama that could level up your company’s annual meeting.

Make it Special

You don’t need 17-thousand people to feel the excitement for an event. The real key is that Berkshire Hathaway has made it an event instead of a meeting. Hold your meeting somewhere breathtaking. Invest in the details. Cherry Coke and See’s Candy doesn’t cost much, but it’s a unique part of Buffet and Munger’s performance that delights shareholders every year.

Give Value

The kings of value investing deliver with their meeting too. In an annual meeting context, this means delivering the statutory minimums for a shareholder meeting. To paraphrase Buffet, create an outstanding meeting at a sensible price.

If you seize the opportunity to inspire, give advice, and build confidence, your shareholders will walk away from the meeting excited about the company, its future, and their role in it.

Engage your audience

Buffet and Munger don’t follow a script. They engage with their shareholders for hours of q&a. They give financial and life advice. They crack jokes. They make it worthwhile for shareholders to book flights and hotels and sit in the arena on a warm Saturday for the change to learn.

Best Practices for Startups

The intimate gathering of a startup’s annual meeting provides an opportunity for officers, directors, and shareholders to strengthen relationships, forge meaningful conversations, and grow together.  

In 2018, the “Best Practices Committee for Shareowner Participation in Virtual Annual Meetings” delivered five key principles and 12 best practices companies should incorporate into their annual meetings. This advise can also help you create an outstanding meeting at a sensible price and make your next meeting a conversation your shareholders will look forward to having again and again. The last two are relevant for companies who decide to conduct virtual or hybrid meetings. 

Five Principles

  1. Broad investor participation in annual meetings should be valued and encouraged.

  2. Shareowner meetings should promote equitable and equal treatment of investor participants.

  3. Opportunities for meaningful engagement between investors and directors should be provided.

  4. Issuers should communicate the benefits of a virtual meeting to shareowners.

  5. Virtual meetings should be used as a way to provide meaningful open dialogue between shareowners and companies.

Twelve Best Practices

In addition to the five principles, the Committee looked to how technology can help expand and enhance opportunities for participation in a fair and balanced way. 

  1. Recognize that the meeting format must be determined before the proxy is published.

  2. When deciding on annual meeting format, companies and their boards should consider the items to be voted on at the meeting as well as other issues that may be of current concern to their shareowners.

  3. Evaluate constantly changing technology and processes for supporting a virtual meeting.

  4. Ensure equal access to all shareowners.

  5. Create formal rules of conduct for the meeting.

  6. Establish reasonable time guidelines for each participant in the virtual meeting.

  7. Establish rules for when questions are out of order.

  8. Establish rules to promote transparency.

  9. Post questions received online during the meeting.

  10. Ensure shareowners have access to board members.

  11. Have a technical support line available. 

  12. Archive virtual shareowner meetings for future viewing. 

If you’re curious what the Woodstock of Capitalism is all about, Berkshire Hathaway’s annual meeting is live streamed exclusively on Yahoo! Finance on May 4th, 2019 for the fourth straight year. 

For more on the Committee’s guiding principles and best practices, you can find the Committee’s full white paper here.

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

How to Figure Out Your Delaware Franchise Taxes

Domestic Delaware corporations (formed and organized in the State of Delaware) have franchise tax and annual reports due on or before March 1st.

The First State actually has two ways to calculate the franchise tax, and it defaults to a method that’s usually way more expensive for startups and emerging-growth companies.

Delaware’s Default Method: Authorized Shares

The default—and more expensive—method is to base the franchise tax on the number of authorized shares in a company’s charter. Here’s how it breaks down:

Number of Shares Amount
5,000 shares or less (minimum tax) $175
5,001 – 10,000 shares $250
Each additional 10,000 shares or portion thereof      $85

For a company with 1,000,000 authorized shares, the annual tax would be $8,665. That’s $250 for the first 10,000 shares and an additional $8,415 for the remaining 990,000 shares.

Yikes.

The (Usually) Cheaper Method: Assumed Par Value Method

 This method is often more favorable for startups because it calculates the tax based on the company’s gross assets, rather than its authorized shares. If your company’s issued shares are at least a third to a half of the company’s authorized shares, this is likely the best way to go. The gross assets should be the same number as what’s reported to the IRS on Form 1120, Schedule L. If you haven't filed yet, then you can use the gross assets number from a recent balance sheet and amend the Delaware filing later if necessary.

The Assumed Par Value Method is more complicated. But after making a few simple calculations, it could mean significant savings on your annual tax bill.

This might make more sense to see the numbers play out. Here’s an example from Delaware’s Division of Corporations. Let’s assume the following for your corporation:

  • 1,000,000 shares with a $1.00 par value

  • 250,000 shares with a par value of $5.00

  • Gross assets of $1,000,000

  • 485,000 total issued shares

Here are the steps to determine the tax amount based on the assumed par value.

Step

Example

Divide your total gross assets by your total issued shares carrying to 6 decimal places. The result is your “assumed par”.

 

$1,000,000/485,000 = $2.061856 assumed par

Multiply the assumed par by the number of authorized shares having a par value of less than the assumed par.

 

$2.061856 * 1,000,000 = $2,061,856

Multiply the number of authorized shares with a par value greater than the assumed par by their respective par value.

 

250,000 * $5.00 = $1,250,000

Add the results of #2 and #3 above. The result is your

assumed par value capital.

 

$2,061,856 + $1,250,000 = $3,311,856 assumed par value capital

Figure your tax by dividing the assumed par value capital, rounded up to the next million if it is over $1,000,000, by 1,000,000 and then multiply by $400.00.

 

4 * $400.00 = $1,600.00

The minimum tax for the Assumed Par Value Capital Method of calculation is $400.00.

How to File

 Reach out if you’ like us to provide guidance on how to determine the tax amount via an Assumed Par Value Method, or if we can provide any additional guidance as you prepare to file your annual report with the Secretary of State. You can file your report by clicking on the link below. You’ll need to have your company information ready, including its entity number, which you can look up here.

If you fail to file your Delaware annual report and franchise taxes prior to midnight on March 1st, Delaware will place an immediate penalty one-minute past 11:59 pm.

California Corporations

California domestic and foreign corporations (corporations domestic to other states but qualified to do business in the State of California), are required to file a “Statement of Information” annually.  The due date for each corporation will be the last day of the corporation’s anniversary month.  This means that if your corporation was formed or qualified to do business on January 2012, your Statement of Information will be due on January 31st, of each year.  To file your California Statement of Information, please follow this link:

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

Pending Certified B Corporation Status For Startups

To become a Certified B Corporation, a company generally must be in operation for at least 12 months.  However, startups that can’t meet this requirement can obtain temporary “Certification Pending” status.  

Certification Pending status signals to customers, employees, investors, and partners that the company has met the legal requirements of B Corp Certification and is on the path to becoming fully certified.  It also authorizes the company to use the B Lab’s Certification Pending logo, which is reproduced on the right.

Certificate Pending status is valid for 12 months from issuance.  The company may then apply for full certification as soon as the Company has been in operation for at least 12 months.

Pending status does not mean the company will qualify for certification at the end of the 12-month period. The company must have a verified B Impact Assessment score that meets B Lab’s score requirements when it applies for full certification. If the company cannot achieve B Lab’s requirements by the end of the 12-month pending period, a one-time 90-day extension may be requested at no cost.

Basic Requirements

To earn temporary Certification Pending designation, the following requirements must be met:

1.1.   The company must not have been in business for more than 12 months.

1.2.   The company must meet B Lab’s legal requirement concerning its corporate formation:

1.2.1.   If the company is a corporation formed in California or Delaware, the company must be a benefit corporation.  Alternatively, corporations in California (or other states which allow them) may choose to be a Social Purpose Corporation, but must include additional language in their Charter.

1.2.2.   Corporations formed in other states or territories of the U.S. can find the B Lab requirements applicable to their state at: https://www.bcorporation.net/become-a-b-corp/how-to-become-a-b-corp/legal-roadmap/corporation-legal-roadmap

1.2.3.   If the company is an LLC, LLP, or LP, it must amend its LLC agreement or partnership agreement to include the B Corp principles outlined by B Lab, located at the link above. 

Note that amendment of a corporation's charter or partnership / operating agreement will almost certaintly require the consent of the company's shareholders and managers, so it is important to consult your company's legal documents to ensure proper procedure is followed.

Steps To Receive Certification Pending Status

2.1.   Structure Your Startup’s Legal Entity to Meet B Lab Requirements, as outlined above.

2.2.   Complete a Prospective B Impact Assessment. This Assessment should be prospective, meaning it should reflect the positive impact the company intends to have 12 months from the date of earning the pending status.

2.2.1.  The Assessment can be found at:

https://beta.bimpactassessment.net/get-started/bcorporation

2.3.   Become familiar with the performance requirements for full certification by reading “Guidance on Meeting the Performance Requirement for B Corp Certification.”

2.3.1.  The Guidelines can be found at:

https://www.bcorporation.net/performance-requirement-pending-b-corps

2.4.   Sign a Pending Certification Term Sheet, which includes acceptance of the limited rights to IP and limited access to B Lab’s services and support during the 12-month term.  the term sheet can be found here:  https://www.bcorporation.net/sites/default/files/documents/term_sheets/B_Corp_Term_Sheet-Pending_Certification%202014.pdf

2.5.   Pay a $500.00 Pending Certification fee to B Lab.

2.6.   Plan and begin conducting business operations in a way that optimizes your B Impact score and ensures certification once the company is fully eligible.

Additional information concerning the Pending designation may be found at: https://www.bcorporation.net/become-a-b-corp/how-to-become-a-b-corp/steps-start-ups

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

UPCOMING DEADLINES: DELAWARE CORPORATIONS’ ANNUAL REPORTS ARE DUE MARCH 1ST

Domestic Delaware corporations (formed and organized in the State of Delaware) have franchise tax and annual reports due on or before March 1st.  To file your annual report and franchise taxes please follow this link: 

https://icis.corp.delaware.gov/Ecorp/logintax.aspx?FilingType=FranchiseTax 

You will be required to enter your corporation’s entity number which may be looked-up by entering your corporation’s name in the following link:

https://icis.corp.delaware.gov/Ecorp/EntitySearch/NameSearch.aspx

If you fail to file your Delaware annual report and franchise taxes prior to midnight on March 1st, Delaware will place an immediate penalty one-minute past 11:59 pm.

CALIFORNIA

California domestic and foreign corporations (corporations domestic to other states but qualified to do business in the State of California), are required to file a “Statement of Information” annually.  The due date for each corporation will be the last day of the corporation’s anniversary month.  This means that if your corporation was formed or qualified to do business on January 2012, your Statement of Information will be due on January 31st, of each year.  To file your California Statement of Information, please follow this link:

https://businessfilings.sos.ca.gov/

If you have any questions, please contact us for assistance.

 

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

Two Ways To Get Traction Prior To Funding

The plight of pre-seed founders can seem like a Catch-22.  Founders need traction to get funding, and funding to get traction. 

Crossing this chasm is a founder's first and fundamental role. From a funding standpoint, in the earliest stages, personal resources and connections substitute for traction, so founders rely on personal finances and their immediate personal and professional network for "friend and family" stage funding.  Operationally, I have seen founders stretch limited resources to maximize traction in two ways:

1 - Use Equity To Build Out A Team and Move The Venture Forward.  I have seen clients make amazing progress with teams of co-founders, advisors and other contributors compensated mostly or solely in equity.  They have then leveraged product and user traction, and the quality of their team, to attract angel and seed investment.  It works not just because of traction, but because founders have demonstrated the ability to persist, persuade and lead. 

2 - Launch A Streamlined Initial Product and Keep Refining It.  Do what it takes to build a basic version of your product and launch it to a cohort of initial users in your target market.  Leverage the user feedback to test assumptions, refine the product, improve engagement, generate compelling case studies and acquire initial paying customers, all of which go a long way to attracting both talent and investment.  Y Combinator has a terrific article here discussing in more depth the virtues of launching quickly, working closely with users, and doing what's necessary to make it indispensable, even if it means Doing Things That Don't Scale.

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

Preparing for the European Union’s General Data Protection Regulation: A Brief Overview for U.S. Companies

The European Union’s General Data Protection Regulation (“GDPR”) will come into effect on May 25, 2018.  Many American companies are unaware of GDPR requirements and unprepared for its imminent arrival.  This Article summarizes key provisions of the GDPR and outlines steps US companies should consider in anticipation of its effective date.  If you have questions after reviewing this article, please don’t hesitate to contact us.

A Summary Of Certain Key Provisions of the GDPR

The GDPR applies to non-EU organizations, including U.S. companies, that process personal data of individuals or data subjects located in the EU. The GDPR expands existing EU data protection law in numerous ways, including the following:

·       “Personal Data” is defined more broadly.  In fact, the reach of the revised definition may surprise some as it includes data not previously considered to be personally identifiable information or “PII”, such as IP addresses.

·       The processing of Personal Data must be lawful, fair and transparent.  

·       Personal data may only be collected for specified legitimate uses and may not be kept longer than is necessary for the purpose for which it was collected. 

·       A robust duty to delete data after it is no longer needed will be instituted.

·       More explicit notice and consent requirements are imposed on the data controller, the entity amassing the data.  The consent of the data subject whose personal data is being collected must be freely given, specific, informed and unambiguous.    

·       Increased attention is paid to data security measures as well as to the types of data.

·       Breach notification rules are tightened.

·       The data subject is given broader rights to require that his or her data be deleted from a database, in other words, to exercise “the right to be forgotten”.

·       Personal data may only be transferred out of the EU to a jurisdiction which provides adequate safeguards for that data.

·       The GDPR applies equally to data controllers who amass information and data processors who get information from controllers.

Preliminary Steps US Companies Should Take To Prepare

Failure to comply with the GDPR can subject violators to significant penalties. US companies processing EU data, or planning to do so, should take measures to ensure compliance.  Some preliminary steps include the following:

·       Determine if your company is subject to GDPR as a threshold matter.

·       Review existing privacy policies to ensure the new notice and consent requirements are met and consider revisions to existing policies if not.

·       Review data security protocols and determine if a DPIA (Data Privacy Impact Assessment) is necessary.  A DPIA may be required if new activities are undertaken with respect to the processing of personal data.  The DPIA will identify potential areas of shortcomings.

·       Appoint a Data Protection Officer if your company’s primary activities consist of processing which requires regular and systematic monitoring of individuals on a large scale or if the processing concerns certain types of sensitive data.  Note: The activities of the company and not the size of the company determine whether a DPO is necessary.

·       Review the data security measures of your vendors to ensure that those vendors which handle personal data also provide sufficient protections, and revise your existing vendor agreements to address GDPR compliance matters. A company is responsible for ensuring that it uses vendors which also comply with GDPR.

·       Consider becoming “Privacy Shield” compliant in order to transfer data out of the EU.

·       Prepare Binding Corporate Rules or Model Contractual Clauses to meet the adequate   safeguards requirement for transfer of data out of the EU.

Why It Matters

Customers in the US and EU and indeed throughout the world are increasingly concerned with the privacy of their personal data.  In addition to avoiding penalties for non-compliance, compliance with GDPR demonstrates to customers that your company has their interests at heart.  

Please note the foregoing is not intended to be an exhaustive summary of the GDPR or the steps to be taken to become compliant and is not intended as legal advice.  For customized recommendations and guidance concerning your EU data security and compliance, please contact us directly.  

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

C Corp or Pass Through? Choosing The Right Entity After The New Tax Law

The 2017 Tax Cuts and Jobs Act enacted major changes to the US tax system, including broad reductions in corporate income tax rates, a 20% deduction for qualified business income earned by pass-through entities, and modest reductions in individual income tax rates. 

This article briefly summarizes how the Tax Act might impact the choice of legal entity for new and existing businesses.

As an initial matter, for high growth startups on the venture path, the Tax Act is unlikely to impact the prevailing preference for C-corps, for reasons nicely summarized by Gust:

  1. The tax rate has been lowered for C corps and startups generally don’t pay dividends. Most startups put every dollar they make into the business to grow and scale their business. The corporation will now pay less in taxes on any income they make, and startups that are C corps already don’t pay dividends, so there are still no double taxation concerns to worry about.
  2. The qualified small business stock (QSBS) under § 1202 still only applies to C corps. This exemption says that stock owners in qualified C-Corporations can exclude $10 million or 10x aggregate adjusted basis (higher of the two) at the successful exit of the business.
  3. Venture capitalists have not done anything to suggest that they will no longer prefer to invest only in Delaware C-Corps. VCs still want to limit the legal and regulatory complexity of their portfolios. Because of this, it is unlikely that their preference to invest only in Delaware C-Corps will change with the new tax laws.

For businesses not fitting the venture profile, the choice-of-entity issues raised by the Tax Act require a multi-faceted analysis, ideally in partnership with your accounting and tax advisors.  Following summarizes several factors that will play into the analysis of whether c-corp or pass through taxation will improve your results: 

1. Tax Rate.  C corp income is now taxed at a flat 21% rate whereas pass-through income flowing through to an individual partner is subject to tax at a maximum 37% rate.  In addition, C corps can fully deduct state and local taxes whereas an individual’s deduction is limited to a maximum of $10,000.

2. Limitations on Availability of Pass-through Deduction.   Pass-through income may be eligible for a 20% deduction for qualified business income (QBI), but the deduction is not allowed for most service businesses (unless taxable income is less than $415,000 ($207,500 if not married filing jointly) and is subject to other limitations.  An analysis will be required to determine the extent to which your business will benefit from the new pass-through rules in comparison with reductions in corporate tax rates and other benefits.

3. C-Corp Dividends Remain Subject to Double Tax.  If a business does not make distributions to its owners (for example, the owners generally take only salary and perks and profits are reinvested), then a c corp structure may result in income tax savings.  On the other hand, if the business distributes all of its profit out to its owners annually, then the double tax resulting from a C corp structure will be disadvantageous.

4. Tax On Accumulated Cash. C Corps may be subject to accumulated earnings tax and personal holding company tax for cash accumulated in the business. 

5. Taxation Upon Sale of Company.  Sale of c-corporation assets may be subject to double-taxation.  Care should be taken to consider owners' exit strategies and whether assets may be held individually to avoid double tax.

6. Step-Up at Death.  If an owner dies owning C corp stock, the stock will receive a step-up in basis to its fair market value.  This will avoid a shareholder level tax if the C corp liquidates.  However, it does not avoid a tax to the corporation on any appreciated assets that are distributed in liquidation or later sold by the C corp.

7. Deductibility of Losses.  If a partnership has losses that flow through to its partners, those losses would not flow through if the entity becomes a C corp, so C corp status would be disadvantageous.

8. Timing.  Changes in the tax elections are subject to a variety of complex rules and deadlines.  For example, s corps terminating their s-election are subject to a five year waiting period to convert back to S status.  Converting a c-corp to S corp may result in recognition of taxable gain. 

In short, business owners should run the numbers with their financial and legal advisors to determine if new tax laws warrant changes in the choice of entity.  

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

A Common Element In Co-Founder Disputes

According to Noam Wasserstein of Harvard Business School, co-founder disputes are responsible for more than 65% of startup failures.  That's a staggering figure but consistent with my experience working with early stage companies.   

In this video, I discuss a common element I've observed in most co-founder disputes I've seen up close. In it, I point to an underlying source of the conflict that has less to do with the content of the dispute (e.g., different visions, expectations, and so forth) and more to do with how founders relate to their own beliefs and opinions. 

It's perfectly common and natural for co-founders to have divergent views when it comes to their business.  What's decisive in the health and longevity of a partnership is not so much the existence of differing perspectives -- as how founders relate, respond to and allow for them in the context of an ever-evolving partnership and business landscape.

Hope the video helps! Would certainly love to hear feedback on it, so please feel free to comment or reach out. 

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

Certified B Corporations and Benefit Corporations: A Summary

I recently co-taught a workshop with Derek Hydon and Andrea Chase for entrepreneurs exploring the "Certified B Corporation" route. Early in the program, it became clear that there is a lot of confusion out there about B Corps, Certified B Corporations and Benefit Corporations and how these concepts fit together.

I get it - the terminology is ridiculously confusing. So I thought I'd do my best here to provide as concise a summary as possible.

  1. “Certified B Corporations” are for-profit businesses that have met stringent sustainability, transparency and governance standards established by a non-profit organization, B Lab. Companies that achieve a certain score on B Lab's assessment tool - the "B Impact Assessment" - and satisfy B Lab's audit requirements are eligible to become Certified B Corporations. Confusingly, a business does not have to be legally structured as a corporation to a be a Certified B Corporation. LLCs, partnerships, corporations and even sole proprietorships are all eligible, but to remain certified, B Lab imposes specific requirements depending on your structure (more on that below). 
  2. A “Benefit Corporation” is a type of legal structure in the same way an LLC is a type of legal structure. A benefit corporation is like a traditional corporation in virtually all respects (including with respect to federal and state taxation) but it has three defining legal features that codify the corporation's commitment to positive impact and enhanced governance standards:
  • Benefit Corporations Are Required To Pursue Public Benefit. Unlike traditional corporations (which can be operated for virtually any lawful purpose), benefit corporations are required pursue a positive public benefit through their business operations. This feature integrates the corporation's higher purpose or social impact commitments into its legal charter.
  • Directors and Officers of Benefit Corporations Are Required To Balance Financial Interests With the Company’s Mission and Impact. Unlike traditional corporations (in which directors and officers are viewed as having an overarching duty to maximize value for shareholders), directors and officers of benefit corporations are required to balance the pecuniary interests of shareholders with the Company’s pursuit of public benefit and its impact on stakeholders like employees, suppliers, customers, the environment, and the local community. 
  • Benefit Corporations Must Satisfy Expanded Transparency and Disclosure Requirements. Unlike traditional corporations (which generally have no legal obligation to report on impact or sustainability metrics), benefit corporations are required to evaluate their impact performance against a comprehensive and independent third-party standard (such as the B Impact Assessment) and publicly report the results of their assessment.

3. Currently, 33 U.S. states (including California and Delaware) and Italy have enacted benefit corporation legislation. The specific legal features of Benefit Corporations vary somewhat from state to state but most are based on model legislation spearheaded by B Lab, including California, but with the notable exception of Delaware, which I will discuss in a separate post. Adding to the terminology confusion: In Delaware, benefit corporations are referred to as “Public Benefit Corporations” or PBCs.

4. As mentioned, any for-profit business is eligible to become a Certified B Corporation regardless of legal structure, but B Lab imposes certain legal requirements once you become a Certified B Corporation. Specifically:

  • If you are operating as a traditional California or Delaware corporation (or in another state that has enacted benefit corporation legislation), you must convert your corporation into a benefit corporation within 2 years of initial B Certification. This generally will require the approval of your Board and 2/3 of your shareholders.
  • If you are operating as an LLC or Partnership, you must amend your operating or partnership agreement to mirror certain B Corp governance principles within 90 days of initial B Certification. This will require whatever approvals are specified in your LLC or partnership documents.

All the B Corps I work with are organized are California and Delaware but if you are organized in another state, B Lab has published a “Legal Roadmap” to help you navigate the legal requirements. You can find it here.

People commonly use the term "B Corp" to refer interchangeably to Certified B Corporations and/or Benefit Corporations. It's also frequently used to refer more generally to businesses that are operated sustainably or with a triple-bottom-line orientation. All of this is understandable but naturally adds to the confusion, which I think we'll be living with for a while.

Hope this is helpful. If you have questions, don't hesitate to reach out.

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

Creative Fundraising Strategies for Impact Ventures and Social Enterprise

In the 1-hour webinar below, hosted by Michael Anderson of Conscious Capitalism San Diego, BCL Founder Francesco Barbera and Of Counsel Jenny Kassan discuss options available to founders seeking growth capital for their ventures.  

The discussions touches traditional fund-raising strategies to new crowdfunding options made available through the JOBS Act to lesser-known options such as direct public offerings.  The central point we drive home in this webinar is that there is enormous room for creativity in creating a fund-raising plan that attracts the right money from the right people in a way that preserves the fundamental character and mission of the venture.  

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

Legal Structures for Impact Entrepreneurs

Below is a webinar featuring BCL Founder Francesco Barbera and serial entrepreneur Michael Anderson discussing legal structures available to mission-driven and social impact entrepreneurs.

Hosted by Conscious Capital San Diego, the discussion focuses on the legal and business factors that come into play when deciding on the right corporate structure for impact-drive ventures.  It includes consideration of traditional corporate forms such as corporations and LLCs, benefit and social purpose corporations, and hybrid structures with for- and non-profit components.

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

17 Incubators For Impact Entrepreneurs and Social Enterprise

Following is a list of accelerator and incubator programs specifically targeting founders and early stage ventures that address social and environmental challenges, in areas ranging from health care, to education, to poverty, economic opportunity and access to technology.  

These organizations are varied in who they serve and where they are located but they share one thing in common:  they offer structured programs designed to help mission-driven founders build organizations (for-profit, non-profit, or hybrid) that generate positive impact at scale.  

We are not able to vet these programs for quality, so do your own diligence and as always, consult with your team of trusted advisors before proceeding.  

Finally, we did our best to create a comprehensive list but please let us know if we've missed any programs. We'll do our best to keep this list current.   

Agora Accelerator, Washington, DC

Targeted to entrepreneurs who create social impact in Latin America and the Caribbean, this is an intensive, 6-month program providing businesses with access to the social, human, and financial capital needed to accelerate growth.

Boomtown Health-Tech Accelerator, Boulder, CA

A 3-month program in Boulder, Colorado focused on entrepreneurs who seek to bring positive impact to health and wellness around the world.

Cleantech Open Accelerator, Redwood City, CA

A 12-week series of intensive workshops and bootcamps to accelerate cleantech startups focused on Energy Generation; Energy Distribution & Storage; Energy Efficiency; Chemicals & Advanced Materials; Information & Communications Technologies; Green Building; Transportation; or Agriculture, Water & Waste. 

Conscious Venture Lab, Columbia, MD

A 4-month immersion program targeting entrepreneurs “using the power of purpose to transform capitalism.” Entrepreneurs must be willing to relocate to Columbia, Maryland for the duration of the program. Companies must be involved in one of the following industries: Cyber Security, Biotechnology, Tech enhanced Professional Services, Technology infrastructure, Hospitality, Consumer Products, 3D Manufacturing, Mobile/ Consumer Internet, Social Applications, and Gaming.                                   

Echoing Green Fellowship, New York, NY

Echoing Green invests in leaders who bring about positive social change around the world. Echoing Green offers three different fellowships. The Global Fellowship is for entrepreneurs "who are deeply connected to the needs and potential solutions that may work best for their communities." The Black Male Achievement Fellowship is for "entrepreneurs dedicated to improving the life outcomes of black men and boys in the United States." The Climate Fellowship is for entrepreneurs "committed to working on innovations in mitigation and adaptation to climate change." Non-profit, for-profit, and hybrid start-up companies are eligible for the fellowship.

Fledge, Various Cities  

With locations in Seattle, Lima, and Barcelona (and a program in Padova, Italy launching in 2018), Fledge offers a 10-week program of guidance, education, and mentorship, plus a large and growing network of support from past fledglings and hundreds of mentors. Applicants should be social impact, for-profit companies that consist of two or more individuals.

GoodCompany Ventures, Philadelphia, PA

Challenging social entrepreneurs to scope and quantify the opportunity that their innovation presents, refine their plan for execution and defend their capitalization strategy.  Over an intensive 12-week period, guides entrepreneurs through a series of expert and investor panels, tactical workshops, peer-to-peer critique, and one-on-one coaching, cumulating in an investor pitch event.  Also offers Climate Ventures 2.0, a 12-week program for entrepreneurs focused on innovations in climate adaptation and resilience, particularly impacting food, agriculture and water in urban areas.

The Global Social Benefit Institute (GSBI®), Santa Clara, CA

Provides social entrepreneurs with Silicon Valley mentors to prepare them for growth, with separate structured programs guiding entrepreneurs from idea-stage to scale. 

Halcyon Incubator, Washington, DC

Helping social entrepreneurs incubate and accelerate social ventures with the capacity for measurable social change. The Halcyon Incubator builds a community of support around the Fellows by bringing together a network of seasoned entrepreneurs and leaders in the government, nonprofit, and for-profit sectors. Ventures may be for-profit, nonprofit, hybrid, or undecided, as long as the core mission is to create measurable social change. 

Imagine H2O, San Francisco, CA

Focused on the water sector, Imagine H2O connects entrepreneurs with world leaders in the water sector, government, and social enterprise to help turn ideas into self-funding, high impact solutions.  IH2O's annual programs focus on themes representing entrepreneurial opportunities within water.  Entrepreneurs are selected to participate in Imagine H20’s annual innovation program and the winning teams get to participate in the business accelerator.

Impact Engine, Chicago, IL

An intensive 16-week accelerator program designed for mission-focused for-profit ventures in broad range of industries, from technology-enabled Internet and products-based companies across different sectors and countries. 

Los Angeles Cleantech Incubator, Los Angeles, CA

A non-profit, public-private partnership that helps promising companies deliver market-ready cleantech solutions.  Focused on products or services that advance sustainable or efficient use of resources.

Points of Light Civic Accelerator (CivicX), Regional

National accelerator program and investment fund focused on for-profit and nonprofit early stage ventures “that include people as part of the solution to critical social problems.” The 10-week, boot camp-style program convenes 10-15 teams in person and online with the goal of equipping each venture to seek investments and scale their social innovation that are working to create greater, more accessible pathways to economic opportunity in communities across the U.S.

Praxis Labs, New York, NY

Focus on Christian entrepreneurs, Praxis provides mentorship and expert networks for entrpreneurs committed creating cultural and social impact through their venture.  Though applicants must be Christian, their organizations are not required to have a religious affiliation.

Singularity University, Silicon Valley, CA

Designed specifically for startups tackling humanity’s grand challenges leveraging exponential technology. An 8 week on-campus program in Silicon Valley which early stage ventures for scale and impact.  

Unreasonable Institute, Various Cities

A wide network of accelerators, located across the U.S. and globally, focused on support entreprenenurs tackling significant social and environmental challenges.  Locally, San Diego Unreasonable Lab San Diego runs a 5-day accelerator for early/idea-stage, San Diego-Tijuana (Cali-Baja)-based entrepreneurs that are tackling financial, social, health, or environmental problems.  

Village Capital, Various Cities

Building communities of practice around entrepreneurs solving major global problems in agriculture, education, energy, financial inclusion, and health. Peer-selected investment model empowers entrepreneurs to become investors themselves, and our programs provide them with training and mentorship from industry experts, policymakers, business leaders, investors, and other entrepreneurs.  The program is structured around three 4-day workshops featuring sessions led by leading entrepreneurs, investors, industry experts, and the Village Capital teams. Programs are held in multiple cities throughout the United States.

This article was researched and written by BCL legal extern Stephanie Snively.  

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.

24 Startup Incubators in the Los Angeles Area

Below is our best shot at compiling a comprehensive list of incubators (in no particular order) in the LA and surrounding areas. It's worth nothing many of the finest technology incubators operate outside of LA, so if you’re willing to travel, there’s even more opportunity out there.  (For reference, here’s a ranking of the Top 15 on a national level.) This list is focused on Los Angeles-area programs.

The startup ecosystem has exploded over the past several years, offering tremendous opportunities for support, resources, mentorship, funding and education.  Startup founders need all of those things to succeed, and for some teams, an incubator may be a good way to get them.  Joining one can provide quick access to a supportive network of experienced experts and fellow entrepreneurs, as well as helpful resources and small amounts of funding. 

Please note we are not endorsing or recommending any of these programs.  We are offering the list as a starting point for your own research and due diligence. As with any important decision, we recommend consulting with your trusted advisors before joining an incubator, as it is a significant business decision.  It's an investment of time (and in some cases, equity), so you want to be sure you are getting value and surrounding yourself with the right people.  

If we’ve left any off this list, please let us know and we’ll do our best to keep it complete and up-to-date.

Idealab, Pasadena, CA

Idealab infuses start-ups with the support they need to rapidly introduce innovative products and services. Resources include office space and the accompanying office services, development and technology, product and graphic design, marketing, financial advice, human resources, competitive research, legal, accounting and business development support and services.

Science Inc., Santa Monica, CA

Science funds, develops and advises companies focused on solving the everyday problems of modern living.  Both create and develop their own business ideas in-house and acquire other Internet startups with the aim of scaling them.

LACleanTech Incubator, Los Angeles, CA

LACleanTech accept early-stage clean-tech companies launching new projects and international companies looking to enter the US market.

Originate Labs, Los Angeles, CA

Works hands-on with entrepreneurs, start-ups, and enterprises to rapidly build modern mobile, web, and data-driven applications.

Founder Institute LA, Santa Monica, CA

Offer four-month, part-time program for founders, enabling participants to “learn by doing” and launch a company through structured training courses, practical business-building assignments, and expert feedback.

MuckerLab, Santa Monica, CA

MuckerLab is a privately funded startup accelerator focused on incubation-stage Internet software, services and media ventures in the Los Angeles market. They provide entrepreneurs with funding, put them through a structured, three-month-long program and give them access to a deep network of top-tier mentors and advisors.

Amplify, Venice, CA

Amplify is a hands-on startup accelerator and multi-faceted entrepreneurial campus in Los Angeles. They help startups grow by providing seed funding, mentorship, strategic resources and access to additional capital.

The Business Technology Center, Los Angeles County, CA

Provides early-stage technology firms business management assistance, technical assistance, and the coordination of available financial resources.

Startup Minds, Los Angeles, CA

Helps turn business ideas into Minimum Viable Products, by guiding founders through the critical yet often overlooked processes of market research and customer development.

Make In LA, Chatsworth, CA

Hardware accelerator Dedicated to launching and keeping product-focused businesses in LA. 

Smashd Labs, Culver City, CA

SMASHD Labs is a 10-week accelerator program in Los Angeles, led by Atom Factory focused on early-stage companies at the intersection of culture and technology.

Startburst Accelerator, El Segundo, CA

Provides access to seed funding from top angels and VC firms dedicated to aerospace, defense and security.

Techstars Healthcare Accelerator, West Hollywood, CA

In partnership with Cedars-Sinai, focused on technology innovators in health care sector.  Offers access to Cedars-Sinai’s clinical expertise and information infrastructure including hardware, software and digital health technical resources; Mentorship from Cedars-Sinai physicians, researchers, healthcare professionals and executives; Access to Techstars’ network of over 7,000 successful entrepreneurs, investors, mentors, and corporate partners.

UCLA Anderson Accelerator, Westwood, CA

Focused on UCLA startups, the accelerator is a central meeting place for UCLA’s multidisciplinary communities to pool resources, whether they are aspiring Anderson entrepreneurs, students or qualified alumni partnering with campus researchers. Accelerator members enjoy guest speakers, topical seminars and “demo days” for resident companies.

The Design Accelerator, Pasadena, CA

The Design Accelerator focuses on early stage design and technology businesses. They use low-cost startup management techniques to spur growth.

Disney Accelerator, Los Angeles, CA

Disney Accelerator, powered by Techstars, is helping today’s technology innovators turn their dreams for new media and entertainment experiences into reality.

Start Engine, Santa Monica, CA

Start Engine is a rapid accelerator focused on helping Los Angeles-based technology startups build a solid foundation for success in 90 days.

USC Viterbi Startup Garage, Los Angeles, CA

Viterbi Startup Garage is a 12 week technology accelerator program that includes $20k in funding, space, strategic and financial resources and access to world-class mentors, and hands-on product, marketing, legal and fundraising support.

Port Tech LA, San Pedro, CA

PortTech Los Angeles is a business incubator dedicated to helping clean technology entrepreneurs transform start-ups into thriving businesses. PortTechLA works very closely with the Port of Los Angeles’ Technology Advancement Program (TAP), which is tasked with the responsibility of evaluating and helping fund technologies that support the Port’s Clean Air and Clean Truck Action Plans.

K5 Labs, Los Angeles, CA

Focused on technology-oriented companies, especially those focusing on software including AI, Machine Learning, Predictive Analytics; Robotics; Fintech, Foodtech, and Digital Health.

The Bixel Exchange, Los Angeles, CA

Bixel Exchange helps technology entrepreneurs by combining the power of the Los Angeles Area Chamber of Commerce and L.A.'s dynamic tech community with the resources of the U.S. Small Business Administration's Small Business Development Center. 

Los Angeles Dodgers Sports and Entertainment Accelerator, Los Angeles, CA

Five to seven startups will be selected, enabling in-depth engagement with the Dodgers’ leadership, business units, and industry network as well as R/GA’s award-winning strategic marketing, branding, design, and technology services.

LA Startup Club, Los Angeles, CA

Not an accelerator or incubator,Startup Club supports founders of early stage web and mobile technology companies via bi-weekly collaborative work sessions in a safe, focused environment to provide support and mentorship.

Grid110, Los Angeles, CA

In partnership with the Office of Mayor Eric Garcetti, supports DTLA startups by connecting them to office space, mentors and resources, with initial focus on fashion-tech.

Ventura BioCenter, Thousand Oaks, CA

Supports startup tech companies with a mixture of wet-lab facilities, lab equipment, mentoring, and additional resources aimed at taking an idea from concept to successful business.  Entrepreneurs can move in and start running experiments the next day.

Updated:  October 5, 2016

Comment

Francesco Barbera

Francesco Barbera is a corporate attorney representing emerging growth companies in a wide range of industries, including software, technology, digital, fashion, health care, retail and e-commerce.


He counsels entrepreneurs, investors and established companies on the full range of their business activities, from formation through raising capital, growth and acquisition. He has special expertise in the representation of mission-driven organizations and social enterprises. 


Throughout his career, he has represented the National Broadcasting Corporation, the Grammy Museum, Ares Capital Management, Credit Suisse First Boston, as well as privately held businesses in internet, media and technology, mobile applications, consumer products, professional sports, film and television production, among others over the course of his career. 


Francesco began his legal career at two large, international law firms in Los Angeles, where he represented large and small enterprises in a broad range of transactions, from mergers and acquisitions to public and private securities offerings to the formation of partnerships and joint ventures.


Francesco is also the Co-Chairman of the Los Angeles chapter of Conscious Capitalism, Inc.A lifelong student of psychology and personal development, Francesco holds a Master’s Degree in Spiritual Psychology from the University of Santa Monica and has been trained and mentored by numerous leaders in the personal development arena, including Steve Chandler, Byron Katie and George and Linda Pransky. 

Francesco has also founded and represented non-profit initiatives.


He has served as outside counsel to the Los Angeles Leadership Academy, a charter school dedicated to training the next generation of social and political leaders, and he is the founder and former Executive Director of SpiritWalk, a non-profit fundraiser created to benefit the University of Santa Monica.  

Francesco’s writing has appeared in The American LawyerCalifornia LawyerSlate, and others. He served as the Supreme Court columnist and Executive Editor of the Harvard Law Record and was the founder and editor-in-chief of the Penn History Review, the first Ivy League journal in the country dedicated to the publication of undergraduate historical research.


Francesco is an honors graduate of Harvard Law School, cum laude, and the University of Pennsylvania, summa cum laude and Phi Beta Kappa.