What kind of legal entity should I set up for my company.
Well there's a couple of different legal frameworks don't worry this won't be boring I'll go through
it quickly.
But it's important there's proprietorship when you start a company on your own and it's very cheap to
set it up.
There's no politics it's just you.
And also there are some negatives though you're personally liable if you get sued.
They can come after your house.
And so I don't want you to set up companies as a proprietorship unless it's such an early stage company
that you actually don't really have much revenue.
You don't really have a product yet.
There's another term you probably heard called GP or general partnership and this is kind of like a
sole proprietorship but it involves a number of people.
So two or more people is cheap to set up but you do have personal liabilities as well and it's tough
to sell a GP.
Then there's something called an L P or limited partnership and these are people that invest in the
company but they can't tell a company managers what to do.
So they're a partner but their authority is limited.
Hence their limited partners and they're passive investors they're past investors they don't really
have any rights.
But from a legal perspective they generally can't get in trouble if things go wrong.
And then there's corporations and this is probably the best one the legal structure to use if you're
a large company and you're about to go public and there's amazing corporate governance stipulations
if you were a big corporation what I mean by that well you'll have a board of directors you have to
and this board of directors has the ability to protect the shareholder protect the investor.
And so they have a fiduciary duty or fiscal responsibility to protect investors.
The negatives are it gets bureaucratic because corporations are big you've got board meetings and it's
expensive and tedious dealing with shareholders and I'll cover that later as well.
But if you're a big company you have to be an LLC.
And so in that chart in the life cycle in the last three rectangle boxes right you'll set up as a as
a corporation.
But in the first two boxes you'll set up as a proprietorship initially or an LLC which I'll explain
in a second.
I want to talk quickly about corporations.
You've heard of the term Not many people use it.
It basically means when you have a lot less a hundred individual investors or corporate There's no corporate
tax only at a personal level.
Forget that stuff those not many people set those up.
Then there's something called and this is important a limited liability company an LLC where the liability
is limited.
And this is the one I want you to use early on after you're generating revenue and you're a little bit
big but not to make it cheaper south of the corporation.
And what I love about it is that for some unknown reason if you get sued your family and your family's
assets are protected because the Company LLC gets can get sued and usually not you.
So I won't spend too much time on this.
But to an LLC is the right way to go and usually it costs a hundred bucks or less per year to set up
an LLC.
And in the book version of the course I talk about in great detail how to set up a company why we use
Delaware instead of other states in America.
And it's mainly because Delaware as has so many great lawyers and business executives that have been
setting up companies for decades that it's just cheaper to do it and there's better tax laws there too.
Now let's talk about taxes so taxes for single people works as follows.
Between making $0 and nine thousand two hundred twenty five dollars you pay 10 percent.
And if you make more than that.
So between nine thousand two hundred twenty six dollars up to $37000 $450 on that Trosch or that amount
you'll play you'll pay 15 percent.
So between 0 and 9000 to 25 you get 10 percent and then between 9000 226 to 3000 37000 450 you pay 15
percent.
And then between 37000 451 all the way up to nine 90000 $750 you'll pay 25 percent of that.
So it's a step function.
That's how it works.
Not really too much detail.
You've got the charts in front of you.
And then taxes for married couples if they're filing jointly is a little bit different per that schedule
and you can pause the presentation look at that if you want and then if the couple is filing separately
this is the tax schedule and then taxes for companies is as follows.
Right.
And it's a little bit different than taxes for for individual people.
In fact companies get taxed twice if they issue a dividend they get taxed on the money they made and
then the investor also gets taxed on the dividends.
And so if a corporation makes $100000 what is the tax rate.
So between zero dollars and $50000 per the schedule you see on the screen there you're going to pay
15 percent tax or seven thousand five hundred dollars and then between 50 grand and 75 grand you are
to pay 25 percent which is sixty six thousand dollars or six point to $5000.
And then between $75000 and 100 grand you're to pay 34 percent tax or eight thousand dollars a point
$5000.
So your total tax is $2500.
So if you take 20 $2500 divided by $100000 your corporate tax rate in this hypothetical example is twenty
two point to five percent.
Please pause the slide to digest this if you'd like.
OK so we talked about dividends being taxed twice.
So again when a company has net income they pay tax on that.
And then if they give part of that money away to investors as dividends then the investor gets taxed
twice once in the company and once on the dividend double taxation w T.F. which stands for.
Why the face.
OK.
Let's move on to how do I protect my IP IP stands for intellectual property.
How do I protect it so that other people can't use my brand.
Well there's a number of different ways and you'll see these little signs there and the screen may be
too small for you to see but one is T.M. or trademark and the other one is are with a circle around
it.
You see this all the time you probably ask yourself what does this mean.
I'll show you.
OK.
So there's three ways to protect your intellectual property or your company from being copied.
The first way is to file patents or copyrights or trademarks.
I'll give you an example HiSeq.
The second way is to have non-disclosure agreements so people that see your trade secrets or whatever
that you have to share with them may be partners they have to sign an NDA or nondisclosure agreement.
Right.
And get your lawyer to set that up.
And the last one is employee contracts so that employees can't come to your company steal all your intellectual
property and leave to better let's talk about patents first.
So a product is generally speaking protected once it's been filed and to file a patent to protect your
products from being copied.
It usually costs between $1000 for a rudimentary or basic product all the way up to $100000 if it's
a very complicated biotechnology or pharmaceutical product.
And so it usually takes less than one year in the United States to set it up.
And recently the U.S. government opened a patent office here in Silicon Valley.
Strange they haven't had a free for for the past couple decades here but they do now.
And so usually it takes less than one year and often you'll see on infomercials or in magazines.
You know you've got patent pending and that basically means that the patent is going to be issued within
a year.
And usually it's good enough.
So once it's been filed your patent it's protected OK.
Patent pending is almost as good as as as patents trademark trademark is T.M. and you'll see that a
lot on products.
And it basically names a name brand or a slogan is trademark so nobody can copy it.
And so if it's redshirted at the state level and you have to go to a patent office to do that just search
online for patent office.
Easy to do.
And you you have it set up in a couple of states protected.
It makes sense.
It's cost effective to have a trademark T.M. protect your brand or your company in three states if you
don't use it for a couple of years you'll lose it.
So trademark RTM is a way to protect your brand your product your company in three states or just a
handful of states if you register a trademark at the federal level meaning in all states you want to
be protected.
Then it's called a registered trademark or an R with a circle around it.
OK.
Big companies usually use our or the registered trademark right.
Small companies that only do business a couple of states will have T.M. which is trademark.
OK so what is copyright.
I see with a circle around a lot but I don't know what that means.
Well it's very hard to patent software or media.
And so the solution is copyright.
So software or media or music or whatever it's virtual You can't see feel or touch it.
So you can copyright it.
Right.
And so copyright protection is usually for 50 years after you die.
So Bruno Mars who who's alive he's good singer his stuff is copyrighted because alive but.
But amazing classical music composers like Beethoven Bachan Chopan are not mispronounces on purpose.
Those people are not copyright and that's why when you go to a music store online or in a real physical
movies music store if they still exist you can buy classical music for next to nothing because nobody
owns the rights anymore.
OK so let's talk about a quick recap of IP or intellectual property.
So T.M. is trademark means it's Russia at the state level and a couple states if you want to resurrect
or in all states it's a bit more expensive.
You set up a registered trademark which is are with a circle or C with a circle around it means you're
registering a protecting media or software.
And that means the registration of a thing or a process or the way to do something.
OK so there's a couple of those examples so if you use it to explore one of the Internet browsers which
which I don't but if you do if you go to the help a boat has section you'll see register trademark on
the brand and explore it circle there the top and then the software itself is copyrighted by Microsoft.
The C with a circle around it.
I had a friend that worked at Microsoft on the Internet Explorer actually in back in 1995 there a bunch
of liars lawyers at Microsoft standing behind him.
And every time you wrote a couple of cool lines of code they would say patents patents.
So the software industry is very litigious.
You have a lot of lawyers in place to protect IP OK.
Kindle you'll see if you go to the help about section you'll see copyright and trademark examples used
as well.
OK.
Let's talk about trade secrets very quickly.
So Trade Secrets are secrets that are not filed for a reason because the secret is so Coca-Cola has
a trade secret in their vaults and they also get their employees to sign contracts.
That's how they protect their IP.
But for the most part nobody watching this will use trade secrets.
I want you to all please read your employment contract closely before signing them.
The person you work for if you work for somebody else or with someone else they love you obviously which
is why they hired you but their lawyer doesn't have your best interests or your family's best interests.
They're lawyers trying to protect them and the company and that's cool it's ok it's just the way it
works.
It's not a reflection of the person trying to hire you not not trusting you.
They usually don't even read the contracts that give you a lawyer does.
But you've got to read it yourself and you've got to hire your own lawyer on the side.
My costs a couple hundred bucks before signing that employment contract if you can protect your family
and yourself.
So lawyers lawyers are a necessary evil.
We need them at business.
And I think I've covered just about everything we're in a couple cover in this course except Chapter
11 when it comes to legal stuff and we'll cover Chapter 11 when there's blood in the water.
The last section of this of this course.
OK so again this course is bringing Silicon Valley and Wall Street into this class.
And so I'll be using a lot of examples from Silicon Valley and Wall Street and I worked on Wall Street
called the tax and I worked in Silicon Valley for a decade here as well.
So but you'll enjoy it.
So let's talk about unicorns.
It's a very hot topic right now.
Venture capital.
So unicorns are companies that have a billion dollar plus valuation and the probability of investing
in unicorn is less than point zero seven percent.
It's very rare just like unicorns.
And so about 40 unicorns have been born since 2003.
That's about for every single year.
And here is the billion dollar unicorn club.
You can see that Facebook is off the charts on this scale it's much much bigger right.
We couldn't fit it in.
And again a handful of unicorns are created every single year.
Inheres number of unicorns created every year versus the Dow Jones.
It's interesting because there was one very successful company in 2001 that got a lot of funding.
And one very successful company in 2008 that got a lot of funding in 0 1 it was Google in 0 8 it was
Facebook.
And those were two horrific recessionary environments as a result the venture capitalist investors only
wanted to really for the most part invest in companies that were a sure thing.
And so you know Google and Facebook are incredibly successful companies but timing had a lot to do with
when they were in their rapid growth private stage.
So timing has a lot to do with with with business as well.
And in the last section of this course we're going to talk about that in great detail.
That's part of the leftover section Okay.
So the odds of venture capital backed investment becoming unicorn is one in 1538.
You've got a better chance getting struck by lightning.
And so the top venture capital firms usually have about 1 percent other investments in unicorn's.
And the best venture capital firm in the world's called Sequoyah and they have 5 percent of their investments
as unicorn's.
So why is technology investment relevant today.
Well let's look at some very cool statistics here.
So one iPhone today costs about $700 over the life of two year contract.
That iPhone has the same processing power of 375 IBM computers from 1975 costing 33 million dollars.
It's amazing.
And there's over a billion smartphones in the world today.
Think of the opportunities.
It's it's mind boggling really.
In fact one iPhone has more computing power than all the computers in the world put together to put
the first person on the moon in 1969.
Incredible.
Just incredible.
So it's much cheaper to set up a company today versus in the late 90s when I started my first company
competing in storage prices were very expensive back then.
I had to deal with recruiting in this archaic fashion of hiring a headhunter.
I had had my own T-1 or high speed line coming to my house which was expensive.
I had to God forbid pay for my own software for office product productivity perspective.
Today most of that stuff is free and I'll talk about Amazon Web Services in great detail much later
in the course.
I will bog down in the boring technical details of that right now but that's why you've seen explosive
growth in the number of technology startups getting funding because it is much much cheaper today to
start a company than it was during the last Internet boom which ended in 2000 or 2001.
OK here are some other cool stats.
Over 10 billion pictures are 10 billion hours of YouTube video is viewed every month over 500 million
photos upload Facebook every single day.
I'm sure Instagram is is just as much if not more.
Now currently there's two and a half people on the Internet with access in four and a half billion people
that don't have internet access yet.
And so there's a lot of great growth opportunities and when it comes to starting technology companies.
Currently remember investment Thrun transmat last much longer than you think.
The first investment trend on the Internet sector started in 1995 when the first relevant browser company
went public which was Netscape.
Right.
And here we are more than 20 years later and this investment theme still has legs investment themes
last much longer than you think.
Okay let's talk about a new topic.
We're going to talk about networking.
OK.
So again relationships are more important than product knowledge.
We've talked about that at length.
Now if I told you this and I tell all my students this is the first class that if you did 20 informational
meetings then you would have the job of your dream.
Would you do it in every one of my students says puts her hands up and says yes I'll do 20 informational
meetings this semester and I'll get the job my dreams and only one or two people ever do it.
And those are the ones that get the best jobs.
And those aren't the ones with the best grades either.
Those are just the ones that network the most and I teach you exactly how to network.