New York Qualified Emerging Technology Company (QETC) Incentives @ Paper This Deal

If your company operates in New York and meets the definition of a “qualified emerging technology company” (a “QETC”) it is eligible for New York tax credits.  Additionally if you are a New York State taxpayer and interested in investing in a QETC you may be eligible to claim a credit as well. Continue reading

New York Tax Department’s Voluntary Disclosure and Compliance Program @ Paper This Deal

If you become aware of the fact that you’ve failed to report and pay tax due to New York State, don’t think that it will go away.  It will only get worse.  Penalties, interest and especially criminal charges are serious business. The New York Tax Department has a Voluntary Disclosure and Compliance Program that you can avail yourself of. Continue reading

New York State Manufacturer’s Real Property Tax Credit @ Paper This Deal

If you are a “qualified New York manufacturer” doing business as a corporation and you paid real property taxes (either as the owner or as the lessee) for your business location where you perform the manufacturing activities, you are eligible for the New York State Manufacturer’s Real Property Tax Credit.

The Credit is equal to 20% of the eligible real property taxes paid by the manufacturer each year.   The manufacturer must exclude portions of the owned or leased real property that are not used in the manufacturing activities (such as parking lots, and common areas, etc.).

A “qualified New York manufacturer” is a manufacturer that either (1) has property in New York State of the type described for New York’s investment tax credit under Tax Law section 210.12(b)(i)(A) that has an adjusted basis for federal income tax purposes of at least $1 million at the end of the tax year, or (2) has all its real and personal property in New York State.

 

IRS Voluntary Disclosure Practice @ Paper This Deal

Faced with the situation that you or your company has been misreporting income or miscalculating taxes, you should not stick your head in the sand and hope that it never catches up with you.  You should work with your accountant and attorney and calculate the amount due.

First, the IRS has two voluntary disclosure programs.  The first is for domestic voluntary disclosure of tax issues, which I am discussing here.  The other is a separate program for Offshore Account Voluntary Disclosure (to be discussed in a later post). Continue reading

Trademark Consent Agreements @ Paper This Deal

When filing a trademark application, if the USPTO Examining Attorney issues an initial refusal because he or she finds that there is a substantial likelihood of confusion with a pre-existing mark, this can be an issue with respect to getting the application registered.  One way around this is to enter into a Consent Agreement with the holder of the pre-existing filed trademark.

The holder of the pre-existing filed trademark may not have any incentive to enter into such an agreement, so monetary compensation may be required.  As their are usually parameters that are agreed to, such as use of the marks in certain industries, on certain products, in certain markets, using fonts, colors, etc.

Something to remember is that if you file the Consent Agreement with the USPTO it is a public document and can be viewed by others.  This is an issue if you are paying monetary compensation.  A way to avoid this is to draft two agreements (or one with all of the issues and the compensation in a side letter agreement).

The existence of a Consent Agreement when an initial refusal for confusion is usually found by the Examining Attorney to be a good factor in allowing the filer to have its application registered.  The holder of the pre-existing filed mark is a good barometer for what would be seen as confusion by consumers in the marketplace.

Partnership Taxation: Substantial Economic Effect @ Paper This Deal

Partnership taxation is a complex area of tax law. We’ll be walking through some of the issues you should be aware of.

The first is to ensure you are getting the deal you thought you were.  Partners (or LLC members where the LLC has multiple members and does not “check the box“) can agree on how to allocate the profit and losses of the business as they see fit in the agreement.  The allocations can be done in any manner the partners/members choose, provided that the allocations have “substantial economic effect.” See IRC 704(b); Treas. Reg. 1.704-1(b). Continue reading

Strip Rights @ Paper This Deal

In addition to the other ways we’ve discussed here (stock options, phantom stock, stock appreciation rights), another way to compensate individuals working for a startup is to give them a cash payment upon a change in control of the company, called in the industry a “strip right”.

For example if a startup company has four founders each owning 25% of the shares, and they bring on another but don’t grant him or her shares, the initial founders can agree to pay the new individual a percentage of the “net proceeds” received from a “change in control” of the corporation.   “Net proceeds” is usually defined as the gross proceeds received minus transaction costs and brokers commissions as well as some other items.   A “change in control” is defined as it normally is in these agreements, and covers if the company merges with another or sells substantially all of the company’s assets.  In such a case, the shareholders would receive cash (or assets it can sell for cash, like tradeable shares of the acquirer).  The strip right agreement would require the shareholders that granted it to pay to the holder of the strip right, either a percentage or flat fee before they received their cash for the change of control.

In the example, if the four founders grant a 10% strip right, and a couple years down the road the company is sold for one million dollars, with transaction fees of $100,000, the holder of the strip right would receive $90,000 (net proceeds of $900,000 x ten percent).    The shareholders would split the rest of the $810,000 and each receive $202,500.

One of the benefits of the granting of the strip right is that it is not taxable to the recipient.  The downside, at least to the recipient is that they are not a shareholder of the corporation and they may never receive a cent if there is never a change in control.  Due to its tenuous nature, the strip right is usually granted in connection with other compensation awards.