Employment Practices & Insurance

• The brand SUNSET is onboarding Solvent Delaware C-Corp.
• Consumers want juice but lack ingredients, juicers are difficult to clean, and making a full glass takes a long time.
• The vision is for the juice to be squeezed out of a bag versus using a juicer.
• Juicero is being incorporated.

Incorporation Options

• Sole Proprietorship: A single individual owns and runs the business, with no separation between the business and owner, meaning the owner is personally liable.
• C-Corporation (C-Corp): It is a common structure that operates as a separate legal entity.
  • C-Corps can have unlimited shareholders, including foreign investors.
  • C-Corps can issue multiple classes of stock.
  • C-Corps are subject to corporate income tax, and shareholders are then taxed on distributed dividends, this resulting in double taxation.
• Limited Liability Company (LLC): It protects personal assets while offering tax benefits.
  • LLCs can have single or multiple members.
  • LLCs provide a balance between the limited liability that corporations offer, and the operational simplicity of partnerships.
  • This makes LLCs attractive for small to medium-sized businesses.
• Partnership: Two or more parties share both ownership and responsibility for a company.
  • Partners contribute money, property, labor, and skills and share profits and losses.
  • Partnerships can be structured to decrease each partner’s liability exposure.
• S-Corporation (S-Corp): It passes corporate income, losses, deductions, and credits to its shareholders for federal income tax purposes.
  • S-Corps avoid double taxation.
  • S-Corps cannot have more than 100 U.S. citizen shareholders.
  • S-Corps can only issue one class of stock.
• Juicero is being incorporated as a C-Corp.
  • C-Corps allows for unlimited shareholders, including international ones.
  • C-Corps allows for multiple stock classes.
  • C-Corps establish a clear separation between personal assets and business assets, reducing personal liability.
• Juicero is going to incorporate the C-Corp in the state of Delaware being that most venture-backed companies are Delaware C-Corps.
  • Delaware is business-friendly.
  • Delaware has tax advantages such as no state corporate income tax.
  • Investors prefer Delaware due to established legal frameworks.
  • Delaware is easy to incorporate in.
• Delaware C-Corps are common and simple tools like Stripe Atlas or Clerky can be used to incorporate.
• Sunsets HQ Corp is being filed with Delaware's Secretary of State.
• Delaware reviews and returns the stamp-certified copy.
• It is a requirement to have a Board of Directors and elect at least 1 Director.
  • This document is called the Action of Incorporator.
• A standard stock structure is needed being that Juicero is a C-Corp., so issue stocks to the founders.
  • 10M authorized shares.
  • 8M shares issued to initial founders.
  • Par value is set low at $0.00001.
  • The additional 2M shares are reserved for future employees/advisors.
• A unique Employer Identification Number (EIN) is applied for by the IRS.
  • This stands for Employer Identification Number.
  • The EIN is used to file taxes, hiring employees, and opening bank accounts and credit cards.
• Once incorporated and an EIN number is assigned, a bank account/credit card can be applied for.
  • Ramp, Brex, or Mercury can be used.
• The Juicero business will be expensive to function being that they will need:
  • Engineers.
  • Designers.
  • Ops.
  • Marketing.
  • Sales.
  • A lot of equipment
• Money will be raised from angel investors and venture capitalists instead of getting a bank loan.
  • Equity in the company will be exchanged for those funds opposed to a loan.
• It's easier to raise money during initial stages than it was 10+ years ago.
• $2M will be looked to raise using a SAFE with a $10M post-money valuation cap, this will result in selling 20% of Juicero.
• The CEO's job is to get intros to talk to investors and pitch why Juicero is going to make billions.
• Investors are sent a SAFE for signature and then logged in a cap table.

Cap Table

• It is a spreadsheet listing investors and stockholders. A cap table helps keep track of:
  • Ownership %'s over time.
  • Investment history.
  • Financial planning.
• Pulley may be used as a cap table manager, but Carta is also popular.
• With money in the bank, employees will be hired.
• A Human Resources Information System (HRIS) tool will be signed up with to pay, manage, and employ the new hires.
  • Gusto, Rippling, and Justworks can be used.
• Justworks and Rippling are Professional Employer Organizations (PEO) where Gusto isn't.
• The contract between a business and a PEO shares the employer responsibilities in a co-employment relationship.
• The PEO acts as an "employer of record" to handle payroll admin, related tax filing, HR support, and access to benefits.
• Businesses retain responsibility for operations and management of employees.

Employee Benefits

• Employee benefits like health and retirement can be grouped together to get better prices for smaller companies.
• PEOs help meet compliance obligations for employment, which include payroll and taxes.
• PEOs offer worker's compensation, insurance, and state unemployment insurance.
• PEOs help hire remote employees.
• 401K might be implemented for our employees for a service like Guideline or Human Interest.
• Through a PEO, medical, dental, and vision insurance will be offered.
• A mix of contractors and full-time folks will be hired.
• Full-time folks:
  • Classified as W-2 employees.
  • Will get that form annually for tax reporting, are on payroll, receive benefits, receive checks with taxes withheld.
  • Are covered by regulations and labor laws.
• 1099 Contractors:
  • Independent, self-employed workers.
  • Don't get company benefits, protections, but get a 1099 form for taxes each year.
• Insurances are used to protect our employees, assets and ourselves.
  • General Liability: Covers third-party claims for bodily injury, property damage, and personal injury.
  • Directors & Officers: Protects executives and board members from personal liability in lawsuits.
  • Worker's Compensation: Mandatory where applicable.
  • Employment Practices Liability (EPLI): For employment-related lawsuits.
  • Errors and Omissions (E&O): Protects against claims of professional negligence or failure to deliver promised services related to the technology product or service.
  • Cyber Liability Insurance, for financial losses and legal fees due to data breaches, cyberattacks, or data violations.
• An office has been obtained for the team being that the headcount is increasing. A lease was signed without personal guarantees.
• Money will be spent to build the MVP, and that we now have a team.
• Recording and categorizing transactions will be done to maintain financial statements.
  • Software like Puzzle or Quickbooks Online (QBO) will be used.
  • A bookkeeper at Pilot or Fondo may be hired to help.
• Patents and trademarks will need to be obtained to protect inventions and brand by:

1. Filing for a patent for the rights to manufacturing, use, and sell our invention.
2. File for a trademark for the logo and name.

• These are non-cash assets.
• It is time for tax season being that it has been a year since the business launched.

Tax Filing Responsibilities

• State Franchise taxes (Delaware).
• State Corporate income taxes.
• Filing Form 1120, which is a US Corporate income tax return, to report income, gains, losses, deductions, and credits.
• More could be done such as:
  • Raising additional funds.
  • Hiring in more states.
  • Financial modeling.
  • Acquiring customers and building more IP.
  • Purchasing software, tools and equipment.

Understanding different employment classifications, insurance types, and benefits is crucial for businesses. This knowledge helps manage risks, protect employees, and attract talent as companies grow, ensuring compliance and fostering a supportive work environment. Learn about PEOs, employee classifications (W-2 vs. 1099), and key insurance coverages.