We are helping our daughter (she has been a junior faculty member in bio-eng) set up a consulting company where she is the sole member of the LLC, and she will be dealing with agencies to represent her work, which is how her revenue drives. As we were doing this, it was very interesting to watch what she is going through with her company and the deals. She is experiencing what the players must be going through in their NIL$ deals. Many decisions and a lot to consider - is it exclusive deal, clawbacks, carve outs, tax impacts on setup, front vs dowstream revenue, etc.
Daughter setting up her own company
- Thread starter blion72
- Start date
Keep a “black-book” of all the contact pts and ensure she focuses on the pipeline/timing for future revenue opportunities. If there’s an overwhelming amt of opps, consider playing agency role for known/talented others w/same skill set. Good way to make serious bank - earn $ while others are working
She needs to sit with a good CPA and lawyer and solicit their advice on how best to set up her business. It's money well spent.
Yes this is good advice. She may find that an S corp is much more beneficial from a tax standpoint than an LLC, for example. She can still use “LLC” in her company name, but be organized as an S corp for tax purposes.
When her earnings get into 6 digits, she should probably file for S-corp status.
She will pay more in accounting fees since she will have to pay herself as en employee of the company, but there are tax savings to offset the additional fees.
She can exclude some earnings from Social Security taxes by taking dividend distributions instead of Payroll wage.
Plus, S-corps are rarely audited compared to LLC sole proprietors.lol Less worries there.
Make sure she has a very good understanding of the IP issues involved with her present employment. Millions/years are spent litigating bio/pharma/medical inventions every year and you don't want her to be involved in any of that. She probably signed a non-compete and assignment of all IP she created to the university. She needs to understand what is hers and what is the university's. It's not just patents - its trade secrets, trade dress, copyright, proprietary data, copyrights, etc.
I agree with what was said above about having a good lawyer advise her - and that good lawyer should be up to speed on IP.
I agree with what was said above about having a good lawyer advise her - and that good lawyer should be up to speed on IP.
She has a law firm and an accounting firm, which is where she got the LLC advice. Good point re the audits. Her mom and I are keeping her grounded in reality. She is going agency for marketing/sales. My brother and I are helping her re IP before she burns legal time. She will do about $150k this year in license revenue. To scale she will have to get into some services - i..e. staff whether 1099 or W2. When she started this she did not have the feel of what running your own little company means - kind of what some of the NIL players must be dealing with.
Did you see Jason Belzer talking about his company and how they are running the business side of SWH? He must be helping the players in a similar way.
Make sure the law firm has someone who understands patents. Some firms say they are IP experts, but they don't have any registered patent attorneys or agents on staff. Any licensed attorney can be a trademark, trade secret, copyright, trade dress attorney, but the real big $$ (and the real downsides) are in patents. Biotech and IT are the two hot areas in patents right now and there is tons of litigation in those areas.
I don't know who Jason Belzer is or what SWH is. Can you enlighten me?
I don't know who Jason Belzer is or what SWH is. Can you enlighten me?
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