Doing Business as a Consultant

1. Doing Business as a Consultant Michael K. Barron, Esq.

2. DLA Piper: Who We Are • Global Practices, Local Resources • We provide an extensive range of legal services through seven global practice groups: • Commercial • Corporate and Finance • Real Estate • Legislative and Regulatory • Litigation • Human Resources • Technology, Media and Communications • We counsel our clients on a full range of legal issues, assisting with the challenges that businesses face as they develop strategies and deliver plans. • Our lawyers are locally trained and fully conversant with the cultural and business practices of all our jurisdictions. Doing Business as a Consultant

3. Global Office Locations • A global organization • 66 offices in 28 countries • 3,700 lawyers • Over 1,500 lawyers on each side of the Atlantic • Additional coverage via DLA Group Firms, an alliance of legal practices, Focus Firms, and DLA Piper affiliate firms Doing Business as a Consultant

4. United States Office Locations Doing Business as a Consultant

5. US Market Presence • One of the 10 largest law firms in the US • 1,500 attorneys • National coverage in major US business centers • Leading national corporate practice • 275+ corporate/securities attorneys • 250+ finance/franchise attorneys • Ranked among the top IPO, M&A, and venture finance firms in the country • Corporate counsel to more than 120 public companies • National reputation in intellectual property • Leading litigation practice • Securities, intellectual property, product liability, commercial • 550 attorneys • High profile government affairs and regulatory practice Doing Business as a Consultant

6. Services for Digital Media Clients • We advise our clients on: • distribution and licensing agreements and the risks and liabilities afforded by copyright in these agreements • competition law issues, particularly where platforms and their owners merge • the value of content rights and liabilities during the merger and acquisition or disposal process • data protection and freedom of information and the particular legal risks encountered where information crosses borders and media • the protection and enforcement of IP in the context of digital platforms, particularly in respect of the patentability of databases • avoiding disputes, copyright infringement tribunal proceedings and piracy cases • finance agreements and revenue splits where consumers access content through new channels • cross-jurisdictional libel and privacy liabilities where content is transmitted across channels and legal and regulatory borders Doing Business as a Consultant

7. Advertising, Trade and Promotion • Advertising Copy • Comparative Advertising • E-Commerce • International • Internet • Litigation and Dispute Resolution • Marketing Agreements • Packaging and Product • Rebates and Coupons • Sweepstakes and Contest Promotions • Trade Practices Doing Business as a Consultant

8. More than 140 lawyers representing young companies and VCs in the US We provide the following services to our clients: Access to domestic and foreign funding sources Business growth and exit strategy planning Intellectual property development, exploitation and protection Innovative business arrangements, including strategic partnerships and alliances Counsel on day-to-day matters (tax, M&A, executive compensation, and regulatory) Follow-on round syndication help We offer comprehensive legal counsel, which includes our services in the following areas: Domestic and International Tax Mergers and Acquisitions Employee Benefits and Executive Compensation Technology and Sourcing Regulatory Affairs Emerging Growth & Venture Capital Doing Business as a Consultant

9. DLA Venture Pipeline • Dedicated team of non-lawyers experienced in technology, start-ups and the venture capital markets • Focused solely on helping our emerging growth clients raise and invest venture capital • Formalized approach to helping entrepreneurs raise capital • Trusted deal source for venture firms • Leverage global platform to provide emerging growth companies world class service Doing Business as a Consultant

10. Getting Started: • Should I form a company? • If so, what type of company? • What steps do I need to take to form a company? Doing Business as a Consultant

11. Getting Started: • Should I form a company? • Not necessarily. A consultant can operate as a sole proprietorship. But, what are the risks? • Can insurance cover the risks? Doing Business as a Consultant

12. Massachusetts Limited Liability Entities: • C corporation • S corporation • Limited liability company Doing Business as a Consultant

13. How to Choose Which Type of Entity is Right for You… Some criteria to consider: • Limited liability • Availability of pass-through tax treatment • Ease of formation • Cost of operation Doing Business as a Consultant

14. Setting up a C Corporation Formed by completing and filing Articles of Organization with the Massachusetts Corporations Division Minimum filing fee to incorporate in Massachusetts is $275.00 Annual Report Fee is $125.00 (due March 15th) Other Required Documents: • Bylaws • Incorporator’s Consent • Initial Director’s Consent Obtain Federal Employer Identification Number by completing and filing IRS Form SS-4 Doing Business as a Consultant

15. Setting up a S Corporation Formed by completing and filing Articles of Organization with the Massachusetts Corporations Division Minimum filing fee to incorporate in Massachusetts is $275.00 Annual Report Fee is $125.00 (due March 15th) Other Required Documents: • Bylaws • Incorporator’s Consent • Initial Director’s Consent Must file IRS Form 2553 to elect S corporation status Obtain Federal Employer Identification Number by completing and filing IRS Form SS-4 Doing Business as a Consultant

16. Setting up a Sole Proprietorship No forms need to be filed with the Massachusetts Corporations Division No annual reports need to be filed with the Massachusetts Corporations Division No need to obtain an IRS Employer Identification Number. All tax filings will be under your Social Security Number However, if conducting your sole proprietorship under an assumed name (known as a d/b/a), Chapter 110, Section 5 of Massachusetts General Laws requires you to file a Business Certificate (D/B/A) with the city or town where your business is being conducted. City of Boston charges a filing fee of $50.00 for a Business Certificate, and the Business Certificate must be renewed every four (4) years Doing Business as a Consultant

17. Setting up a Limited Liability Company Formed by completing and filing a Certificate of Organization with the Massachusetts Corporations Division Formation fee is $500.00 Annual Report fee is $500.00 Other Documents: Operating Agreement Obtain Federal Employer Identification Number by completing and filing IRS Form SS-4 Doing Business as a Consultant

18. Taxation of a C Corporation No pass through tax treatment for a C Corporation. Income is taxed to the corporation. The tax rate will be 35% of taxable income if the C Corporation is deemed a qualified personal services corporation. The Massachusetts corporate excise tax is calculated by adding two different measures of tax: a net income measure, and either a property measure or a net worth measure, depending on whether the corporation is a tangible or an intangible property corporation. The income measure is calculated at a rate of 9.5 percent of the corporation’s taxable net income apportioned to the Commonwealth. The property/net worth measure is imposed at a rate of $2.60 per $1,000 of either a corporation’s taxable Massachusetts tangible property or its taxable net worth. Doing Business as a Consultant

19. Taxation of a S Corporation Federal Tax Treatment Pass-through tax treatment. Massachusetts Tax Treatment Pass-through tax treatment, except as follows: S corporations with total receipts of $6 million or more are liable for the income measure of the corporate excise at the following rates: • 3 percent on net income subject to tax if total receipts are $6 million or more, but less than $9 million; or • 4.5 percent on net income subject to tax if total receipts are $9 million or more. All S corporations owe a minimum corporate tax of $456 regardless of profitability. Doing Business as a Consultant

20. Taxation of a Limited Liability Company Federal Tax Treatment Pass-through tax treatment (if so elected by taxpayer). Massachusetts Tax Treatment Massachusetts treats limited liability companies for tax purposes in the same manner as they are treated for federal income tax purposes. Doing Business as a Consultant

21. Employee vs. Independent Contractor Federal and Massachusetts law governs whether you are providing services to an entity as either an employee or as an independent contractor. The Internal Revenue Service formerly used a twenty factor test to determine whether a worker is an employee or an independent contractor. The twenty factor test has been recently consolidated by the IRS into eleven main tests, organized into three main groups: • Behavioral Control • Financial Control • Type of Relationship of the Parties Massachusetts uses a three part test which is more stringent than the federal test. The three part Massachusetts test is as follows: • The individual has been and will continue to be free from control and direction in connection with the performance of the services under his/her contract. • The service is performed outside the usual course of business of the employer. • The individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as the service performed. Doing Business as a Consultant

22. Biography Michael K. Barron focuses his practice on representing early and later stage biotechnology, medical device, healthcare, software, internet and technology companies and investors in such companies. He counsels clients on corporate formation, corporate transactional and intellectual property matters and has particular experience working with clients on early stage financings (angel, venture and strategic), mergers and acquisitions, licensing (software, technology, and biotech), and trademark matters. Mr. Barron has served as the legal advisor for numerous common stock and preferred stock private placements for early stage companies. He handled private placements of a biotech company’s common stock, which netted gross proceeds for the company of over $200 million. Mr. Barron has also represented numerous clients in the sale of their businesses, including the recent sale of an internet focused marketing company to a Fortune 50 company. In 1995, Mr. Barron founded the Massachusetts Innovation & Technology Exchange (MITX), a trade association which serves more than 6,000 New England professionals involved in internet and digital technologies. Mr. Barron currently serves as the General Counsel of MITX and on its Executive Committee. Doing Business as a Consultant

23. Michael K. BarronPartnerDLA Piper LLP (US)33 Arch Street, 26th FloorBoston, Massachusetts 02110T (617) 406-6006 F (617) 406-6106 michaelk.barron@dlapiper.com