CHRIS HAZLITT* FAEGRE & BENSON LLP

1. CHOICE OF ENTITY CHRIS HAZLITT* FAEGRE & BENSON LLP *WITH GENEROUS ASSISTANCE FROM SUSAN MORLEY

2. Entity Choices • Sole Proprietor • C Corporation • S Corporation • Limited Liability Company • Single Member LLC

3. Filed Documents • Sole Proprietor – None • C Corporation – Articles of Incorporation • S Corporation – Articles of Incorporation and S Corporation Election (Form 2553) • LLC (both) – Articles of Organization

4. Governing Documents • Sole Proprietor – None • C Corporation and S Corporation – Articles of Incorporation, Bylaws, and Shareholder Agreement • LLC – Articles of Organization and Operating Agreement • Single Member LLC – Articles of Organization and short form Operating Agreement

5. Names • Sole Proprietorship – No requirement • C Corporation and S Corporation – “Corporation” (or “Corp.”), “Incorporated”(or “Inc.”), “Company” (or “Co.”), “Limited” (or “Ltd.”) • LLC – “Limited Liability Company” or “LLC”or “Limited”

6. Designation of Owners • Sole Proprietorship – Owners • C Corporation and S Corporation – Shareholders • LLC - Members

7. Liability Protection • Sole Proprietor – None (unless insured) • C Corporation and S Corporation – Limited personal liability unless corporate veil is pierced • LLC – Limited personal liability unless “corporate” veil is pierced

8. Piercing the Corporate Veil • Failure to observe corporate formalities • Commingling business funds with personal funds • Single business entity theory

9. Types of Owners • C Corporation – No limitation on types of persons who can be shareholders • S Corporation – Only individuals, estates, and certain trusts can be shareholders; individuals must be US citizen or US resident • LLC – No limitation on types of owners except individuals must be 18 years of age

10. Number of Owners • C Corporation – No limitation • S Corporation – Cannot have more than 75 shareholders • LLC – May have as few as one member

11. Equity • C Corporation – May have different classes of stock with different voting and economic rights (including stock options and stock warrants) • S Corporation – Cannot have more than one class of stock, but may have nonvoting stock • LLC – May create any economic and management relationships

12. Taxation • Sole Proprietor – Schedule C(Form 1040) • C Corporation – Separate taxpayer(Form 1120) • S Corporation – Flow through taxation(Form 1120S and Schedule K-1) • LLC – Flow through taxation(Form 1065 and Schedule K-1) • Single Member LLC – Schedule C

13. Compensation • Sole Proprietor – Self-employment income • C Corporation – Salary subject to employment tax and withholdings; excess as dividends • S Corporation – Salary subject to employment tax and withholdings; “dividend” loophole • LLC – Self-employment income (no withholdings); make estimated tax payments • Single Member LLC – same as sole proprietor

14. Miscellaneous • Intellectual Property • Patents • Colorado Business Registration • Taxpayer Identification Number • Payroll • Insurance • Annual Reports • Secretary of State – Online filings • Annual Meetings/Minutes

15. Pitfalls to Avoid

16. Keys to Success

17. QUESTIONS?

18. CHOICE OF ENTITY CHRIS HAZLITT* FAEGRE & BENSON LLP *WITH GENEROUS ASSISTANCE FROM SUSAN MORLEY