Legal Factors | Roger Royse

Interview Transcript of: Legal Factors | Roger Royse

Alan
Welcome back. I’m here today with Roger Royse. He is a founder of the rice law firm with three offices in Palo Alto, San Francisco, and Los Angeles. Roger, welcome to today’s show.

Roger Royse
Thanks, Alan, good to be here.

Alan
Roger, give me your background, and how did you get to where you are today?

Introduction of Roger Royse, his bio can be found below.

Roger Royse
where I am today? Well, you know, I’ve been I’ve got quite a diverse background, actually, in the law. I started out practicing in the Midwest and the Great Plains, out working in the oil fields and agricultural areas of North Dakota. And in the end of the 80s, I moved to New York City, furthered my education and tax law and liked it so much I stuck around and I work with a big law firm on Wall Street, during the the end of what they call the gogo 80s, doing some of the big m&a deals worked on some of the transactions we worked on in New York are the kinds of things that you would have read on and read about on the front page of The New York Times it was very exciting. In early 90s, I came out to Silicon Valley. And since being out here, it’s been mostly technology and technology companies. We recently opened an office in Los Angeles a few years ago. So we’ve gotten involved in the entertainment industry as well. So you could say that I’ve done a little bit of pretty much a lot of the big industries in the United States. And I’ve settled primarily here in Silicon Valley now working here, and what I think of as the center of the technology company universe, certainly the center of the startup and venture capital universe.

Alan
Yeah, it said that about 50% of the venture capital money in the world runs through Silicon Valley,

Roger Royse
I believe it. I mean, I drive I tell people, we work with a lot of companies and entrepreneurs from other countries. And when I come to visit them in the valley, or when I go to visit them, I tell them that on my way to work every morning, I drive past $10 billion a year of venture capital.

Alan
There seems to be a lot more and more entrepreneurs that are raising capital through crowdfunding to bring their ideas to fruition. What is crowdfunding?

Roger Royse
Yeah, so So let’s be careful about terms. Because when people say crowdfunding, right now, they usually mean crowdsourcing, they mean things like Kickstarter and Indiegogo, where we’re that everybody’s familiar with, and I’m working with a new fund called gazillion Fund, which is doing something similar, where the company will basically solicit donations, it’s not a store, but you know, the the contributor might get a might get a baseball cap or something like that. That’s what’s legal. Now. The crowdfunding that we’ve been hearing about in the press a lot recently, is equity crowdfunding. And that’s the idea that companies will be able to go out on a on an internet portal, and sell their securities to unaccredited investors, just through the internet. Now, that is not yet law. And it’s unclear as to when it will ever become law, because it requires implementing regulations by the Securities and Exchange Commission. And they’ve been surprisingly slow to get these regulations. And probably not so surprisingly, because there are so many flaws in this law, it’s going to be quite difficult for the regulation drafter, to put in place enough protections and enough direction in order for companies to go out and implement this new law in a meaningful way. So that’s the crowdfunding we’ve been hearing about, it’s not yet law, and it’s unclear as to what it will be. While I’m on a topic, there’s another provision of law, that has gotten a lot less attention, but I think is going to be much more important. And that is what we call the changes to Rule five or six allowing solicitation of accredited only investments. As the law is today. If a company is going to do a financing, and it is going to go out and solicit investors, it really cannot do public solicitation, it can’t do advertising, it has to be personal relationships, that sort of thing. The change and that’s that’s a that’s in Regulation D of the securities laws, the proposed change would allow advertising and solicitation of accredited only investments, meaning that the investors must be accredited, they have to have either a million dollars in net worth excluding principal residence, or $200,000, a year of annual income 300,000 jointly. So if all of the people who actually invest meet those requirements, then the company is allowed to advertise it can sky right, it can go through the phonebook and call people whatever it can solicit. That also was not yet law. We’re waiting for final regulations. But when it does become law that I think is going to be very big. The one thing that is going on now that’s really interesting in this industry, is that there were a couple of no action letters by the Securities and a Exchange Commission about a month ago, that may just open the floodgates to one off single member, special purpose entities that are designed to go out and invest in companies, they will likely be accredited and only and they will not be publicly solicited or marketed. But still, you’re going to see very creative and interesting way that companies are going to be able to go about raising money.

Alan
I’m visiting here today with Roger Royce. He is the founder of the Royce law firm with offices in Palo Alto, San Francisco and Los Angeles, I Roger, we need to take a quick break. When we get back, I want to talk about your new book, dead on arrival. We’ll be right back after these messages.

Alan
Welcome back. I’m here today with Roger Royse. He is the founder of the Royce law firm with offices in Palo Alto, San Francisco, and Los Angeles. Roger, moving through the next topic, I want to talk about your book you recently released dead on arrival. What What inspired you to write this book?

Roger Royse
Well, Alan, you know, as I mentioned, I’ve worked a lot with industries and various industries all over the country, and indeed all over the world. And over the past 30 years, and I’ve been doing this, I noticed that regardless of the industry, regardless of the country, regardless sometimes of the people was oftentimes the same mistakes that companies would make. And especially being out in Silicon Valley working with startup companies, I would see over and over again, people coming into my office that have a great idea. And they got a great business plan. And they’ve managed to line up the finance, and then they seem to have everything in place. But they made some legal mistake. And it would usually be one of a fairly discreet list of mistakes that they made. And most of these mistakes we could deal with, we could clean up, some of them we could deal with, but it might cost them a little bit on valuation. But some of those mistakes, were just what I began to call dead on arrival mistakes, they’d come in, and I just have to give them the bad news, you’re dead on arrival, you need to go back and completely start over. That’s where the title of the book came from. And the book basically summarizes what the major issues are for startup companies. And I think it’s important for every entrepreneur, to have an idea of what to avoid and what to do and just have a roadmap, there was really nothing out there like this, to give them a sense as to what the legal landscape look like when they should see a lawyer, what kind of lawyer to see whether their advice that they were getting was consistent with industry practice. So that’s the impetus for the book,

Alan
what are some of the the important factors that causes a small business to fail?

Roger Royse
Well, yeah, so certainly there there, there are lots of pieces to the puzzle. And as you know, good accounting and tax compliance is one of them. Certainly, good business development, good marketing, there’s a lot of things from my standpoint, I like it. I, my job is to make sure the company has good legal bones, right, they get started on a very solid legal foundation. And oftentimes, entrepreneurs will wait a little bit too long before they put that in place. I saw a statistic recently that almost half of the companies in America, don’t even consult a lawyer, they just do it themselves. So there’s somewhat of a lot of landmines out there just waiting to explode. So the biggest factor I would say that causes a company to have problems is just not documenting, just waiting too long, and not getting things in writing and documented and established. What are some

Alan
of the common legal mistakes that companies should watch out for in the startup stage.

Roger Royse
So that’s the first one, of course is just lack of documentation. Once a company decides it gets past that, they understand that they do need to document their relationships, it’s important that they that they select the right kind of entity, right? It has to be the right kind of NAD. It’s important that the equity split among founders be agreed to in advance and be in writing. It’s important that there be technology assignments to the company. It’s a real problem. If a company gets way down the road and ends up in front of their potential investor and then discovers in due diligence that they don’t own all the rights of the tech now alleging that they thought they did. You would be surprised how often that happens. employment laws are a real sleeper, because almost every startup I know is non compliant. You know, it’s counterintuitive, it’s complex. It’s Byzantine, especially if you’re unlucky, unlucky enough to be in a state like California. So employment laws is a place where companies are well advised to seek some good legal counsel. And that of course, on the securities every once in a while, we’ll see a company that will jump the gun on issuing securities or taking money from investors without securities compliance, and that can be a very serious problem.

Alan
I’m visiting here today with Roger Royce. he co founded the Royse law firm with offices in Palo Alto, San Francisco, and Los Angeles. Roger, we need to take a quick break. But when we get back I want to talk about strategic planning for company and the role in attorney should play with.

Alan
Welcome back. I’m here today with Roger Royse. He is the founder of the Royse law firm with offices in Palo Alto, San Francisco, and Los Angeles, Roger, in the area of a company starting to grow, and they have all their strategic initiatives. How important is all this strategic planning important for a company when a person comes to you? And says, Roger, I’m going to start a company? What is the attorney look for?

Roger Royse
Yeah, great question, Alan. Unlike a lot of other lawyers, I very much believe in a team approach. I don’t think that there’s any one person that can solve all of the problems that a company has. So the very first thing I do when I meet a new client is I make sure that that all the right seats on the bus are filled, that they’ve got the right team members in place. Part of that, like I said is accounting part is tax part is HR part is benefits. Part of it might be business development. And of course, my part is oftentimes the legal pardon. Now in the legal and tax planning that we do for for a company, the very first question we have to ask, especially in a current environment, is are you incorporated in the right state, and or country? And do you have the right kind of entity. And unfortunately, with what’s been going on with the tax law lately, a lot of companies are finding that even small companies and startup companies are finding that it’s worth it to form intellectual property holding companies and foreign tax havens, or to form based companies in other jurisdictions. In other words, what I’m seeing in my practice is that the tax law is making a is having a big impact on not only the type of entity people form, or what state they incorporate in, but in what country they do business. And so part of our strategic planning has a very decidedly international aspect to it.

Alan
Now, for the listeners. What exactly is the company doing if Apple goes down to the British Virgin Islands, or some of these other companies? And what are they working towards?

Roger Royse
Yeah, so I can answer that for you. By giving you some numbers. I know your accountant. I know you like numbers. So here’s a statistic that outages scare the heck out of everybody. About half of the Fortune 500 companies in this country pay on a regular basis, an effective tax rate of 15% or less. Now, the only way that they’re able to do that is by using offshore vehicles, and by moving technology and intellectual property offshore. And why is that scary? Not only because of the loss of the of the revenues, that the US is realizing, but the erosion of the tax base, because when an IP and that technology moves offshore, guess what? The jobs follow it. So clients come into my office, and I have this happen on a regular basis. They say, gee, you know, we’re thinking of locating a big presence here in Silicon Valley. But you know, there’s also Ireland, which has lots of incentives. And there’s another lens, which is a really a great base company for Europe. And or maybe they’ve got the metrics to put in place a Cayman Islands or VVIP holding company. And, and today, it makes more sense for more companies to do that than was true 10 years ago.

Alan
I guess International is is an important part of anyone looking to put their strategic plan together especially with the internet today and very

Roger Royse
true. The economy has changed and the tax law has not kept up with it. We now live in an information age with a very mobile economy. The last major tax overhaul we had was in 1986. Remember 1986? Allah? Yeah,

Alan
passive loss rules. And that’s the

Roger Royse
last time there was no such thing as Google and 1986. There was no Facebook, we could not even conceive of a Facebook. I mean, the world was much different than the tax law has changed dramatically since then. Or the I’m sorry, the world has changed dramatically since then. The tax law has not and it’s time now for it to change because the US is certainly losing business.

Alan
Roger, your firm is very progressive. In fact, they’re a and I appreciate all the things that you’ve done with the education seminars and the webinars, but it’s it’s made your law firm, very unique, with the amount of video and and other technology tools that are used out there. Now what what’s next for the Royce law firm?

Roger Royse
Well, I’m glad you asked that. We’ve been we’ve been working I’ve been working for probably three years now on on a tech a consumer facing technology solution. And we currently have the problem with you know, as the world changes, the law practice is changing as well. And legal services are just too expensive. They just are, you know, the rest of the industry has gotten much more efficient, legal has lagged behind, maybe it’s because it’s regulated, maybe because lawyers are just slow to act? Well, we’ve come up with our own solutions that we call the rice Law Legal wizard, and it does a couple of things. Number one, it’s a form generator. So our clients can go on to our legal wizard, they can find a document, they can fill out the form, they can complete their own document, then route it to an attorney to review and make sure that it’s right and all the combos are in the right place and do what we attorneys do, and then send it back to the client drives the cost of delivering those documents way down. We are now about to launch a legal wizard that is going to provide for a questionnaire a query and basically is a set of queries that the consumer can answer in a questionnaire form very simple 10 questions, and bam, you’ve got your corporation or your LLC, or your S corp or whatever your limited partnership, and our system is going to provide legal advice. The problem that a lot of these technology solutions have in the legal world is that they are missing this very important part of legal judgment. And the thing is ln guys like you and I will never be replaced by computers. But there are certain things certain repetitive tasks that can be replaced by computers and made much more efficient. So our system relies on both a technology component as well as a real live lawyer to get a very efficient

Alan
solution. Gotcha. How does an individual contact your firm you can reach me through my website,

Roger Royse
which is www.royselaw.com We have a resource site called Rice University where we post our videos or blogs or articles and other content. And of course, we have a relationship site for selected clients, service partners and investors at Royce link.com.

Alan
isn’t here today with Roger rice. He is the founder of the Royce law firm. Roger, thanks for joining today’s show. Thank you, Ellen. We’ll be right back after these messages.

To receive our free newsletter, contact us here.

Subscribe to our YouTube Channel for more interviews and updates.

To receive our free newsletter, contact us here.

Subscribe our YouTube Channel for more updates.

This transcript was generated by software and may not accurately reflect exactly what was said.

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

Alan L. Olsen, CPA, Wikipedia Bio

 

 

GROCO.com is a proud sponsor of The American Dreams Show.

 

The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.

Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.

The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.

They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more.

MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness.  I’s mission statement:

In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.

Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.