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This article explains the considerations and consequences of the American Taxpayer Relief Act of 2012 and how it affects both individuals in their employment and in their estate planning needs.
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When might bankruptcy be the right course of action to take to eliminate securities violations? In this post, we will explore why this course of action was needed for Neogenix and how it might apply to your company.
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FINRA has begun gathering information on how to implement the new JOBS act required provision of Regulation D regarding crowdfunding. What does this mean for your business?
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After the Court invalidated Zappo's Arbitration Provision, what does this mean for companies and their website terms of use?
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After almost a year since Congress passed the Jumpstart Our Business Startups Act (or JOBS Act), which originally had great excitement from the start-up community, I’ll explore how implementation of the JOBS Act has progressed and what we might...
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This article discusses the implications of the contents in a Nondisclosure agreement and how they could affect how a merger and acquisition is handled. In particular it discusses the rights of an interested party after discovering important...
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The case study of NeoGenix Oncology presents a wonderful opportunity to warn against the dangers of not complying with SEC regulations, including the possibility of civil litigation or criminal charges. Neogenix Oncology paid finder fees to third...
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This post discusses the effectiveness of using an entity such as an LLC or limited partnership that provide limited liability protection. Deciding if this is necessary is dependent upon each situation but should be determined by seeking legal counsel...
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Do I need an LLC or corporation or can I operate as a sole proprietor? Will purchasing insurance grant me enough liability coverage? Will my LLC become an asset for me? Are there any costs to incorporating? These are some of the many questions...
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The SEC released its preliminary regulatory requirements for the new amended Rule 506 of Regulation D. This is only a proposed rule, which means that the amended 506 can not be implemented into practice yet. This article discusses the proposed rule...
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The JOBS Act contained two very important provisions for startups: Reforming Regulation D to allow for general solicitation and a provision allowing crowdfunding, which will grant startups the ability to raise capital via the Internet. Both...
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This is the sixth post discussing retaining key employees through different types of benefit compensation. This post discusses the legal and regulatory requirements for companies that choose to compensate their employees through stock. There are...
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Are lawyers really all that important for letters of intent (LOIs)? This post discusses the benefits and implications of having and not having legal counsel during the initial stages of a business deal or venture.
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The fifth in a series on how to retain key employees, and this post discusses the account implications, and affects to Profits & Losses, for issuing stock options, restricted and phantom stocks, and stock appreciation rights. The accounting of...
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Rule 506 of Regulation D is the most commonly used exemption from securities registration requirements for startups to raise capital. There can be no general advertising or solicitation but an unlimited amount of money from "accredited investors" can...
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Article is the fourth in a series exploring techniques to attract and retain important and key employees through the use of profits interests. Profits interests are interests in a Parternership's or LLC's future profits without using existing...
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This article continues a series looking at exemptions from state securities registration for private funds with a look at a recent order issued by the Maryland Securities Commissioner. The article details what the new order proposes to change...
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This article continues a series which explains when a deal (and what types of deals) involve securities regulation. This particular entry focuses on sales of stock, noting the history of how sales of stock have been treated, the Supreme Court's...
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This article continues a series which explains when securities laws impact business transactions. The focus of this article is on promissory notes and the jurisprudence which has been developed to determine when such a note qualifies as a...
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This article provides a further update to regulation of private funds by the various states' securities regulators. The state in question in this article is Missouri, and the article details both what private funds were relying on to...
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If you are an angel investor (or anyone else looking to invest in a startup venture), how can you maximize your chances of making a good investment? From the entrepreneur's perspective, what types of questions do sophisticated investors...
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This article updates a prior article about regulations on private fund managers which had been proposed in Massachusetts. As this article details, these proposals were largely adopted by the Massachusetts Securities Division; the article...
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When is an investment in an LLC or a partnership covered by the federal securities laws? This article, which continues a series on the scope of securities regulation, analyzes that question; it explains how innovations in business forms have...
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This article continues a series which examines when a transaction involves the federal securities laws by reviewing SEC v. W.J. Howey Co. (aka, "Howey"). Howey is a famous case to students of securities regulation; it involved sales of tiny...
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One theme of the federal securities laws is that they apply broadly; as a business owner, then, they will often apply in situations where you might not expect. This article points to the definition of "security" as part of the reason for this...
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This article contends that the crowdfunding exemption which has now passed both houses of Congress will kill crowdfunding as a viable source of capital for startups. It points to several differences between the bills passed by the House and the...
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This article surveys recent court decisions which have analyzed the interplay between the Dodd-Frank Act's requirement that shareholders get a non-binding vote on executive pay and directors' long-standing fiduciary duties to the shareholders. ...
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This article commemorates the House vote in favor of and reviews the substantive components comprising the Jumpstart our Business Startups Act. The article examines the six measures passed as a part of the bill, all of which are aimed at...
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This article examines both a recent Delaware court decision regarding the fiduciary duties a manager of an LLC (whether member-manager or non-member-manager) owes to the LLC's (other) members and that decision's chances on appeal. As the...
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The Securities and Exchange Commission (SEC) recently updated the definition of "Qualified Client," which could impact both registered and unregistered private fund managers. This article details the SEC's change, examines the change's impact,...
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This article highlights a proposed investment advisor exemption from state registration promulgated by the Virginia Division of Securities. The article provides background for what motivated the exemption and provides details of the contours of...
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A California state rule exempting certain private fund managers from being required to register as investment advisers recently expired. This article examines a new rule passed by California regulators in the wake of this expiration; as the...
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This article continues a series exploring the parameters of the due diligence in which someone purchasing a company (and their attorney) should engage. This article focuses on operational due diligence, which entails verifying that the business...
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This article examines a question with implications for the availability of capital for business of all kinds: given the changes in technology in the past 30 years, to what extent should Regulation D's ban on general solicitation in...
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This article continues a series exploring the parameters of the due diligence in which someone purchasing a company (and their attorney) should engage. This article focuses on financial diligence; the article details the purposes of financial...
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This article details a change by the Indiana Securities Division to the securities exemption used by venture capital funds; the article explains the conditions a fund must meet to be exempt from investment advisor registration in that...
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The Dodd-Frank financial reform bill required private fund managers to calculate their regulatory assets under management in various circumstances. This article examines what goes into the regulatory assets under management calculation and...
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This article continues a series exploring the role of due diligence in the acquisition of a business. This article focuses on legal due diligence, which concerns things like pending litigation, valid corporate existence, intellectual property...
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Before consummating the purchase of a business, the buyer will want to perform due diligence on the company which they are buying. This makes sense, as businesses cost a lot of money, and the buyer will want to make sure they are buying what...
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Many lawyers are expensive, and since much legal work is aimed at preventing future problems, business owners can be tempted to cut corners on legal documentation. This article highlights a few reasons why this is a bad idea, using seed...
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This article provides an update to a private article, as the Massachusetts Securities Division has almost finalized changes to its investment advisor registration regulations. The article details the effects of the proposed changes, but notes...
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The NFC North-leading Green Bay Packers recently announced a stock offering to the public. Any entrepreneur who has navigated the seed financing process will likely intuitively believe that this means that the Packers have to conduct the...
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This article highlights several effects of the pending startup crowdfunding bill which is poised to create a new exemption from the federal securities laws. It explains how the bill, although facially creating something very useful to startups,...
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This article is the tenth part of a series analyzing the Securities and Exchange Commission's new definition of a venture capital fund. This part of the series focuses on how (if at all) the SEC's new definition changes things for existing...
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This article is the eighth part of a series analyzing the Securities and Exchange Commission's new definition of a venture capital fund. This part of the series focuses on the requirement that a venture capital fund not register as an...
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This article examines what the future holds for the crowdfunding legislation currently before Congress. After first analyzing whether it will pass (the article thinks that crowdfunding legislation will pass due to the bipartisan support it...
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In this article, the statute passed by the House to create the new crowdfunding securities exemption is analyzed. The explains the basic parameters which a company raising money via crowdfunding will need to follow to fall within the exemption,...
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This article is the eighth part of a series analyzing the Securities and Exchange Commission's new definition of a venture capital fund. This part of the series focuses on the requirement that investors in a venture capital fund have limited...
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This article is the seventh part of a series analyzing the Securities and Exchange Commission's new definition of a venture capital fund. This part of the series focuses on the requirement that a venture capital fund limit its leverage. It...
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LLCs are something of a unique corporate form, as they combine many features of partnerships and corporations. One of the advantages of this unique combination is tax flexibility. This article reviews the tax flexibility which the Federal...
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This article is the sixth part of a series analyzing the Securities and Exchange Commission's new definition of a venture capital fund. This part of the series focuses on the requirement that a venture capital fund keep no more than 20% of its...
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Even startup companies need to comply with the federal securities laws when raising capital; the most innocuous-seeming transactions (such as those with friends and family) can become a ticking time bomb for your business if not done properly. ...
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This article is the third part of a series analyzing the Securities and Exchange Commission's new definition of a venture capital fund. This article focuses on the requirement that the fund can invest no more than 20% of its total assets in...
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One of FizzLaw's goals is to help small businesses and startups find the right lawyer for their business's needs. The "right" lawyer is about much more than just cost, but many lawyers on the site understand that transparency about fees appeals...
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This article is the third part of a series analyzing the Securities and Exchange Commission's new definition of a venture capital fund. This article focuses on the requirement that the fund must invest at least 80% of its total assets in...
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This article is the second part of a series analyzing the Securities and Exchange Commission's new definition of a "venture capital fund." This article focuses on the SEC's requirement that a venture capital fund represents to investors that it...
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Many rounds of capital raising by startups take advantage of Regulation D's exemption from registration under the Securities Acts. However, one of the conditions to qualifying as a Regulation D offering is that the issuer (the company raising...
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Thanks to what is popularly known as the "carried interest tax loophole," many investment fund managers pay a much lower federal tax rate than most other Americans. This article explains the justifications for it, and also examines why...
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In the context of a fund, a "side letter" is an agreement by which particular investors in a fund receive terms varying from those of other investors in that fund. This article reviews a recent Delaware court decision which determined that...
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Even when a private fund manager is exempt from registration under the Investment Advisers Act of 1940, it must still make a determination whether it is also exempt under state investment adviser regulation. This article surveys the regulations...
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If you issue securities (such as equity in your startup) in a private placement (for example, if a VC fund takes a stake in your firm) under Regulation D, the Securities and Exchange Commission requires you to file Form D. This article examines...
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This article critiques another article which identified five legal mistakes commonly made by startups, ultimately disagreeing with one of the mistakes identified by the other article. This article opines, contrary to the other article, that...
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This article explains why your small business or startup might need the assistance of a lawyer who specializes in patents, as opposed to the lawyer who helps with your general corporate matters. It also provides some advice for finding such a...
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The Dodd-Frank Financial Reform Act, passed in the wake of the financial crisis in 2009, required certain financial pools of capital to register with the SEC. However, it exempted "venture capital funds" from this requirement, and left it up to...
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This article explains why you usually don't want to insist that potential investors sign an NDA (it's a good way to scare them off), and highlights those exceptions where you should ask them to sign one.
- Summary by FizzLaw Team
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"Crowdfunding" refers to the practice of raising small amounts of money from large numbers of people in order to fund a business. The internet is an ideal tool for crowdfunding. However, the federal securities laws outlaw...
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Many business owners regularly engage in transactions with their companies. These can include loans, leases, and employment agreements. For the reasons discussed in this post, it is important to prepare legal documentation for these...
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Even when a private fund manager is exempt from registration under the Investment Advisers Act of 1940, it must still make a determination whether it is also exempt under state investment adviser regulation. This article surveys the regulations in 10...
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Wyoming LLCs are heavily promoted on the internet, leading many entrepreneurs to wonder if they should forming their businesses as Wyoming LLCs. This article takes a look at the supposed benefits of Wyoming LLCs from the perspective of the...
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While it may be tempting, clients should not assume that because they hired a lawyer to work on a business transaction, they are freed from having to deal with the details involved in that transaction. For a number of reasons, clients must...
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Even when a private fund manager is exempt from registration under the Investment Advisers Act of 1940, it must still make a determination whether it is also exempt under state investment adviser regulation. This article surveys the regulations in 9...
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Even when a private fund manager is exempt from registration under the Investment Advisers Act of 1940, it must still make a determination whether it is also exempt under state investment adviser regulation. This article surveys the regulations in 8...
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Many businesses incorporate in Nevada, leading many entrepreneurs to wonder if they should be doing the same. This article approaches the decision of whether to incorporate in Nevada from the perspective of the small business owner. In...
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There is clearly a need to streamline the process for small businesses who wish to raise capital. Could a group that has posted an online petition possibly have the answer?
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This article surveys the regulations in 12 states located in the Southeastern United States dealing with investment adviser registration of managers of hedge funds, private equity funds, venture capital funds, and other private investment vehicles....
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The friends and family round of financing is a great source of financing to bootstrap a business and get it off the ground. If it is done correctly, it should be structured as a private placement to comply with securities laws. Most...
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"Real estate" investment funds come in many forms. Some invest directly in real estate, others invest indirectly by purchasing debt interests in real estate or companies that own real estate. This article explores the question of when the...
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Even when a private fund manager is exempt from registration under the Investment Advisers Act of 1940, it must still make a determination whether it is also exempt under state investment adviser regulation. This article explores the interplay...
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Retirement plans can be useful for more than just tax savings. They also can provide asset protection as well. Retirement accounts such as 401(k)s and IRAs can be exempt from attachment in a civil suit and can be retained after a...
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Many businesses incorporate in Delaware, leading many entrepreneurs to wonder if they should be doing the same. This article approaches the decision of whether to incorporate in Delaware from the perspective of the small business owner....
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Under the Dodd-Frank Act passed last year, private fund managers with assets under management of $150 million or more will be required to register as investment advisers with the SEC. Private fund managers with assets under $150 million or...
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Representative David Schweikert recently introduced a bill called the "Private Company Flexibility and Growth Act." The bill loosens restrictions on private companies by allowing them to have more shareholders than current law allows without...
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This article discusses 7 reasons why entrepreneurs may want to structure their new business as a C Corporation, an option which is often overlooked.
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This article explores common misconceptions involved in labelling an employee as a "1099 employee" (an independent contractor), as well as some of the perils to a business owner who falls prey to these misconceptions.
- Summary by FizzLaw Team
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Rule 506 offerings are most commonly used by startups for their seed and angel rounds of financing because these offerings are exempt from the securities laws. Hedge funds and venture captialists also take advantage of this rule. In this...
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This article discusses a new model rule by the North American Securities Administrators Association (NASAA) which complements federal securities laws and addresses when an fund manager exempt from federal registration is also exempt...
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A buy-sell agreement can protect business owners (where businesses have more than one owner) if owner(s) of the business, by choice or not, no longer wish to be affiliated with the business. This article by Alex Davie explains why having a...
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Although the "friends and family" round of financing seems informal, many entrepreneurs are surprised to discover that it falls under the umbrella of the securities laws. In this blog post, Alex Davie explains how the securities laws apply to...
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Fund managers know that they are faced with increased disclosure. In this blog post, Alex Davie details an additional change coming soon for fund managers: an increase for some funds from the "accredited investor" minimum...
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Early on, entrepreneurs must decide whether they should form their new entity as a limited liability company (LLC) or a corporation. In this blog post, Alex Davie explains how the governance of these two types of entities differs.
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The proposed "bad actor" rule will prohibit the use of Rule 506 of Regulation D in connection with any offering which is associated with or promoted by a person which has committed certain "bad acts: (as defined by the rule) by imposing a...
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The Small Business Capital Access and Job Preservation Act is a potential bill working its way through the U.S. House of Representatives. The bill aims to exempt certain private equity funds from Investment Adviser ("IA") registration by...
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Drafting a letter of intent often kicks off the formal process of buying a business. It's an important step to beginning to formalize the negotiation process. A well-written letter of intent sets the parameters for the upcoming...