In Memoriam (1964-2023) It is with great sadness that we mourn the January 13, 2023 passing of our longtime colleague and friend, Kimberly Davis Crear. Kim was a distinguished practitioner representing Massachusetts employers at the Department of Industrial Accidents. She was a well respected worker’s compensation attorney for over 30 years. She will be greatly […]
After a company raises funds from an angel investor through a convertible note, the next progression is generally to get their product or service to market and attempt to lure a larger investment in the form of a Series A. This is typically a more complicated transaction with serious long-term implications for the company and […]
Determining how much equity the convertible note holder receives is relatively complicated. Assuming conversion is triggered by a Series A, the first factor is the valuation used for the Series A. If the Series A investor buys 2,000 shares (and the company originally has 10,000 total issued and outstanding shares) for a $1,000,000 purchase price […]
It is becoming less and less common for investors to invest in companies in exchange for equity ownership. It is simply too difficult to value the average startup company that hasn’t even gotten its product or idea to market yet, let alone generated a profit. Since virtually all the conventional valuation methods are based on […]
In their infancy, most startup companies lack the requisite credit history and hard assets to obtain conventional bank financing. As a result, if the business does not generate sufficient cash flow to maintain its operations, it may be necessary to seek out funds from angel investors or venture capital groups. One disclaimer here is that […]
As mentioned in other articles, LLC’s are governed by Operating Agreements. This article is based on the assumption that the LLC has two or more members and that it is treated as a partnership for federal income tax purposes (meaning that it has not elected to be taxed as a corporation). You should always read […]
Once you have formed a legal entity, you are not done yet. You still need to prepare detailed organizational documents governing your business and its owners. Below is a list of some common types of entities and the appropriate corporate governance documents: Limited Liability Company: LLC’s are governed by an Operating Agreement. Operating Agreements primarily […]
Despite all the advantages highlighted in earlier posts relating to using an entity with less corporate formalities (LLC’s) and/or pass-through tax treatment (LLC’s or S corporations), there is one obvious situation where you are better off using a C Corporation (“C Corp”): venture capital deals. Below are some of the primary reasons this is true: […]
The two most common types of legal entities are LLC’s and corporations. The three main considerations in choosing between the two relate to corporate governance, taxation and flexibility. Ultimately, the choice between an LLC and an S Corporation will depend on the facts and circumstances of each business. In cases involving complicated economic arrangements among […]
One of the first steps in starting a business is to choose the best type of legal entity. There is no legal requirement to incorporate your business. An individual can operate a business as a sole proprietorship and a group of individuals can operate a business as a partnership. A sole proprietorship or a partnership […]