Limited Liability Companies

What Are The Pros And Cons Of Venture Capital Financing?

August 18, 2017 | Katya Mezek

Venture capital (VC) is a form of financing that is provided to early-stage companies that have been deemed to have high-growth potential by venture capital firms or funds. Typically, venture capital financing is attractive to smaller, newer companies that do not have access to traditional forms of funding such as issuing stock or applying for a loan through a bank.

Venture capital firms generally provide capital to companies in return for equity shares, which they then sell back to the company for a profit after a specific event, such as an initial public offering (IPO).

While obtaining venture capital financing has many benefits, it has drawbacks as well. As a result, entrepreneurs should fully explore their options and discuss them with a Silicon Valley venture capital lawyer before entering into any binding agreements. Some of the common pros and cons of venture capital financing are discussed below.

Protection of Your Business: Maintaining the Corporate Form

July 28, 2017 | Brett Bunnell

Often, selection and formation of a startup can be stressful and confusing. But it is not the end of the process. In order to protect your startup and its status, many steps must be followed to continue to ensure the startup remains in good standing with local and state laws. The experienced California corporate lawyers at Structure Law Group, LLP can help entrepreneurs and businesses, at any stage of the process, protect and maintain their corporate form.

Why It Matters

Formation of a limited liability company (LLC) or incorporation of a startup takes time and money to gain the protections offered by the corporate form. If a business owner fails to maintain the ongoing requirements, the startup’s status may be put in jeopardy, and as a result, can lose the protection offered by the corporate form. Maintenance of a corporation or an LLC is a continual process, requiring completion of steps to be in compliance with all applicable California state and local laws.

What are the Similarities and Differences between LLC and Corporate Formalities?

June 23, 2017 | Gokalp Gurer

Many considerations go into deciding which legal entity to choose when starting a business. In some cases, as the business grows, it may even want to convert into a different entity type. For example, if it began as an LLC and the owner now plans on seeking angel investment, he/she may consider converting to a corporation. In these situations (formations or conversions), one critical factor to consider is meeting the formalities required for different legal entities.

When a California business is considering converting its entity type, it should not do so without consulting with an experienced California corporate attorney. In addition to filing conversion documents, there are many internal factors that should be considered and discussed before transitioning (the company’s management structure and capitalization structure, as well as any special voting considerations, are only a few examples).

Now, we will look at some of the similarities and the differences in formalities required for limited liability companies (LLCs) and corporations.

What is Member-managed vs. Manager-managed?

June 9, 2017 | Mark Figueiredo

When forming a Limited Liability Company (LLC), one must choose who will be responsible for managing the operations of the company. LLCs are managed by either its members or by a manager(s) and are, therefore, either member-managed or manager-managed. Some entrepreneurs know which form they want for their business from the start while other don’t know which would be best and don’t know how to come to the right decision. Consulting with a knowledgeable Silicon Valley corporate attorney will allow the entrepreneur to understand every avenue for their company and reassures them that their business is moving forward in the right direction.

Member-managed LLCs

In forming an LLC, the “members” are the owners of the company. In a member-managed LLC, the members of the LLC are actively involved in the running of the LLC’s business. It is the members who handle the day-to-day running of the company and share in the responsibility for management decisions.

What is the Importance of Letters of Intent in an M&A Negotiation?

May 5, 2017 | Katya Mezek

Corporate merger and acquisitions are highly technical transactions with a lot at stake for all parties involved. It can take thousands of hours of dedicated work to finalize this type of deal and the last thing you want is to commit time, energy, and money to the process only to have one party back out at the last minute. For this reason, the early stages of any merger and acquisition should involve a carefully drafted and negotiated letter of intent (LOI) that is signed by all parties.

What is a Letter of Intent?

Before you begin the merger and acquisition process, both parties should be on the same page regarding the basic terms of the transaction. These terms are set out in a letter of intent that the parties can review and negotiate to ensure they are in general agreement regarding the basic terms of the final agreement before they commit resources to the transaction. Though you want the terms of a letter of intent to be attractive to the other party, you should also always be realistic. Disputes can arise later in the M&A process that can halt the process and you could even be accused of acting in bad faith.

Integrating Social Media Into My Business

March 24, 2017 | Structure Law Group, LLP

If you are looking into ways to market your business online, you have undoubtedly come across articles extolling the virtues of social media marketing. Sites like Facebook, Twitter, and LinkedIn allow businesses to target certain groups of consumers with pinpoint accuracy, interact with them directly, and build brand recognition. Furthermore, there are often no costs associated with creating social media presence for your business and there are certainly ways to engage in social media marketing without spending money on paid ads. If your business posts a piece of content that goes viral, it could easily result in millions of views from individuals who may become paying customers or clients.

Unforeseen Liability

Before you rush out to join the social media marketing frenzy that is in progress, you should consider some of the legal issues that may be implicated. The good news is that it is completely possible to engage in social media marketing without incurring legal liability; it is important, however, to determine whether there are any legal problems that could potentially arise. Here are some of the potential issues to consider:

Foreclosure of a Charging Order

March 3, 2017 | Ryan Penhallegon

Foreclosure of a Charging Order

Limited liability companies (LLCs) provide their owners (members) a number of protections that do not exist for partnerships or sole proprietorship’s. One critical protection is limited liability protection. Because an LLC is considered a separate legal entity and its assets and debts are separate and distinct from any assets or liabilities that its owners may have, a creditor of an LLC member typically cannot reach or interfere with the LLC and vice versa. However, California law does provide a tool for creditors to try to reach a judgment debtor’s LLC interest. The tool is called a charging order.

A charging order is roughly akin to a wage garnishment, but instead of directing an individual’s employer to pay over a portion of the individual’s salary to the creditor, it directs an LLC in which the individual judgment debtor has a membership interest to pay over any distributions that would otherwise be made to the member to the creditor. Notably, a charging order ordinarily cannot compel an LLC to make a distribution to a member and does not confer any management rights, instead extending only to distributions made to a member. For this reason, charging orders do not always result in payment to the creditor. Nonetheless, a charging order can still be effective because they can cut-off an LLC member’s rights to receive any distributions from the LLC and may impact the member’s dealings with the LLC and its other members.

What A Startup Should Look For In An Investor

February 24, 2017 | Structure Law Group, LLP

A startup or entrepreneur looking to raise capital is willing to do almost anything to accept capital from an investor. As a corporate and business law attorney, experience with more successful clients has led to some observations about what an entrepreneur might also want to look for or consider in an investor besides capital only.

Consider the following observations when looking to attract investments.

Build Friends Not Just Investors

Treatment of Limited Partnership (LP) and Limited Liability Company (LLC) Interests in Bankruptcy

January 27, 2017 | Ryan Penhallegon

When the shareholder of a corporation files bankruptcy, the shareholder’s stock becomes part of the debtor’s bankruptcy estate and will generally be subject to liquidation by the bankruptcy trustee for the benefit of the debtor’s creditors.

However, when a limited partner in a limited partnership (LP) or a member of a limited liability company (LLC) files bankruptcy, the debtor’s ownership interest may well be treated differently because interests in LPs and LLCs are typically considered and treated as more contractual in nature.

Membership Interests in LLCs

Privacy Policy – Protecting Personal Information

December 23, 2016 | Structure Law Group, LLP

The purchase and sale of goods and services at a storefront is rarer these days. Information technologies make online transactions more efficient and convenient. However, those same transactions expose businesses to greater risk and liability when receiving and using customer information. Information technology companies must not only must safeguard their electronic transactions, but also secure sensitive information and proactively combat data breaches. Failure to do so can lead to a huge economic loss for the customers and the company. Structure Law Group, LLP advises companies engaged in e-commerce on privacy and security issues, how to safeguard against the inadvertent data breaches and counsels them on the necessary steps to take if such an unfortunate event occurs.

Protection of Personal Information

California law protects the individual’s right to the safety and integrity of his/her personal information. California’s Information Security Act defines personal information as any information that could identify or describe a person. Personal information includes a person’s name, address, social security number, license number, medical information, and the like. If your website collects such information, then you are required by law to take reasonable steps to prevent disclosure of such personal and private information. California law obligates businesses to implement security measures reasonably designed to protect the integrity of the such information. Every business entity, from a sole proprietorship to a multi-national corporation is subject to the Information Security Act.