Navigating Fundraising: Essential Guidance for a Business and Startups

In today’s dynamic business environment, securing the right funding is crucial for the growth and sustainability of startups and established businesses alike. At Sentient Law, we understand the intricacies of fundraising and offer expert advising to help you navigate this complex journey. Our goal is to ensure your business secures the capital it needs while complying with all relevant legal regulations. Here’s a guide to help you understand the fundraising landscape and how we can assist you every step of the way.

Understanding the Fundraising Landscape

Fundraising can be a daunting task, particularly for new entrepreneurs. The process involves several stages, from identifying potential investors to negotiating terms and closing deals. Here is an overview of the primary funding options available:

  1. Bootstrapping | Many entrepreneurs start by using their personal savings to fund their business. While this option allows for complete control, it often limits the scale and speed of growth.
  2. Friends and Family | Borrowing money from friends and family is a common initial step. It’s crucial to formalize these arrangements to avoid future disputes and ensure everyone’s expectations are aligned.
  3. Angel Investors | Angel investors are high-net-worth individuals who provide capital for startups in exchange for equity or convertible debt. They often offer valuable mentorship and industry connections.
  4. Venture Capital | Venture capital firms invest significant sums in businesses with high growth potential. While this option can provide substantial funding, it also involves giving up a portion of control and equity.
  5. Crowdfunding | Platforms like Kickstarter and Indiegogo enable businesses to raise small amounts of money from a large number of people. Crowdfunding can also serve as a marketing tool to validate your product or service.
  6. Bank Loans | Traditional bank loans are a reliable source of funding for businesses with a solid financial history. However, they often require collateral and come with stringent repayment terms.

Legal Considerations in Fundraising

Each fundraising method comes with its own set of legal considerations. Ensuring compliance with regulations and protecting your business’s interests are paramount. Here are some key legal aspects to consider:

  1. Securities Law Compliance | When raising funds through equity or debt, compliance with securities laws is essential to avoid legal pitfalls. This includes adhering to registration requirements and exemptions under federal and state laws.
  2. Term Sheets and Contract | Drafting clear and comprehensive term sheets and contracts is vital to outline the rights and obligations of both parties. This helps prevent misunderstandings and disputes down the line.
  3. Intellectual Property Protection | Safeguarding your intellectual property (IP) is crucial during fundraising. This ensures that your business’s innovations and competitive advantages are legally protected.
  4. Due Diligence | Investors will conduct thorough due diligence to assess the viability and potential of your business. Preparing accurate financial statements, business plans, and legal documents can streamline this process.

How Sentient Law Can Help

At Sentient Law, our team of experienced attorneys specializes in fundraising advisory for businesses and startups. Here’s how we can support you:

  1. Strategic Planning | We work with you to develop a strategic fundraising plan tailored to your business goals and industry landscape. This includes identifying the most suitable funding sources and preparing compelling pitch materials.
  2. Legal Documentation | Our experts assist in drafting and reviewing all necessary legal documents, from term sheets and investment agreements to confidentiality agreements and IP filings.
  3. Regulatory Compliance | Navigating securities laws and regulatory requirements can be complex. We ensure your fundraising efforts comply with all relevant regulations, minimizing legal risks.
  4. Negotiation Support | We provide robust negotiation support to secure favorable terms and protect your interests. Our goal is to create win-win agreements that foster long-term partnerships with investors.
  5. Post-Funding Advisory | Our support doesn’t end once you’ve secured funding. We continue to provide legal and strategic advice to help you manage investor relationships and achieve your business objectives.

Conclusion

Raising funds is a critical step in the growth journey of any business or startup. With the right guidance and legal support, you can navigate this process smoothly and set your business up for success. At Sentient Law, we are committed to helping you achieve your fundraising goals while ensuring legal compliance and protecting your interests. Contact us today to learn more about how we can assist you in securing the capital your business needs to thrive.

 

Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. Please consult with a qualified attorney for advice regarding your specific situation.

 

5 Ways A Law Firm Can Help Tech Startups Navigate Private Equity Investments

In the fast-paced world of technology startups, securing funding is often a critical milestone on the path to success. Private equity investments can provide the capital and expertise needed to fuel growth, scale operations, and drive innovation. However, navigating the complexities of private equity transactions requires careful planning, strategic guidance, and expertise in legal matters. In this guide we explore how a law firm can be a valuable partner for tech startups seeking to leverage private equity investments to propel their growth and achieve their strategic objectives.

  1. Strategic Guidance and Planning | Navigating the intricacies of private equity investments requires strategic planning and careful consideration of the long-term implications for the business. A law firm specializing in private equity can provide invaluable guidance to tech startups in structuring their transactions, negotiating deal terms, and ensuring alignment with their strategic goals and objectives. By leveraging their expertise and industry insights, legal professionals can help startups develop a comprehensive strategy for attracting and securing private equity investment.
  1. Due Diligence and Risk Assessment | Conducting thorough due diligence is essential for identifying potential risks and opportunities associated with a private equity investment. A law firm can assist tech startups in conducting comprehensive due diligence on potential investors, assessing legal and regulatory compliance, and identifying any potential legal issues or liabilities that may impact the transaction. By conducting a rigorous risk assessment, startups can make informed decisions and mitigate potential risks associated with the investment.
  1. Negotiating Deal Terms | Negotiating the terms of a private equity investment requires careful attention to detail and a thorough understanding of the legal and financial implications for the business. A law firm can serve as a trusted advisor to tech startups in negotiating favorable deal terms, protecting their interests, and maximizing the value of the investment. From negotiating valuation and equity stakes to defining governance rights and exit strategies, legal professionals can help startups secure a deal that meets their needs and objectives.
  1. Drafting Legal Documentation | Drafting comprehensive legal documentation is a critical aspect of any private equity transaction. A law firm specializing in private equity can assist tech startups in drafting and negotiating the various legal documents required for the investment, including term sheets, investment agreements, shareholder agreements, and other transactional documents. By ensuring that the legal documentation accurately reflects the terms of the investment and protects the interests of all parties involved, startups can minimize the risk of disputes and legal challenges down the line.
  1. Compliance and Regulatory Matters | Navigating legal and regulatory requirements is essential for startups seeking to attract private equity investment. A law firm can help startups navigate the complex regulatory landscape, ensure compliance with applicable laws and regulations, and address any legal or regulatory issues that may arise during the investment process. By staying abreast of changes in the legal and regulatory environment, legal professionals can help startups mitigate compliance risks and build a strong foundation for growth and success.

Conclusion

Sentient Law offers invaluable expertise and strategic guidance to navigate the intricacies of private equity transactions. With a deep understanding of the legal landscape and a focus on innovation, our team assists clients in crafting comprehensive strategies, conducting thorough due diligence, and negotiating favorable deal terms. Leveraging our expertise in private equity law, we help clients mitigate risks, protect their interests, and maximize the value of their investments. From structuring transactions to drafting legal documentation, Sentient Law is committed to providing tailored solutions that empower clients to navigate the complexities of private equity with confidence and clarity.

Contact Matthew Rossetti today to learn more about how we can assist you navigate the intricacies of private equity transactions. To schedule your free 15 minute consultation, visit https://calendly.com/sentientlaw/free-consultation





Navigating Start-Up Equity with Legal Expertise

In the vibrant world of entrepreneurship, where innovation and ambition intersect, start-up ventures hold boundless potential for growth and success. Central to the journey of any start-up is the strategic allocation of equity—a powerful tool for attracting talent, securing investment, and fueling expansion. At Sentient Law, we recognize the pivotal role that start-up equity plays in shaping the trajectory of emerging businesses. With our legal expertise and commitment to client success, we empower start-ups to navigate the complexities of equity distribution with confidence and clarity.

Understanding Start-Up Equity

Start-up equity represents ownership in a company and is typically distributed among founders, investors, employees, and other stakeholders in exchange for capital, services, or other contributions. Equity serves as a powerful incentive for key contributors to align their interests with the success of the business and share in its growth and prosperity over time.

Crafting Equity Structures

Crafting an equitable and sustainable equity structure is essential for fostering a supportive and collaborative ecosystem within a start-up. Our legal team works closely with founders and stakeholders to design customized equity plans that align with the company’s goals, values, and growth trajectory. Whether it’s determining founder equity splits, designing employee stock option plans (ESOPs), or structuring equity-based incentive programs, we provide strategic guidance to ensure fairness, transparency, and alignment of interests.

Navigating Investment Rounds

As start-ups progress through various stages of growth, securing external investment becomes a critical milestone on the path to success. Our firm offers comprehensive legal support throughout the investment process, from negotiating term sheets and conducting due diligence to drafting and finalizing investment agreements. Whether you’re raising funds through seed rounds, Series A financing, or subsequent funding rounds, we leverage our expertise to protect your interests and maximize the value of your equity.

Protecting Intellectual Property

Intellectual property (IP) assets play a pivotal role in the value proposition of many start-ups. From proprietary technology and software to innovative products and brands, safeguarding IP rights is essential for maintaining a competitive advantage in the market. Our attorneys provide strategic counsel on IP protection strategies, including patents, trademarks, copyrights, and trade secrets, to ensure that your valuable assets are adequately protected and leveraged to drive business growth.

Compliance and Governance

Navigating the legal and regulatory landscape is essential for start-ups seeking to build a solid foundation for growth. Our firm assists start-ups in establishing governance structures, drafting corporate bylaws and operating agreements, and ensuring compliance with corporate laws and regulations. We provide ongoing support to help start-ups navigate legal complexities and mitigate risks as they scale and evolve.

Conclusion

Start-up equity represents more than just ownership—it embodies the collective vision, dedication, and potential of a burgeoning venture. At Sentient Law, we understand the transformative power of equity in driving innovation, attracting talent, and fueling growth. With our legal expertise and unwavering commitment to client success, we stand ready to support start-ups on their journey to success.

Contact Matthew Rossetti today to learn more about how we can assist you with the complexities of equity distribution and more. To schedule your free 15 minute consultation, visit https://calendly.com/sentientlaw/free-consultation

Accelerating Business Growth: How an Equity Purchase Agreement Can Propel A Business Forward

In the dynamic landscape of business, growth often requires strategic partnerships and investments. Whether you’re seeking to expand your operations, finance new projects, or solidify your position in the market, an equity purchase agreement can be a powerful tool for unlocking growth opportunities and realizing your business’s full potential. At Sentient Law, we specialize in crafting tailored equity purchase agreements that facilitate mutually beneficial transactions and propel businesses forward on their growth trajectories.

Understanding Equity Purchase Agreements

An equity purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions of the sale of equity or ownership interests in a company. These agreements can take various forms, including stock purchase agreements, membership interest purchase agreements (for LLCs), or partnership interest purchase agreements, depending on the structure of the entity being sold.

Facilitating Strategic Investments

For businesses seeking capital to fuel growth initiatives, equity purchase agreements offer a pathway to attract investment from strategic partners, venture capitalists, or private equity firms. By selling equity in your company, you can raise funds to finance expansion plans, develop new products or services, or enter new markets, positioning your business for long-term success and sustainability.

Structuring Win-Win Deals

Crafting an equity purchase agreement requires careful consideration of the interests and objectives of both parties involved in the transaction. Our experienced attorneys work closely with clients to structure agreements that align with their strategic goals, protect their interests, and foster mutually beneficial relationships between buyers and sellers.

Navigating Legal Complexities

Navigating the legal complexities of equity transactions can be daunting, particularly for businesses without extensive experience in corporate finance and securities law. Sentient Law offers comprehensive legal guidance throughout the equity purchase process, from conducting due diligence and negotiating terms to drafting and finalizing agreements that comply with applicable laws and regulations.

Protecting Investor Rights

For investors considering purchasing equity in a company, it’s essential to ensure that their rights and interests are adequately protected. Our attorneys can negotiate provisions such as voting rights, board representation, anti-dilution protections, and exit strategies to safeguard investors’ investments and maximize their potential returns.

Supporting Business Growth

At Sentient Law, we understand that every business is unique, with its own set of opportunities, challenges, and growth objectives. Whether you’re a startup seeking funding to scale your operations or an established company looking to expand into new markets, our team is dedicated to providing personalized legal solutions tailored to your specific needs and aspirations.

Conclusion

In today’s competitive business environment, seizing growth opportunities often requires strategic partnerships and investments. An equity purchase agreement can serve as a catalyst for driving expansion, innovation, and value creation within your organization. With our expertise and commitment to client success, Sentient Law is here to help you navigate the complexities of equity transactions and unlock new possibilities for growth and prosperity. 

Contact Matthew Rossetti today to learn more about how we can assist you with the complexities of equity distribution and more. To schedule your free 15 minute consultation, visit https://calendly.com/sentientlaw/free-consultation

 







Legal Foundations For A Business: Terms Of Use, Privacy Policies, And Terms & Conditions

In the fast-paced world of entrepreneurship, launching a business or startup is an exhilarating journey filled with endless possibilities. However, amidst the excitement of bringing a vision to life, it’s crucial not to overlook the importance of establishing solid legal foundations to protect  a business’s interests and ensure compliance with applicable laws and regulations.

At Sentient Law, we understand the challenges that entrepreneurs and startups face, particularly when it comes to navigating the complexities of legal documentation. That’s why we’re proud to offer affordable services for crafting essential legal agreements, including Terms of Use, Privacy Policies, and Terms & Conditions, tailored to meet the unique needs of your business or start up.

Why Legal Documentation Matters

Terms of Use, Privacy Policies, and Terms & Conditions serve as the cornerstone of a business’s relationship with its customers or users. These documents outline the rights, responsibilities, and expectations of both parties, helping to mitigate risks, protect intellectual property, and establish clear guidelines for conducting business.

Crafting Comprehensive Terms of Use

A business’s Terms of Use govern the use of a website, app, or platform and establish the rules and regulations that users must adhere to when accessing a business’s services. A law firm will work with you to draft clear and concise Terms of Use that reflect the business model, address key legal issues, and provide enforceable terms to protect interests.

Ensuring Privacy Compliance with Privacy Policies

In an era marked by heightened concerns about data privacy and security, having a robust Privacy Policy is essential for building trust with users and demonstrating commitment to protecting their personal information. A law firm can assist you in drafting a Privacy Policy that complies with relevant privacy laws and regulations, clearly communicates  data handling practices, and outlines users’ rights regarding their personal data.

Establishing Legal Frameworks with Terms & Conditions

Whether a business is selling products or services online or entering into agreements with business partners or vendors, having clear and comprehensive Terms & Conditions is essential for defining the terms of business relationships and minimizing the risk of disputes or misunderstandings. A law firm can help draft tailored Terms & Conditions that address critical legal issues, such as payment terms, warranties, liability limitations, and dispute resolution mechanisms, to protect a business interests effectively.

Affordable Solutions for Entrepreneurs and Startups

We understand that budget constraints are a common concern for entrepreneurs and startups, which is why we offer affordable rates for our legal services. Our goal is to provide high-quality legal documentation that meets your business needs without breaking the bank, allowing you to focus on growing your business with peace of mind.

Conclusion

As you embark on your entrepreneurial journey, don’t overlook the importance of establishing solid legal foundations for your business. With our affordable services for crafting Terms of Use, Privacy Policies, and Terms & Conditions, you can ensure compliance with legal requirements, protect your interests, and build trust with your customers or users.

Contact Matthew Rossetti today to learn more about how we can assist you with the complexities of equity distribution and more. To schedule your free 15 minute consultation, visit https://calendly.com/sentientlaw/free-consultation.


Eight Ways A Law Firm Can Help A Business With Data Privacy

Eight Ways A Law Firm Can Help A Business With Data Privacy

In an increasingly interconnected world where data has become one of the most valuable assets, safeguarding the privacy and security of sensitive information is paramount for individuals and businesses alike.  Fortunately, partnering with a law firm specializing in data privacy can provide invaluable assistance in navigating the complex landscape of data protection laws and regulations. From ensuring compliance with stringent legal requirements to implementing robust risk management strategies, here are eight ways a law firm can help safeguard a business’s data privacy and mitigate the risks associated with handling sensitive information.

 

  1. Legal Compliance: Data privacy laws and regulations can be complex and vary by jurisdiction. A law firm specializing in data privacy can help ensure a business is compliant with relevant laws such as the GDPR, CCPA, and others. They can assess current practices, provide guidance on compliance requirements, and help draft policies and procedures to meet legal standards.
  2. Risk Assessment and Mitigation: Law firms can conduct thorough risk assessments to identify potential vulnerabilities in your data handling processes. They can assess your data collection, storage, and sharing practices to pinpoint areas of risk and provide recommendations for mitigation strategies to protect sensitive information from unauthorized access or disclosure.
  3. Privacy Policies and Notices: Crafting comprehensive privacy policies and notices is essential for transparency and compliance with data privacy regulations. A law firm can assist in drafting and reviewing these documents to ensure they accurately reflect your data practices, inform users about their rights, and comply with legal requirements.
  4. Data Processing Agreements: If a business shares or processes personal data with third parties, it’s crucial to have robust data processing agreements (DPAs) in place. A law firm can help negotiate and draft DPAs that outline the responsibilities of each party, ensure compliance with data privacy laws, and protect your interests in the event of a data breach or dispute.
  5. Data Breach Response: In the unfortunate event of a data breach, a law firm experienced in data privacy can provide guidance on the appropriate steps to take to mitigate the impact and comply with legal requirements. They can help assess the extent of the breach, notify affected individuals or regulatory authorities as necessary, and navigate any legal obligations or liabilities that may arise.
  6. Employee Training and Awareness: Human error is a common cause of data breaches, so educating employees about data privacy best practices is essential. A law firm can develop customized training programs to raise awareness about data privacy obligations, security protocols, and procedures for handling sensitive information, helping to reduce the risk of accidental breaches.
  7. Regulatory Compliance Audits: Regular compliance audits are essential for ensuring ongoing adherence to data privacy laws and regulations. A law firm can conduct comprehensive audits of data privacy practices, policies, and procedures to identify areas of non-compliance and recommend corrective actions to mitigate risk and maintain legal compliance.

 

Legal Representation: In the event of regulatory investigations or legal disputes related to data privacy, having legal representation is crucial to protect a business’s interests and defend against allegations of non-compliance. A law firm specializing in data privacy can provide expert legal counsel and representation throughout any regulatory proceedings or litigation.

Contact Matthew Rossetti today to learn more about how we can assist you with the complexities of equity distribution and more. To schedule your free 15 minute consultation, visit https://calendly.com/sentientlaw/free-consultation

The Importance of Hiring a Lawyer to Draft Website Terms and Conditions

The Importance of Hiring a Lawyer to Draft Website Terms and Conditions

Whether you’re selling products, offering services, or simply providing information, having a well-crafted set of terms and conditions for your website is crucial. However, many business owners overlook a critical aspect – legal review. These legal documents are often underestimated but play a pivotal role in protecting you, your business, and your customers. Below are a few reasons why you should hire an attorney to – at the very least – review and approve your terms and conditions. 

Legal Compliance

One of the primary reasons to hire a lawyer for website terms and conditions is to ensure legal compliance. Laws and regulations governing websites can vary greatly from one jurisdiction to another. A skilled attorney can navigate this complex landscape and draft terms and conditions that align with local, state, and federal laws, as well as international regulations if your website caters to a global audience. This will help shield your business from potential legal disputes and penalties.

Protection of Intellectual Property

Your website may contain valuable intellectual property such as copyrighted content, trademarks, or proprietary software. A lawyer can help you include clauses in your terms and conditions that clearly define your ownership rights and the rules for using your intellectual property. This safeguards your assets and reduces the risk of intellectual property theft or infringement.

User Guidelines and Behavior

Website terms and conditions serve as a rulebook for users, outlining acceptable behavior, prohibited activities, and consequences for violations. By working with a lawyer, you can craft comprehensive guidelines that protect your website from abusive users, spammers, and hackers. Additionally, these guidelines can help maintain a respectful online community, enhancing the user experience.

Limitation of Liability

In today’s litigious society, businesses often find themselves facing lawsuits, even for minor issues. A lawyer can include clauses in your terms and conditions that limit your liability, provided it’s legally permissible. These limitations can be essential in protecting your business from excessive legal claims and potential financial ruin.

Dispute Resolution

Disputes can arise between your business and its website users. A lawyer can help you establish clear dispute resolution procedures within your terms and conditions. Whether through arbitration or mediation, having a structured process in place can save your business time and money in the event of a disagreement.

Privacy and Data Protection

With growing concerns about data privacy and security, it’s crucial to address these issues in your website terms and conditions. A lawyer can assist in drafting a privacy policy that complies with applicable data protection laws, ensuring the proper collection, use, and protection of user data. This builds trust with your customers and helps avoid legal trouble related to data breaches.

Regular Updates

Laws, regulations, and your business model can evolve over time. A lawyer can ensure that your website terms and conditions stay up-to-date, reflecting any changes in the legal landscape or your business operations. Regular reviews and updates are essential to maintain legal compliance.

In the digital age, having a strong online presence is essential for businesses. However, this presence must be built on a solid legal foundation, which includes well-drafted website terms and conditions. Hiring a lawyer to assist with this task is a prudent investment that can protect your business, your customers, and your intellectual property while ensuring legal compliance. Don’t underestimate the importance of these legal documents, as they can be a safeguard against potential legal pitfalls in the online world.

Contact Matthew Rossetti today to learn more about how we can assist you with the complexities of equity distribution and more. To schedule your free 15 minute consultation, visit https://calendly.com/sentientlaw/free-consultation

 

 
 

The Essential Role of an Attorney in Crafting Your Website Privacy Policy

The Essential Role of an Attorney in Crafting Your Website Privacy Policy

In today’s interconnected digital landscape, a website’s privacy policy serves as a crucial document that outlines how user data is collected, processed, and protected. With data privacy concerns on the rise and regulations becoming more stringent, such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), businesses must prioritize safeguarding user information. While it might be tempting to take the DIY route when drafting a privacy policy, hiring an attorney to undertake this task offers numerous benefits that far outweigh the initial cost.

  1. Legal Expertise and Compliance: Attorneys possess a deep understanding of the complex legal requirements surrounding data protection and privacy. They stay up-to-date with the evolving landscape of privacy regulations, ensuring your privacy policy is compliant with the latest laws. Relying on their expertise minimizes the risk of legal challenges, fines, and reputational damage stemming from non-compliance.

  2. Tailored to Your Business: A generic privacy policy template may not adequately address the specific data practices of your business. Attorneys take the time to understand your operations, data collection methods, and processing procedures, allowing them to craft a policy that accurately reflects your unique needs and practices.

  3. Precise Language and Terminology: Legal documents demand a level of precision that can be challenging for non-lawyers to achieve. Attorneys are adept at using precise language and terminology to clearly communicate your data handling processes and user rights, reducing the potential for misinterpretation or confusion.

  4. Risk Mitigation: A well-crafted privacy policy can serve as a shield against potential legal disputes. By outlining your data collection, storage, and usage practices transparently, you demonstrate your commitment to data privacy and minimize the chances of user complaints or legal action.

  5. Customized Disclosures: Depending on the nature of your business and the types of data you collect, certain specialized disclosures may be required. Attorneys can tailor your privacy policy to include necessary information, such as details about third-party data sharing, cookies, and cross-border data transfers.

  6. Adaptability to Changes: As your business grows or privacy laws evolve, your privacy policy may need updates. Attorneys can draft policies with built-in flexibility, making it easier to accommodate changes while maintaining legal compliance.

  7. Confidence for Users: A professionally crafted privacy policy instills confidence in your users. Knowing that their data is handled in a secure and transparent manner can enhance your reputation and encourage user trust.

  8. Easier Integration with Agreements: Privacy policies often need to be integrated with various agreements, such as terms of use and cookie policies. Attorneys ensure that these documents align seamlessly, providing a cohesive user experience and a stronger legal foundation.

  9. Full Understanding of User Rights: Attorneys can ensure that your privacy policy comprehensively explains user rights, including how users can access, update, or delete their data. This level of clarity is essential for building trust with your audience.

  10. Long-Term Value: While hiring an attorney may involve an upfront cost, the long-term benefits far outweigh the initial investment. A well-drafted privacy policy can help you avoid legal pitfalls, establish a positive brand image, and navigate the ever-changing landscape of data protection regulations.

Sentient Law, Ltd.’s Sean Lanagan can help your business craft a privacy policy and terms and conditions. Why wait? Schedule a free consultation now here.

 

 
 

Start Your Dream Business During a Downturn

Slicing Pie and Dynamic Equity: The Best Way to Start Your Dream Business During a Downturn

Many potential clients and current clients have been asking us whether they should pursue their dreams and start their new business despite challenging economic conditions or put their plans on hold. While we understand that it is exceedingly difficult to raise capital and the cost of capital is increasing, we advise everyone to follow their dreams. In fact, in our opinion, challenging economic conditions are the perfect time to start a new business (I have done it) if you are using the right equity allocation model.

What is the right model?

If you are on a limited budget, plan to bootstrap your venture, and are seeking a fair method of sharing equity with your cofounders, dynamic equity is the answer. Mike Moyer, the author of The Slicing Pie Handbook and Will Work For Pie, lays the foundation for perfectly fair equity splits for bootstrapped startups. We have developed a legal framework for limited liability companies that will allow you to start your business with minimal cash investment and fairly and proportionately distribute equity.

How does the model work?

Slicing Pie or dynamic equity provides for both an equity allocation framework as well as a recovery framework. We contractually set initial specific goals for the venture at the outset. Upon founding of the business all uncompensated time, cash contributions, etc. (we call these “Inputs”) that go into the venture are tracked. When the initial specific goals are accomplished we “bake the pie” and enter into a new agreement under which each member’s ownership stake is based on their Inputs as compared to the Inputs provided by everyone.

For example, if Alex and I start a business today and our initial specific goal is to achieve $10k in monthly revenue. Upon reaching said goal, we look at our relative contributions to the venture and determine what percentage of the venture each of us should own at that time.

In other words, instead of the founders of a venture attempting to predict the future (wouldn’t that be nice!), Slicing Pie or dynamic equity provides for a quantitative algorithmic method of equity distribution. This model also provides for a recovery framework in the instance that one of the founders of the venture decides to quit for good reason or no reason at all or is terminated for cause.

Conclusion

There is no time like the present! Slicing Pie and dynamic equity will allow you to follow your dreams and start a new business with a limited amount of cash capital. Click here to schedule a free consultation with us today to discuss how we can help you make the most of challenging times.

 

 
 

How important is it that the governing law be of Country X, as opposed to Country Y?

 

Choosing which laws govern a contract and where contract disputes, should they arise, will be handled is an important part of contract negotiations. The choice of law and/or forum can present significant advantages to one or both parties. They can also create significant disadvantages, especially when parties and legal systems from different countries are involved. The post below is based on a recent question we answered for a client regarding these exact issues.

For context, the client was based in Country X, and they were negotiating an agreement with a party based in Country Y. The other party required that the laws of their (the other party’s) country, Country Y, will be the laws that govern the contract. As a result, our client wanted to understand what this meant from a legal perspective and how to best proceed. Our client’s question and our answer explaining the issue are below.

While it is not something that would be considered “make or break”, having Country X law as the governing law would be advantageous to you. As a person and a business that are domiciled in Country X, Country X clearly has a much stronger interest in protecting you and your business if something were to happen. Conversely, Country Y law would present the same advantage to the other party since that is where they are based. Another advantage that using Country X’s law creates for you is that you (and any Country X-based legal counsel) are much more familiar with Country X’s laws and how the legal system works in Country X. Thus, if there are ever any issues or you have any future questions, it will be much easier for your legal counsel to research the issue(s), provide you with advice, and, if necessary, represent you in court. While it is not impossible for Country X-based lawyers to research and understand Country Y law, it will likely take significantly more time and work (will need to find out where to look, possibly need to translate from Language Y to Language X, need to familiarize themselves with the court system and legal precedents, likely required to work with local counsel from Country Y if litigation is involved, etc.), which means higher legal fees.

Another aspect to consider when evaluating your choice of law is whether or not you would be able to recover any damages if something were to happen. If you were to choose Country X law, it would likely be very difficult to recover any damages in a Country Y court. The issue here is whether or not a court in Country Y would be able and/or willing to recognize the laws of a foreign country. If they are unwilling and/or unable to recognize Country X law in Country Y, which is definitely a possibility, then you would not have any way to enforce your contract against the other party. If that were the case, you could try to bring suit against them in Country X, but that is also likely to be unsuccessful because it would require them to voluntarily submit to Country X’s jurisdiction. If they refuse to submit to Country X’s jurisdiction, then there isn’t much, if anything (depends on the situation), that could be done.

While Country X law would generally be more advantageous to you, in this situation, Country Y law may be a better bet. If the contract is governed by Country Y law, then you know that the courts in Country Y will be willing and able to adjudicate an issue (as long all of the requirements for litigation are satisfied) if something were to happen. Also, since it is highly unlikely that a foreign entity who is generally not subject to Country X’s laws would submit to Country X’s jurisdiction, using Country Y law could provide a potential pathway for recovering damages through Country Y’s legal system if something were to happen.

In sum, although it is common practice for parties to choose the type of law that governs a contract, international agreements are unique because they usually involve completely separate systems of law. Choosing the law of your home jurisdiction will usually be more beneficial to you because your home jurisdiction (whether it is your country and/or state) will have a greater incentive to protect you and your interests than those of a party from another country or state. However, especially when entering into international agreements, you should consider the potential willingness and ability of a foreign jurisdiction to enforce the law selected in a choice of law provision. This is where local counsel or an attorney with expertise in that particular jurisdiction can really help clarify and explain the nuances of the local legal system in question. Here, although not ideal, we think using Country Y law would be your best option. If something were to happen it would give you a better chance at successfully bringing an action, not necessarily winning (that is dependent on the situation and circumstances), in court than Country X law. Additionally, as we mentioned above, the other party would have to be willing to submit to jurisdiction in a Country X court if Country Y doesn’t recognize Country X law, which we would not expect them to do.

 

 
 
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