Start-Ups & Financing

What is Convertible Note Financing?

January 26, 2018 | Gokalp Gurer

Financial-300x225
There are many ways for San Jose technology companies to obtain startup financing and fundraising. One way in which private financing and fundraising can be accomplished is through convertible notes, and may or may not require the involvement of traditional venture capital firms. Convertible notes can allow startup companies to determine the amount of control that their investors will have over the management of their company during the initial startup phase. The experienced San Jose corporate attorneys at Structure Law Group can help your startup explore all financing options to advise on which are best for your business.

A convertible note is a form of short-term debt that converts to equity at a specified point in the future. For startup companies, this is most often accomplished by converting an investor’s initial investment into a given number of shares in the company, at a specified round of financing. The equity does not need to be expressed in shares of common stock, nor does it even have to occur during the first round of financing. The note’s terms and conditions can be negotiated to meet the needs of both the startup company and its investor(s).

Other Negotiable Terms of a Convertible Note

How to Avoid Conflicts of Interests with Venture Capital Funds and Private Equity

January 19, 2018 | Brett Bunnell

Private-Equity-300x200
The Securities and Exchange Commission has, in recent months, been closely monitoring private equity and venture capital fund managers in order to identify conflicts of interest. The more investments a particular manager oversees, the more potential there is that he or she will encounter a conflict for two (or more) investments. An experienced San Jose corporate attorney can help your business enact practices which will help your fund managers identify and resolve conflicts of interest as early as possible. This will save your business the time and expense of administrative sanctions, SEC hearings, and civil liability – all of which are potential ramifications for any violation of the fiduciary duty of loyalty to act in the best interest of each fund a manager manages.

The Problem Area of Related Transactions

When a venture capital or private equity funds manager engages in transactions closely related to the fund’s investors or portfolio companies, a potential conflict of interest is created. Common examples include co-investment, or when an investor, fund manager, or another one of the manager’s funds has the opportunity to invest in one of the fund’s portfolio companies under terms and conditions which are different from those of the initial investment. Co-investment can also present a problem when a fund manager has an investment opportunity which should be presented to two or more different funds and must determine which fund gets priority at a given time. Fund managers can also face conflicts of interest when divesting a fund of its assets. In such a case, many managers oversee other funds which would benefit from the purchase of the divested assets, but this would create a conflict between the interests of the selling fund (which must maximize the sales price) and the purchasing fund (which must minimize the sales price). When an affiliated transaction arises between a fund manager, its affiliates, the fund, or an individual investment, there is a potential that the fund manager will face a conflict between the interests of the initial fund investment and the affiliated transaction. The affiliated transaction must be carefully assessed for all potential sources of conflict.

Stock Purchase Agreement For A California Corporation

December 1, 2017 | Gokalp Gurer

There are a variety of ways for a corporation to sell its assets without compromising its structural integrity or otherwise damaging the business. One common method by which California corporations can sell assets is a stock purchase agreement. For example, if an investor (which can even be a company) wants to buy stock in a company,

Fotolia_77570998_Subscription_Monthly_M-300x293
the executing instrument is typically a stock purchase agreement. The stock purchase agreement allows a business to sell its assets – and sometimes, certain voting and management rights – without actually selling the business itself. In order to protect the assets at issue and protect the legal interests of the companies involved, a California corporate transactional attorney can help businesses effectively negotiate and execute stock purchase agreements.

What is a Stock Purchase Agreement?

Human Resource Department – Does My Company Need One?

November 17, 2017 | Jaclyn Ford

Silicon Valley companies have human resource (HR) departments to manage employment issues. HR departments both limit the company’s exposure to legal liability for employment-related claims and

facilitate the timely resolution of workplace disputes. For small companies, however, it can be difficult to train, staff, and maintain HR employees. A Silicon Valley employment law attorney can help you determine whether an HR department is right for your business.

HR-1-300x126
The Cost-Benefit Analysis of Human Resources

What Can I Charge As A Business Expense On My Taxes?

November 10, 2017 | Mark Figueiredo

For California business owners, knowing what expenses are deductible from tax liability is not just a sound financial strategy. It can also prevent criminal liability for tax fraud and other white collar crimes. Ensure that all your financial and legal interests are protected by consulting with an experienced California tax law attorney.

expense-e1508532021260-300x198
Common Deductions

Tax liability is a function of a company’s profit less its operating and business expenses. These expenses are known as the taxpayer’s deductions. Thus, the greater a company’s deductions, the less overall tax liability it will have. This causes many companies and business owners to push the boundaries of allowable business deductions. While this can reduce the company’s initial tax liability, it can also result in a time-consuming audit and heavy fines. In serious cases, it can even result in criminal liability. It is, therefore, very important for business owners to ensure that they are making appropriate, lawful deductions.

How Do I Write The Bylaws Of A Company?

September 29, 2017 | Brett Bunnell

Of the many challenges faced when starting a business, creation of a company’s bylaws can be one of the more complex, technical, and overwhelming challenges of them all. While daunting, such agreements can protect startup companies from liability in business transactions. A Silicon Valley corporate lawyer can help your business create the bylaws which will best meet your legal needs.

Identify the needs of your business

Before crafting any corporate policy, it is important to determine your goals. Does the policy need to protect the company from legal liability? Reduce operating expenses? Provide clarity for executing important business discussions? Identifying clear goals will allow for bylaws to effectively address such needs. Owners should also be sure to consider both the short and long-term needs of the business. Business, financial, and legal concerns can change over time. Effective bylaws will allow the business to adapt to the dynamic reality of the marketplace.

Is Your Liability Completely Limited When You Form a Limited Liability Company?

August 25, 2017 | Gokalp Gurer

Limited liability companies, or LLCs, are one of the various types of business entities from which you can choose when forming a company. Generally speaking, limited liability companies combine the tax advantages and flexibility of a partnership with the liability protections of a corporation, without subjecting small business owners to the onerous reporting requirements and governance rules associated with corporations. When forming a limited liability company there are many factors to consider and questions to ask. The Silicon Valley business attorneys at Structure Law Group, LLP have the knowledge and experience to advise entrepreneurs to weigh all options and make the best decisions for the limited liability company now and in the future.

How Does an LLC Limit Liability?

Like a corporation, a limited liability company is a separate legal and tax entity, meaning that the LLC is separate from the members who manage and operate the business. And also like a corporation, the LLC, and not the LLC’s owners, will be liable for the LLC’s debts. For example, if one sues the LLC to recover on an outstanding debt, only the LLC’s assets can be reached. In other words, an LLC’s members are not personally liable for the LLC’s debts (just like how a corporation’s shareholders are not personally liable for the corporation’s debts). This is significantly different than a general partnership or sole proprietorship, where the partners or the individual owner, respectively, are personally liable for the debts and obligations of the business.

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.

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.

Venture Capital Financing – Is it Right for my Startup Business?

May 12, 2017 | Structure Law Group, LLP

Venture capital financing can be an extremely important asset to startups that do not have access to other types of traditional business financing, such as bank loans or the public markets. There can be many benefits to venture capital financing for entrepreneurs, including the following:

Venture capital involves equity capital, so it does not leave a startup with substantial debt from the start;
Venture capitalists often take greater risks on young and unestablished companies because they see the potential for extensive growth and, therefore, higher returns;