Start-Up Entrepreneur Series: Corporation or LLC? (Part II)

In the Start-Up Entrepreneur Series, I will be taking a deeper look into some of the most common questions early stage founders face in putting together and operating their new businesses.  

Start-Up Entrepreneur will be published each Wednesday morning until conclusion. For more information, check out www.hoeglaw.com or drop Rick a line at rhoeg@hoeglaw.com.

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This post is a continuation of our discussion on the differences between corporations and LLCs (if you missed Part I, check it out here).  Note: As I did not want to split this discussion up over three weeks, this post is a bit longer than most.

How likely are you to follow “corporate formalities”?

One of the primary purposes of setting up a new business entity (rather than just operating as a “sole proprietorship” or similar “individual” form) is to protect yourself and your investors from liability for the actions of that entity.  As I tell it when giving presentations on forming a business: you set up a corporation (or an LLC) to prevent someone from seizing your house if your company gets sued.

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Financing Term Sheet Deep Dive: Valuation

Whether you’ve only recently decided to seek out capital for your business or you’ve already received (or made) your first offer, the term sheet (or “letter of intent”) is an integral part of the process.  In this series we’ll look to shed some light on the legal language contained in a financing term sheet by taking a “deep dive” into the most often used terms and how choices made in selecting those terms can affect both the Company and the Investor.  

Financing Term Sheet Deep Dive will be published each Monday morning until conclusion. For more information, check out www.hoeglaw.com or drop Rick a line at rhoeg@hoeglaw.com.

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Last week we gave an overview of just what a financing term sheet is and why it is important (check it out here if you missed it). This week we begin our first real “deep dive” discussion.  To start us off, we’ll consider the top line item, the one of most concern to both Company and Investor alike: What is the price of the stock being sold? (Or, by corollary, how much of the Company does the current ownership have to “give away” in exchange for the investment?).

What we will see is that the answer to that question all comes down to what the parties “value” the Company at prior to investment:  the “pre-money” valuation.

TGIF: March 10th, 2017 – Plane Crashes, Television Contracts, and Scofflaws

Despite what you may have heard, lawyers are, in fact, human beings with interests and hobbies all their own. They are not, I repeat not, robots sent from the future solely for the purpose of billing hours, drafting documents, and negotiating terms.  Not all of them anyway.  

In TGIF, I touch on some of my own interests primarily through the lens of the “Rules of the Game”, focusing on the rules and resulting incentives that ultimately affect all of us in pursuing our life’s endeavors. I may even crack a joke or two.  Hard to say.

TGIF will be published regularly on (surprisingly enough) Friday mornings.  For more information, check out www.hoeglaw.com or drop Rick a line at rhoeg@hoeglaw.com.

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Critical Thinking and Jumping to Conclusions – Michigan Men’s Basketball’s Eventful Journey to the Big Ten Tournament

On Wednesday March 8th, the State of Michigan was buffeted by a wind storm so fierce that more than a half million homes lost power (and expect to stay that way until Sunday or beyond).  Hoeg Law itself lost power 8 separate times (but fortunately for only a few minutes each).  It was in this  storm that the Michigan Men’s basketball team attempted to take off for their Big Ten tournament game in Washington D.C.  The results of that attempt were less than ideal, as their plane failed to take flight amidst 60 mph+ winds before skid-crashing off the runway (Mgoblog, SB Nation).  Players and team members would later describe the harrowing incident (including fuel pouring in the head coach’s face, exit door evacuations, and more) and admit to certain of them needing stitches and other medical care.  Plane crashes are not minor things.

Despite this the “games”, as they say, must go on, and so Michigan’s 12 noon tournament game on Thursday was refused to be rescheduled.  As it turns out, TV contracts are not minor things either.

Start-Up Entrepreneur Series: Corporation or LLC? (Part I)

In the Start-Up Entrepreneur Series, I will be taking a deeper look into some of the most common questions early stage founders face in putting together and operating their new businesses.  

Start-Up Entrepreneur will be published each Wednesday morning until conclusion. For more information, check out www.hoeglaw.com or drop Rick a line at rhoeg@hoeglaw.com.

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Perhaps the most important early question facing the start-up entrepreneur is simply “what is it that you want this enterprise to look like”?  We’ll be discussing boards, officers, equity, contracts, and other organizational questions in more detail later in the series, but the most fundamental of these is whether the entity should be organized as either a corporation or a limited liability company (“LLC”).  (While there are other forms, they are usually only pertinent to the most special circumstances.)

Financing Term Sheet Deep Dive: An Overview

Whether you’ve only recently decided to seek out capital for your business or have already received (or made) your first offer, the term sheet (or “letter of intent”) is an integral part of the process.  In this series we’ll look to shed some light on the legal language contained in a financing term sheet by taking a “deep dive” into the most often used terms and how choices made in selecting those terms can affect both the Company and the Investor.  

Financing Term Sheet Deep Dive will be published each Monday morning until conclusion. For more information, check out www.hoeglaw.com or drop Rick a line at rhoeg@hoeglaw.com.

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One of the primary times that a client will seek out my advice is when they are faced with reviewing (or drafting) a term sheet for the sale (or purchase) of a company’s stock. For those who have not gone through the process, the notion of a term sheet (a document that lays out the basics of a proposed transaction but not in sufficient detail to actually effect the sale) can seem a little odd or even antiquated.  What good is a document that expressly states that it is “non-binding”, after all?

The easiest answer, like many things in the law, is that offering a term sheet before drafting definitive documents is simply the way things are done.  But, while true, that answer is not only pat (and somewhat unhelpful), it is also incomplete.

Start-Up Entrepreneur Series: Where Should I Form My New Business?

In the Start-Up Entrepreneur Series, I will be taking a deeper look into some of the most common questions early stage founders face in putting together and operating their new businesses. For more information, check out www.hoeglaw.com or drop Rick a line at rhoeg@hoeglaw.com. 

One of the most common questions I receive from folks looking to start their first business (or who were not previously included in organizational discussions) is “Where should I form my Company?”.

Like most legal questions, the answer can be complicated (and must always be tailored to the specific facts and circumstances at hand), but there are a few “rules of thumb” that should be considered at the start.

Start-Up Law and Game Development: The Ann Arbor Game Developers Forum

Well, it looks as though I am officially one of those blog folks who posts (infrequently) primarily to apologize for not posting.  Sorry about that.  Cliche though it may be, starting a new law firm and building up a practice is not as worry-free and leisurely as one might expect.  Still, I’m going to do my best to post here more regularly, as being out there and involved in the community is one of the major reasons I started Hoeg Law.

Which brings me to the reason for this post.

I was recently invited to a wonderful gathering of both current and burgeoning game developers at SPARK East in Ypsilanti, Michigan to talk for a bit on why and when new entrepreneurs might need to consult with a corporate lawyer.  I entitled this presentation “Virtual Legality” and have included a copy below.  Though perhaps a little dry without the speechifying that accompanies it (and who doesn’t love to hear lawyers talk), it does present a good overview of what to look out for when starting a business, whether that business be in game development or widget manufacture.