What Is Equity Financing?


If you’ve held any interest in business and entrepreneurship, then its highly likely you’ve heard the term equity financing or something similar mentioned. Equity financing is the process of raising money for company growth by offering personal or company stock, in exchange for investments. In return for the money paid, investors are entitled to a pre-determined amount of interest in the business.

Sign at the entrance of Startup city, Washington

Types of Investors

There are two main investor types, the Angel investor being one and the Venture Capitalist the other. Angel investors tend to be wealthy individuals, family members or even friends. Angel investors are more likely to provide financial support during the start-up phase of the business for either equity or full ownership. There may also be a number of benefits of working with an Angel investor, such as contacts and connections.

Venture Capitalists tend to invest larger sums of money than Angel investors. VC’s are more likely to invest in companies that are in the second stage of growth, this is because there is less risk during this stage of companies development. VC’s will also take a bigger chunk of equity and control. One of the main benefits of the Venture Capitalist is that they can help groom the company for merges or buyouts. There are various types of Venture Capitalist’s and they all operate in different ways.

The intended goals of the business should always be factored in when seeking the right form of investments to accept. [Read more...]



No Attorney-Client Relationship The materials on the Townsend & Lockett, LLC site are for informational purposes only and are not legal advice. Use of this Web site does not create an attorney-client relationship between you and Townsend & Lockett, LLC. You should not act upon the information on this Web site without seeking advice from a lawyer licensed in your own state or country. Please note that you should not send any confidential information pertaining to potential legal services to Townsend & Lockett, LLC or any of its attorneys until you have received written agreement from Townsend & Lockett, LLC to perform the legal services you requested. Unless you have received such written confirmation, we will not consider any correspondence you send us as confidential.

Business Organization Types Explained


Here at Townsend & Lockett, LLC – we love to encourage the next generation of entrepreneurs. Ambition is a quality that can bring you places you never imagined in life, and many of us are born with the level of ambition needed to take us there. However, before you begin your journey of entrepreneurship it is important to have a basic understanding of organization structure.

When conducting business, whether on your own or with partners, it is vital that you cover all possible outcomes when planning out your venture. You will need to understand the different business organization structures and understand where they benefit you or leave you vulnerable. Below we explain the different types of business organizations and how they work.

sole proprietor

Sole Proprietorship

The Sole Proprietorship is without a doubt the most common form of business structure in the United States. With the Sole Proprietorship the business is run by an individual, and there is no legal distinction between the business owner and the business itself. This structure would be ideal for home businesses, shop or retail businesses and one-person consulting firms. As the business grows into a more high profit platform with demanding staff requirements, the sole proprietor should be willing to transition to a business structure that will protect themselves against the number of legal vulnerabilities that will present themselves.

Pros:

  • Easy to start-up and operate.
  • Less capital needed to start-up.
  • Business can be run from literally anywhere.
  • The owner receives all the profit of the business.

Cons:

  • Unlimited liability, all debts must be paid by the business owner.
  • Banks are reluctant to grant loans to Sole Proprietors due to low assets and a high mortality rate.
  • Finding a successor to the business is difficult as the replacement will be agreeing to take on all outstanding liabilities.

partnership business organization
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No Attorney-Client Relationship The materials on the Townsend & Lockett, LLC site are for informational purposes only and are not legal advice. Use of this Web site does not create an attorney-client relationship between you and Townsend & Lockett, LLC. You should not act upon the information on this Web site without seeking advice from a lawyer licensed in your own state or country. Please note that you should not send any confidential information pertaining to potential legal services to Townsend & Lockett, LLC or any of its attorneys until you have received written agreement from Townsend & Lockett, LLC to perform the legal services you requested. Unless you have received such written confirmation, we will not consider any correspondence you send us as confidential.

Contract Drafting Tip Series: Must-have Provisions Part II (270°)


In our last entry of the Townsend Lockett Contract Drafting Tip Series, we talked about the importance of properly identifying the parties, setting the duration of the agreement, outlining where the contract is to be performed and correctly quantifying the consideration. Today we are going to round out the Must-Have Provisions discussion by addressing vital items relating to responsibility in the face of mishap, planning for the unexpected, and resolving disagreements.

contract-signing-small

Contingency Provisions

When preparing a solid business contract, it is rare that every fact and circumstance that might arise over the lifetime of the relationship will be determined at the onset. Thus including contingency provisions are vital to a thoroughly drafted and functional business agreement. In a manufacturing agreement, it is wise to make provision for obtaining comparable parts and to set forth what alternatives are acceptable; or where they might be obtained. Shipping contingencies are also good to have. In the event the preferred carrier is unable to perform, you can prevent a delay in delivery of materials, parts and product by prescribing other options as method of delivery. Outlining contingent solutions to foreseeable problems is a great way to keep your business arrangement moving forward without the need to come back to the table for every little thing.

Limitation of Liability and Indemnification

While we always hope that every business arrangement goes smoothly and without any hitches, glitches or fumbles, the ball does hit the ground sometime. A good contract drafter always accounts for who will take responsibility for what. Malfunctioning products, improperly performed services, delays, and the like, can all cause damages and it is very likely that a party to the agreement is going to be on the hook for those damages even if the harmed party is a third-party. Provisions directing the responsibility for such damages and setting forth the extent of such responsibility will go a long way to ensuring efficient compensation for those damages. Such provisions also afford the parties the opportunity to plan and budget for such liabilities. Lastly, they put parties to the contract on notice which shapes behavior in a way that reduces mishaps. Once someone knows they are going to be responsible for the cost of a particular thing going wrong, they work a lot harder to ensure that thing goes right.

Mediation-Dispute-Resolution

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No Attorney-Client Relationship The materials on the Townsend & Lockett, LLC site are for informational purposes only and are not legal advice. Use of this Web site does not create an attorney-client relationship between you and Townsend & Lockett, LLC. You should not act upon the information on this Web site without seeking advice from a lawyer licensed in your own state or country. Please note that you should not send any confidential information pertaining to potential legal services to Townsend & Lockett, LLC or any of its attorneys until you have received written agreement from Townsend & Lockett, LLC to perform the legal services you requested. Unless you have received such written confirmation, we will not consider any correspondence you send us as confidential.

Why High Billing Rates From Law Firms Doesn’t Always Equal Quality of Service


While browsing the Wall Street Journal online an interesting article about legal billing fees stood out to me. It addresses law firms billing clients up to $1,150 per hour, which many would deem outrageous. In fact these same law firms who charge these incredibly high fees are often demanded discounts by their clients as a result.

law-discounts

Not only does this make things difficult for legal firms who choose to price their rates at reasonable prices, but these firms are often not delivering on the value for money with their service. When clients have to demand a discount every time they seek legal advice they begin to get used to this mindset. This in turn makes them more likely to talk down a lawyers asking fee whether it’s reasonable or not. This can be detrimental to firms who strive to deliver a quality service at a reasonable price, especially when these firms have targets that must be met to maintain the running of their business.

Furthermore, law firms consistently offering discounted service to their clients vastly alters the perception of the legal profession to those looking in from the outside. Discount’s are great when you’re shopping for groceries, and goods. It helps to build consumer loyalty and satisfaction. But discounting services such as legal advice has a greater affect on those who work in the profession. It also makes clients question whether they are truly receiving the level of quality expected of lawyers.

Think of hourly fees “as the equivalent of a sticker on the car at a dealership,” said legal consultant Ward Bower, a principal at Altman Weil Inc. “It’s the beginning of a negotiation.…Law firms think they are setting the rates, but clients are the ones determining what they’re going to pay.”

The above quote is insightful in the sense that an hourly fee is not arbitrary, but is fixed and guided by the market and quality of service. The tried and true method of offering a reasonable rate that the market will bear and driving quality service still seems to be the best model. This builds a level of trust with your clients and it will ensure they are naturally inclined to use your service in the long term.

We understand that there are a few factors that encourage firms to raise their prices such as escalating firm overhead. This in turn urges partners to raise their own rates. Townsend & Lockett however, understands that delivering a great service translates to long-lasting relationships and great client experience. Providing clients with high-quality expertise at market acceptable rates seems to be good working order for client, firm and market.



No Attorney-Client Relationship The materials on the Townsend & Lockett, LLC site are for informational purposes only and are not legal advice. Use of this Web site does not create an attorney-client relationship between you and Townsend & Lockett, LLC. You should not act upon the information on this Web site without seeking advice from a lawyer licensed in your own state or country. Please note that you should not send any confidential information pertaining to potential legal services to Townsend & Lockett, LLC or any of its attorneys until you have received written agreement from Townsend & Lockett, LLC to perform the legal services you requested. Unless you have received such written confirmation, we will not consider any correspondence you send us as confidential.

Contract Drafting Tip Series: Must-have Provisions Part I (180°)


Welcome to the second installment of the Townsend Lockett Contract Drafting Tip Series. In our introduction we discussed the purpose of contracts to provide context for everything we will be covering in the series. If this is your first visit to the series, be sure to read our previous article. Today we cover the first set of key components of a contract and outline the provisions that every single agreement must have. While each of these provisions could be dissected and expounded upon over hundreds of pages, I am going to limit today’s entry to explaining the nature of the provisions and offering some guidance on tightening them up.

Contract Drafting provisions

Contract Party Identification

For an agreement to be effective, the parties need to be identified. You cannot have a working arrangement if you do not know who must do what. That seems simple enough right? Not exactly. With over 7 billion people in the world and the millions of companies, and the varied spellings of names, misidentification of parties to a contract is not uncommon. Further, often times there is a separation between the negotiating parties and the performing parties. Be sure to check down legal names, confirm spellings, include middle names or initials, and add place of residence or principal place of business of the parties if possible to ensure the intended parties are on the hook.

Consideration

“Consideration” is just a fancy term for what the parties are going to give each other. By law, no contract can exist without it. So understand if you have a contract that essentially says you can walk, without doing anything, if you choose to, you do not have an enforceable agreement. Typically, one party’s consideration in a contract will be money. Money is fairly easy to incorporate into an agreement as consideration. Goods and services are the other items that most often represent a party’s consideration in a contract. Whatever the form, ensure it is not left out of the agreement provisions.

Term, Termination and Renewal

Assuming you have determined who is going to do what, you have to button down how long the relationship will last. The drafter should always cover when the obligations of the parties begin and end, whether there is an opportunity to renew, and under what circumstances the arrangement may be terminated prior completion of the designated term. It is best to set forth the precise dates and years of commencement and termination.

contract agreement

The “Where”

Things have to be done pursuant to contracts, and where those things will be done must be designated in the four corners of the contract. Whether it is delivery of payment, delivery of goods, materials and supplies, or the provision of services, the location of where each should be made must be spelled out clearly. The location can even be “any location designated by one party,” so long as that location option is spelled out in the contract. The main point is that some expectation of where things will be done, or how the “where” will be selected, must be included in the agreement.

How Much

I touched on this item slightly in the consideration discussion above. If money is the consideration, the amount of money or at least a formula for determining the amount of money needs to be written into the contract. The same goes for amounts of goods that are provided as consideration. If services are provided, the number of hours or the project commitment must be addressed in the provisions of the contract.


Contracts are very much like novels. As laid out above, there needs to be a who, what, when and how “much”. In the next installment of the Townsend Lockett Contract Tip Series, we will round out the must-have provisions of a contract and talk about contingencies, liability, dispute resolution and more.

 

 



No Attorney-Client Relationship The materials on the Townsend & Lockett, LLC site are for informational purposes only and are not legal advice. Use of this Web site does not create an attorney-client relationship between you and Townsend & Lockett, LLC. You should not act upon the information on this Web site without seeking advice from a lawyer licensed in your own state or country. Please note that you should not send any confidential information pertaining to potential legal services to Townsend & Lockett, LLC or any of its attorneys until you have received written agreement from Townsend & Lockett, LLC to perform the legal services you requested. Unless you have received such written confirmation, we will not consider any correspondence you send us as confidential.

Contract Drafting Tip Series Introduction (90°)


What is most often produced on Xerox paper, contains lots of words, printed on non-color printers, but fails to come out black and white sometimes? Here’s an additional clue. While it loves to give an address, when not given the proper coddling it will refuse to speak when you need it to most. Yes my friends, I’m talking about our good friend the contract.  Contracts are the ties that bind relationships in business at every level. Service providers enter contracts with clients, retailers execute them with customers, employers sign their employees to them, manufacturers make them with suppliers, and the list goes on.

Contract Drafting tips

If you are in business, you have contracts. Or at least you should have contracts. They are important. However, contracts can be unruly if not properly trained. Unruly contracts are terrible for business. If badly behaving contracts have ever been a thorn in your business end, have no fear, Townsend Lockett has developed a series to help you wrangle those pesky bad behaving papers. Welcome to our “Contract Drafting Tips,” where we provide insight, guidance and dos and donts when preparing contracts.
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No Attorney-Client Relationship The materials on the Townsend & Lockett, LLC site are for informational purposes only and are not legal advice. Use of this Web site does not create an attorney-client relationship between you and Townsend & Lockett, LLC. You should not act upon the information on this Web site without seeking advice from a lawyer licensed in your own state or country. Please note that you should not send any confidential information pertaining to potential legal services to Townsend & Lockett, LLC or any of its attorneys until you have received written agreement from Townsend & Lockett, LLC to perform the legal services you requested. Unless you have received such written confirmation, we will not consider any correspondence you send us as confidential.

Licensing the Right to Sue for Third-Party Patent Infringement


IP Licensing is everywhere. Many of us were introduced to licensing practices during the 1990′s when shrink wrap licensing was popularized by Microsoft and other software manufacturers. More recently, click-through (or click wrap) licenses have emerged. With the rise of shrink wrap and click-through licensing, most of us, whether wittingly or unwittingly, are or have been a patent or technology licensee. Whether you read the license or simply check the “I have read and agree to be bound by the foregoing terms” box before you hit the download button, you understand the basic concepts: you get some right to a licensed technology or product, usually the right to use that technology or product, subject to certain restrictions and conditions. This type of licensing is typically referred to as end-user licensing.

Patent  Defined

End-user licensing is conceptually similar to license arrangements between companies, which can be referred to as business-to-business, or B-to-B licensing. Basically, one company acquires some right to a licensed technology or product from another company. Patent rights licensed in B-to-B licensing arrangements, however, tend to be very different in many respects. One arrangement that is sometimes used by patent owners involves granting a licensee the right to sue third-parties for infringements of licensed patent claims.
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No Attorney-Client Relationship The materials on the Townsend & Lockett, LLC site are for informational purposes only and are not legal advice. Use of this Web site does not create an attorney-client relationship between you and Townsend & Lockett, LLC. You should not act upon the information on this Web site without seeking advice from a lawyer licensed in your own state or country. Please note that you should not send any confidential information pertaining to potential legal services to Townsend & Lockett, LLC or any of its attorneys until you have received written agreement from Townsend & Lockett, LLC to perform the legal services you requested. Unless you have received such written confirmation, we will not consider any correspondence you send us as confidential.

The Trademark Application Process


During my practice as an IP lawyer, I have noticed that my trademark clients routinely have a misapprehension about how long the trademark process will take. In fact, once, after what I thought was a thorough consultation with a client about their soon-to-be-filed trademark application, the client leaned back and said, “Okay. Good. I think I understand everything. So what am I looking at? A couple weeks? A month? How long before this thing is finalized?” I realized then that: 1) the IP bar, myself included, needed to do a better job informing clients and the public about this topic; and 2) my consultation session was not over. In that vein, I thought a brief overview of the application process might be helpful.

Intent-To-Use-Trademark-Application-300x225

As an initial matter, the United States Patent and Trademark Office will very seldom, if ever, immediately grant a federal trademark application after it is filed. In fact, it generally takes up to 5-8 months (or more) before a trademark office official, referred to as an Examining Attorney, will pick up your application to formally review it and start the substantive examination process. Once he has reviewed your application, the EA determines whether there are grounds to reject your application or whether other modifications or clarifications are necessary. If the EA finds grounds for rejection, modification or clarification, the EA will send you a response, called an Office Action, soliciting your response to his findings. These Office Actions are routine and you can expect at least one Office Action as a matter of course during the application process. You or your attorney will respond to the EA’s Office Action, either providing the EA with arguments to overcome his rejection, or providing clarification or amendments to your application to overcome his cited objections. There may be multiple rounds of this back-and-forth between you and the EA during this period.

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No Attorney-Client Relationship The materials on the Townsend & Lockett, LLC site are for informational purposes only and are not legal advice. Use of this Web site does not create an attorney-client relationship between you and Townsend & Lockett, LLC. You should not act upon the information on this Web site without seeking advice from a lawyer licensed in your own state or country. Please note that you should not send any confidential information pertaining to potential legal services to Townsend & Lockett, LLC or any of its attorneys until you have received written agreement from Townsend & Lockett, LLC to perform the legal services you requested. Unless you have received such written confirmation, we will not consider any correspondence you send us as confidential.

Franchise Negotiation Considerations


The wild world of entrepreneurship is a high risk, high reward realm in which to play. Those who step into the rocky waters of self-employment and business building turn in the security of steady and predictable compensation for the unpredictable ebb and flow of eating what they kill. A total lack of control over policy and business approach is exchanged for complete control over management, administrative duties, marketing and every other aspect of business operations. Indeed it takes a special kind of person to go out on a limb and attempt to start a business from scratch. For those quasi-special people who are brave enough to undertake running a business, but do not quite want to start one from scratch, franchise negotiation is a great option.

franchise negotiation

Operating a franchise is a good idea for the more risk-averse entrepreneur because franchises have proven systems that are articulated clearly and definitively in a franchise manual, and typically entail support from the franchisor to help make the business successful. I know, I know … that sounds like the franchisor sales pitch doesn’t it? Well, I will temper my exuberance with a sampling of the legal issues a franchisee should consider when embarking upon a franchise venture – or otherwise find oppression from a new boss in the form of a franchisor.
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No Attorney-Client Relationship The materials on the Townsend & Lockett, LLC site are for informational purposes only and are not legal advice. Use of this Web site does not create an attorney-client relationship between you and Townsend & Lockett, LLC. You should not act upon the information on this Web site without seeking advice from a lawyer licensed in your own state or country. Please note that you should not send any confidential information pertaining to potential legal services to Townsend & Lockett, LLC or any of its attorneys until you have received written agreement from Townsend & Lockett, LLC to perform the legal services you requested. Unless you have received such written confirmation, we will not consider any correspondence you send us as confidential.

Trayvon Martin and a Look at “Stand Your Ground”


BY TRAVIS TOWNSEND, ESQ.

In the wake of the death of 17-year old Trayvon Martin, many important issues relating to law enforcement, self-defense, race and profiling have arisen in public discourse. The questions of whether George Zimmerman’s fatal shooting of Trayvon was justified, and whether the Sanford, Florida police department was derelict in its law enforcement duties for failing to arrest and initiate the prosecutorial process against him are foremost among them.

It would be convenient if resolving these questions were a simple matter of interpreting the Florida “Stand Your Ground” law. But, unfortunately, a complex analysis of the intersection of dangerous racial stereotypes and self-defense principles is required.

Sections 776.012 and 776.031 of the law permit the use of deadly force against another in self-defense or the defense of others, respectively – but only within a narrow set of circumstances. The letter of the Florida statute permits the use of deadly force and says a person does not have a duty to retreat if he reasonably believes such force is necessary to prevent imminent death or great bodily harm to himself or another or to prevent the imminent commission of a forcible felony.

As set forth, this should be a very high standard to establish; however, the Sanford justice system made the determination simply by taking George Zimmerman’s word for it as Trayvon Martin lay dead, incapable of sharing his side of the story.

This law deals in life and death.  Given the value our society places on life, on its face, the Florida statute warrants investigation of the matter beyond a simple onsite inquiry of the killer. Thus the law’s permission of the use of deadly force, while problematic, is not the chief driver in the Sanford PD’s failure to arrest and initiate prosecution. Instead, it is Section 776.032, the “immunity” provision in the statute, that is a major cause of the Sanford PD’s defective actions.

Section 776.032 makes a user of justifiable force immune from criminal prosecution and civil action, and defines “criminal prosecution” to include arrests, detention and even charging the defendant. Further it goes on to state that law enforcement may not arrest the person for using force unless it determines there was probable cause that the force that was used was unlawful.

Ultimately, this law is flawed for it discourages even the most preliminary steps in seeking justice, namely detaining a potential manslaughterer or murderer. It continues by requiring a court to award attorney’s fees, court costs and compensation for loss of income to a defendant prosecuted when they stand immune pursuant to the statute. Thus, it effectively discourages law enforcement from arresting, detaining and investigating someone like Zimmerman because law officers do not want to be the agents responsible for costing their departments money and jeopardizing their employment.

Despite the law’s flaws, it would seem that it still permits an arrest in this case because the facts and circumstances surrounding Trayvon’s death overwhelmingly establish probable cause to arrest Zimmerman. Zimmerman’s 911 calls make it clear that neither he nor anyone, aside from Trayvon it turns out, was in imminent danger of death, serious bodily injury or victimization of forcible felony. Zimmerman had time to call the police and provide an extensive report of the situation – that alone shatters any claim by him of believing imminent danger. Further, he was instructed by the law enforcement agent on the other end of the 911 call not to pursue Trayvon, yet he continued against those clear instructions. Had he allowed police to arrive on the scene and manage the situation, Trayvon would be alive today and no one would’ve been harmed.

This leads us to the elephant in the room, the role that the race and ethnicity of Zimmerman and Trayvon, respectively, have played in this tragedy. The Florida statute allows for a person’s mind state to impact the legality of a killing. The interpretation by Zimmerman, a White Hispanic man, of Trayvon as a threat because he was a Black teen, dressed in a hoodie, is ultimately the reason why Trayvon is dead today. His belief that Trayvon was a threat at all was based primarily on Zimmerman’s stereotyping of Black teens. There is evidence to this effect abound in the tone of his statements to the 911 dispatcher, which may even include a racial epithet describing Trayvon. This highlight’s what is probably the biggest shortcoming of “Stand Your Ground” laws. Someone’s life may ultimately be taken away based on a person’s biases.

Now that many more facts about this case have been unearthed, there can be little debate that Zimmerman should be arrested and prosecuted to the fullest extent of the law. Our justice system’s adversarial process will afford him an opportunity to establish a self-defense fight against conviction, but he should have that burden and it should require more than a simple assertion that Trayvon attacked him.

Beyond justice for Trayvon, Florida’s “Stand Your Ground” law must be taken under review as well as those of the various other states that have similar laws to prevent similar tragedies from occurring. For deeper understanding of self-defense laws I recommend a review of my book, When the Cops Come Knockin’: An Illustrated Guide to Criminal Law. The discussion around Trayvon’s death must be elevated so we can move closer to justice. For that to happen all engaged must become more knowledgeable of the criminal laws.

TRAVIS TOWNSEND, ESQ. is a young attorney and President of the Urban League of Young Professionals in Atlanta, and author of the book When the Cops Come Knockin’



No Attorney-Client Relationship The materials on the Townsend & Lockett, LLC site are for informational purposes only and are not legal advice. Use of this Web site does not create an attorney-client relationship between you and Townsend & Lockett, LLC. You should not act upon the information on this Web site without seeking advice from a lawyer licensed in your own state or country. Please note that you should not send any confidential information pertaining to potential legal services to Townsend & Lockett, LLC or any of its attorneys until you have received written agreement from Townsend & Lockett, LLC to perform the legal services you requested. Unless you have received such written confirmation, we will not consider any correspondence you send us as confidential.