Intrastate Securities Offering Exemption

I wanted to blog on some of the lesser known and relied on securities exemptions.  In certain situations they can be very helpful.  One of these is the federal Intrastate Securities Offering Exemption.  Simply, if you offer and sell in one state and one state only, and some other factors are met, the issuer is exempt from the federal registration requirement.  Blue sky laws will still apply but some states have limited offering exemptions or other exemptions the issuer can rely on. Read more

The Basics of Copyright Protection

Copyright protection was first introduced in way back in 1790, and it has changed a lot over the years.  Despite substantial revisions today’s copyright laws still protect owners of original works, however, it is now applied to many different types of works  (i.e. websites, source code, etc) than existed hundreds of years ago.  Luckily the creators of the copyright protection drafted it so that an original espression in any “fixed medium” is protected.  This allows the law to evolve as does technology. Read more

SEC allows general solicitation and advertising in Rule 506 offerings

Yesterday, July 10th, under the provisions of the JOBS Act the SEC passed its Final Rules which amended Rule 506 and Rule 144A to lift the ban on general solicitation and advertising in offering and selling securities in a Rule 506 sale as long as all purchasers of the securities are accredited investors. Read more

Series A Participating Preferred Stock and Term Sheet Terms

If your startup just got a term sheet from an investor saying that they want to invest in your company and want to receive participating preferred stock with all of these other rights, you may be a bit overwhelmed.  First off, congratulations on the proposed investment.  Next, I’ll explain what all of those terms on the term sheet mean in this post starting with the participation component of participating preferred shares. Read more

Science & Technology Parks in China and Tax Free Zones in the U.S.

I recently sat in on a great panel about doing business in China hosted by the Manufacturer’s Association of Central New York (MACNY) put on by a client of mine, Tech Bridge International, Inc.  Tech Bridge is an international business development and quality consulting company.  It provides consulting services, connections and introductions to Chinese businesses and government officials for companies seeking to do business there (it also operates in Japan).

The conference was interesting for many reasons, but mainly because of the discussion regarding the industrial, science & technology parks in China and the innovation they were driving there.  I had intended to write a post on this a while back, and that’s why I was pleasantly surprised to hear Governor Cuomo’s Tax Free NY proposal yesterday, which he announced in a few Upstate New York cities (Albany, Buffalo, Syracuse). Read more

Series LLCs

If you are one of those people who is tired of having to form seperate entities (LLCs or corporations) for each type of business you operate, or for each piece of real estate that you own, a Series LLC may be useful to you. Nearly a decade ago, the state of Delaware introduced a legal entity that would become known as the Series LLC. Despite its origins in Delaware, several other states have now started to permit the usage of Series LLCs.  Read more

Benefit Corporations (B-Corps) & Other “Good Vibe” Corporate Structures

It used to be that if you wanted to start a corporation and the end goal was not to maximize shareholder value (or other typical corporate goals), you’d start a not-for-profit corporation.  That’s no longer the case. Now in New York (and at least six other states) you can form a Benefit Corporation (a “B-corp”) which has other purposes besides making money.  There are also other strategies you can use in a for-profit company to give it more of an egalitarian feel.  We’ll discuss below. Read more

The Marketplace Fairness Act of 2013 a/k/a the Internet Sales Tax Act

As you may have heard, the Senate is working on a bill which looks like it may be passed on May 6th called the Marketplace Fairness Act of 2013.  If passed into law (it looks like the House will also approve it, but we’ll see) it would allow state governments to force Internet retailers to collect sales tax from their customers and remit the proceeds to the state and local governments where the purchaser lives. The States would have to provide free software to Internet retailers which would allow them to do the calculations, and Internet retailers with revenues under $1M would be exempt.  That’s some small relief.

There are seemingly two goals of the legislation.  The first is to fund state and local governments which are, for the most part, starved for cash and seeking any new revenue sources (ie tax moneys) they can find. Second, brick and mortar retailers claim that they are at a disadvantage because customers can come in and look at items in their stores, check the price of the item on their smart phone and then order the same item online and not have to pay any sales tax on it.

My thought is that the effect of the legislation, if passed into law, would be more economically stifling (from a nationwide perspective) than it would actually serve the goals it presumes to address. Read more

How to form a Single Member LLC in New York State

There are a lot of small businesses out there operating as sole proprietorships, that is they operate the business through the individual(s), and there is no formal entity.  Many sole proprietors tell me that they’ve filed a d/b/a with the local county (here, the counties of Onondaga, Tompkins or Monroe), and therefore believe that is all they need to ensure that they are not personally liable, but this is not correct.

The main reason people incorporate or organize LLCs is to limit liability.  Debts and contractual obligations are not something that you want to owe personally if you can avoid it.  Setting up an LLC will create a seperate legal entity from yourself that you will operate the business through, own business assets, and contract through.  Not much has to change when you form a single member LLC.  LLC’s are also useful because the IRS will let you choose how you want the LLC taxed (either as a disregarded entity, S corp or C corp).

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JOBS Act Broker-Dealer Registration Exemption

The JOBS Act contained many provisions which were aimed at making the capital raising process easier, simpler and quicker from a host of angles.  Many things promised in the JOBS Act will not come to fruition until the SEC promulgates the regulations on the specific topic.  Some of these are equity crowdfunding, and the ability for issuers to use general solicitation in Rule 506 offerings.

One of the things contained in the JOBS Act which went into effect immediately, was an exemption for broker-dealer registration for persons or entities acting as brokers in certain 506 offerings.  The SEC just confirmed this in a recent FAQ available here.  I’ll give a quick overview below. Read more