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September 2012

Compare and Contrast: LLC vs. S Corp

by gavin.n.johnson on September 26, 2012

When discussing choosing the right business entity, it’s important to understand the significant (and subtle) differences between the various choices. Today’s post details the differences between the limited liability company (LLC) and the S corporation.

State v. Federal Distinction
For state law purposes there are two primary entities that merit consideration: corporations and LLCs. Corporations and LLCs both offer limited liability to business owners, which means that absent extraordinary circumstances if the business is sued, only business assets are on the hook—i.e. your personal assets would be safe from any judgment.

For federal… Read the rest

Recent Cases Affirm Difficulty in Challenging Board Decisions on Executive Compensation

by gavin.n.johnson on September 24, 2012

Two recent Delaware cases confirm that the Court of Chancery will not substitute its judgment for that of a disinterested and informed board on executive compensation decisions, including severance, so long as there is a rational basis for the board’s decision. Reaffirming its reliance on the business judgment rule, the court decided in favor of the board’s decision in two recent derivative actions challenging severance/retirement packages for departing employees.

Zucker v. Andreessen
In Zucker, the court granted defendant Hewlett-Packard’s motion to dismiss on… Read the rest

Delaware Courts Top U.S. Survey of Courts

by gavin.n.johnson on September 21, 2012

For the ninth consecutive year the Delaware Courts have been listed as the top courts in the U.S. The survey, sponsored by the U.S. Chamber Institute for Legal Reform, takes into account a number of factors, including judges’ impartiality, timeliness of decisions, and judges’ competence. On the other end of the spectrum is Chicago, deemed the worst court system in the U.S. by the survey. Washington state was the 22nd ranked state.

What makes Delaware Courts so special?
One of the major reasons that Delaware Courts are held on… Read the rest

LawMeets to Offer Free Online Business Law Courses

by gavin.n.johnson on September 20, 2012

Back in 2009, Drexel University Earle Mack School of Law professor Karl Okam0to developed a transactional law competition where law students competed to negotiate the best deals for their fictional clients. Due to its popularity, Okam0to expanded the competition in 2011 by launching LawMeets, a free website that provides transactional simulations to law students. The students submit videos in which they offer legal advice to solve the business scenario. The videos are peer-rated and the best videos receive expert analysis.

Recently, LawMeets received a $500,000 grant from the Read the rest

iVLG News Roundup Week 37: Mergers & Acquisitions, IPOs, Preferred Stock

by Kyle Hulten on September 20, 2012

Mergers and Acquisitions

Yahoo and Alibaba Close Deal
Yahoo has agreed to sell back half of its interest in the Chinese Internet company Alibaba. In 2005 Yahoo acquired a 40% interest in the company, but since then relations between the two companies have become strained, especially as Yahoo failed to meet investors’ expectations. As part of an agreement reached earlier this year, Yahoo will sell another 10% of its Alibaba holdings back to the company when the company files an IPO, and the rest of its Alibaba holdings after the IPO. Yahoo’s remaining interest in Alibaba is valued at… Read the rest

Understanding Contract Terms (post 4): Force Majeure

by gavin.n.johnson on September 19, 2012

In today’s post, we continue our series on understanding contract terms. In this fourth post, we focus on the term force majeure.

Webster’s Dictionary defines force majeure as “an event or effect that cannot be reasonably anticipated or controlled”—for example, such as hurricane, flooding, earthquake, war, riots, etc. The term is French, and is translated to mean “superior force.”

This term is included in contracts as a way to relieve each parties’ liability or obligation when an extraordinary event occurs or circumstances arise that are beyond the control of the parties and prevent… Read the rest

iVLG News Roundup Week 36: Venture Capital; Mergers; Cybercrime; and the iPhone 5

by gavin.n.johnson on September 13, 2012

National News

Apple Unveils iPhone 5
Apple Chief Executive Tim Cook stated that the updates to the new iPhone are “the biggest things to happen to iPhone since iPhone,” referring to iPhone’s launch in 2007. The most notable updates include a slimmer, lighter device, a faster processor and compatibility with wireless carriers’ fastest 4G LTE networks.

Some observers noted that the new device relies heavily on Apple’s current suite of services and software, noting the lack of “never-before-seen” features.

In the wake of its significant win in its patent battle with Samsung, Apple looks to compete with Samsung’s latest devices.… Read the rest

Understanding Contract Terms (post 3): Severability

by gavin.n.johnson on September 12, 2012

In just about every contract you’ll come across, you’ll see the term severability somewhere in the last few paragraphs of the contract. It’s one of those ‘boiler plate’ clauses that most people glance right over when they’re reviewing a contract. However, the effects of this clause are worth reviewing and understanding. In today’s post, the third in our series on understanding contract terms, we explore the definition of severability, and how it may affect your business.

Webster’s Dictionary defines severability as “capable of being divided into legally independent rights or obligations.”… Read the rest

Understanding Contract Terms (post 2): Indemnification

by gavin.n.johnson on September 5, 2012

Last week we started a new contracts series where we explore common terms you see in various contracts and break them down so you can understand exactly what the term means, and its role in your contract. Today’s post will look into the definition of indemnification.

Webster’s Dictionary defines indemnification as “the action of indemnifying” or “the condition of being indemnified,” which is far from helpful. To indemnify is to “secure against hurt, loss, or damage.” Now we’re getting somewhere.

In simple terms, a typical indemnification clause allows you to seek reimbursement for money… Read the rest

iVLG News Roundup Week 35: JOBS Act; Venture Capital; Mergers and Acquisitions; Dispute Resolution

by Kyle Hulten on September 4, 2012

Securities Regulation

SEC Issues Proposed Rules to Implement Title II of the JOBS Act
Last Wednesday the SEC submitted for comment proposed rules to implement Title II of the JOBS Act, which would remove the prohibition on general solicitation for certain private placement offerings.

The highlights from the proposed rules:

The current 506 exemption will remain in place, and 506(c) will provide for the new rule, which lifts the ban on general solicitation.

The SEC is proposing a flexible “facts and circumstances” test to

… Read the rest