Practical advice. Flat rates. Plain language.


by

The economic structure of a limited liability company (LLC) determines the amount and timing of the distributions to the members.

The economic structure of a limited liability company (LLC) determines the amount and timing of the distributions to the members (remember that LLC owners are called “members”). Distributions may occur periodically during the operation of the LLC, when the LLC either redeems (or buys back) the member’s interest, or when the company chooses to liquidate. In this next installment in our series on LLC Operating Agreements, we’ll explore how to structure the distributions and profits and losses for your LLC.

Washington Law
The default rule under Washington law provides that members will receive distributions and allocations of profits and losses in proportion to the amount of capital each member contributed to the company. To clarify some of the terms: a distribution is any…

Read More


by

A New Way for Consumers to Negotiate Favorable Terms of Service
Online service providers typically require users to agree to their terms of service before rendering any services. Every time you sign up for a new online service you have to click “I Agree” to an agreement that can easily exceed 20 pages in length and is usually both legally binding and widely ignored. Most consumers probably believe that they have to agree to those exact terms in order to be able to use the service. But this may not be the case any longer.

A new online bookmarklet may allow consumers of web-based products to amend terms of service agreements. The program TOSAmend, designed by web application builder Kevin Owocki, is…

Read More


by

Today we’ll continue our series on key term sheet provisions by discussing redemption rights.

What Are Redemption Rights?
Redemption rights provisions give investors a future right to have stock repurchased at the original purchase price plus declared and unpaid dividends. The provision can be drafted to provide for mandatory redemption or redemption at the investor’s option.

Generally the right doesn’t mature for at least 5 years, and the redemption payments are spread out over multiple years.

A recent survey indicates that only about one in five venture financings include terms providing for redemption rights.

What is the Rationale for Redemption Rights?
Investors like redemption rights because they provide an alternative exit. If the company is neither collapsing nor rising quickly enough to be an acquisition target…

Read More


by

Protecting your business’ confidential information is critical, and social media has undoubtedly made this process more difficult.

Protecting your business’ confidential information is critical, and social media has undoubtedly made this process more difficult. The inherent nature of social media is to spread information— not to protect it. But if you—and your employees—understand trade secrets (and other confidential information), as well as who owns “your” social media accounts, you can help protect your business from the damage of inadvertent or wrongful disclosure.

So what is a “trade secret”?
Generally, a “trade secret” is information that (1) is maintained in confidence, (2) has commercial value from not being generally known, and (3) is not readily ascertainable by proper means. The more detailed and difficult the information is to obtain, the more likely it is a trade secret.

For your information to…

Read More


by

A principled negotiator is open to the view that bigger and better opportunities and solutions are available that allow us to achieve mutual benefits.

A principled negotiator is open to the view that there are bigger or better opportunities and solutions, and collaborative negotiations allow an opportunity to explore mutual interests. The principled approach was first made famous in Roger Fisher and William Ury’s conflict resolution book, Getting to Yes. Fisher and Ury described the four fundamental rules for principled negotiations:

1. Separate people from the issues.
For this approach to work, you’ll have to learn to separate your emotions from the negotiation. Your emotions will inevitably become tangled up with the substantive issues of the task at hand. Once emotions come into play it’s hard to think rationally; we often act differently or say things we wouldn’t have said otherwise. Coming to an agreement will be that much…

Read More


by

Apple in the News

Apple has huge quarter; launches revolutionary textbook platform; includes draconian terms in book publishers’ end user license agreement

Lots of Apple news this week. The technology giant posted its best quarter ever with revenues of $46.3 billion per quarter and a $13.87 net profit per share. The company sold 37 million iPhones and over 15 million iPads.

Apple also had exciting news about launching a new platform for textbooks. Apple has partnered with text book producers such as McGraw-Hill to make interactive textbooks for iPads. Textbooks in this format will be cheaper, easier to update, more environmentally friendly, and more portable. The interactivity and format will surely be a better and more exciting platform for those trying to learn…

Read More


by

In the beginning, members of an LLC will need to decide between the two primary choices of management structures: member managed, or manager managed.

Over the next few months we’ll be discussing some of the common terms of a Limited Liability Company (LLC) operating agreement in-depth in a series of posts. The operating agreement can be thought of as providing the laws of the business. The operating agreement provides the rights and obligations of the members including members’ management abilities and economic interests. Without an operating agreement, Washington LLCs are governed by the default provisions provided in Chapter 25.15 of the Revised Code of Washington. In this first post, we’ll discuss the management structures and choices available for an LLC.

Flexibility
In Washington, the LLC statute is incredibly flexible. LLCs are easily adaptable to the changing needs or circumstances of the members. There’s also flexibility when choosing the management…

Read More


by

Update: Legislation creating social purpose corporations has passed both the Senate and the House, and is expected to be signed by the Governor this month.

The Washington State Senate and House are considering legislation that would create a new corporate form: the social purpose corporation. The Senate bill is SB 6230, and the House bill is HB 2239. The legislation was drafted and requested by the Corporate Act Revision Committee of the Washington State Bar Association.

Background
Under current Washington law there is no ideal corporate form for businesses that want to consider both the bottom line and a social mission. You can create a business that focuses on profits, a corporation. Alternatively, you can create a business that focuses on a social mission,…

Read More


by

Continuing our series on key term sheet provisions, this week we will be taking a look at dividends.

What Are Dividends?
Dividends are distributions of company cash (or stock) to shareholders, and are most typically issued by mature companies. It is very rare for start ups and emerging companies to have extra cash to give back to shareholders. Dividends are only issued if authorized by the board of directors, and directors have nearly complete discretion in determining if and when they opt to distribute company cash to shareholders rather than opt to reinvest the money back into the company.

Stock Dividends vs. Cash Dividends
Dividends are most commonly issued in the form of cash disbursements. But dividends can be structured in the form of…

Read More


by

Chief sponsor of SOPA, Lamar Smith, announced he will pull SOPA. For now, opponents of SOPA and PIPA are rejoicing the fact that both bills are dead.

The chief sponsor of SOPA, Lamar Smith (R-Texas), reported Friday that SOPA will be pulled “until there is wider agreement on a solution.” Smith said he has heard all the criticism andconcerns regarding the proposed anti-piracy legislation. He said “it is clear that we need to revisit the approach on how best to address the problem of foreign thieves that steal and sell American inventions and products.”

It’s not surprising that the bill was pulled Friday, following widespread Internet protests, White House opposition, and several key players in Congress dropping their support for SOPA and PIPA. Both bills have been pulled for now.

It’s interesting how quickly things change in Congress. Just two days ago, Smith told the Wall Street Journal that he would…

Read More