The Canal Street Blog

Business-focused legal discussion

News Roundup: Instagram in Plain Language; Recent Trademark Battles

Instagram's website policies get plain language overhaul, and a first amendment trademark battle headline this week's news.

  Anne Pfeifle Plain Language, Privacy, and Instagram

A lawyer rewrote Instagram’s terms of use in plain language so that young people using the app could understand their privacy rights. The rewrite was a part of a task force convened to study Internet use among teenagers. The teenagers in the study said “the sheer amount of writing and the lack of clarity within the document” prevented them from understanding Instagram’s terms of use.

The rewrite took the terms of use from over 5,000 words of legalese to a single page of plain language. Illustrating the importance of plain language, after reading the rewritten terms, the teenagers decided to change their behavior. They vowed to post less and not to use direct messaging, because Instagram...

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Attorney-client Privilege: What to Know to Protect Your Business

This post discusses attorney-client privilege and what you need to know about the concept to protect yourself and your business in a future legal dispute.

  Gideon Dionne What is the attorney-client privilege generally?

The attorney-client privilege is the legal right that protects communications between a person and her attorney from compelled disclosure in a legal action. Attorney-client privilege is most often invoked when a person is asked to provide details of communications in a court proceeding or regulatory hearing, and it is codified in Washington as a rule of evidence. In a hearing, if a party otherwise entitled to the information asks for details or copies of communications and the communications are subject to attorney-client privilege, then the person being asked to disclose the information can withhold certain parts of those communications by claiming the attorney-client privilege. 

Why do we have the attorney-client privilege?

The attorney-client privilege exists because it...

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Integration in Securities Offerings

Today's post discusses the concept of securities offering "integration" or "integrated transactions" in securities law and startup law.

  Gavin Johnson

When companies raise money from investors, the transaction will be governed by securities laws. These securities laws have complex requirements that often “trip up” companies unfamiliar with the rules and their application. In today’s post, we tackle one of those areas of securities and startup law where companies often trip up: integration.

What is “Integration” in the context of a securities offering?

To better understand integration, you’ll need to first understand what a “securities offering” is. In very simple terms, a securities offering is a transaction where a company is offering to sell a security in exchange for (in most cases) cash. You can check out a discussion of the more precise definition of a security in our prior post.

Integration is a term in...

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Understanding Your Commercial Lease: Taxes

We continue the Understanding Your Commercial Lease series by discussing how commercial leases treat taxes and what tenants can do to improve tax treatment.

  Gideon Dionne

Taxes are another important consideration when working towards understanding your commercial lease. The tax provisions of your lease will detail what taxes are required to be paid by the tenant and what taxes are required to be paid by the landlord. The tax provisions will also detail how and when all taxes must be paid. To understand the true costs of your lease, you must understand what taxes you are required to pay and who takes on the risk that tax rates rise or additional taxes are levied.

What taxes will you be required to pay under your commercial lease?

The taxes you are required to pay are generally described in the definition of “Taxes” in the lease. How the definition will be written...

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Commercial Lease Letter of Intent (LOI) Basics

In this post we discuss the commercial lease letter of intent and why it is important to fully consider even if it is non-binding.

  Gideon Dionne

In an earlier post in our understanding your commercial lease series, we discussed the value of hiring a broker and briefly discussed letters of intent. We’ve have had many questions about letters of intent recently, so I am taking a quick detour to address this topic in more detail. I hope this post helps to shed light on what a letter of intent is and why it is an important part of understanding your commercial lease.

What is a commercial lease letter of intent?

A letter of intent (LOI) is a document that includes the important terms of the commercial real estate leasing deal and consolidates those terms in writing prior to the commercial lease being prepared. The letter of intent is designed to...

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Four Important Considerations When Launching a Startup

In this post we discuss four important legal considerations for every startup.

  Gavin Johnson

Today’s post highlights some of the key considerations that founders of any startup company should have in mind as they begin the process of turning an idea into a business. The action items we discuss in this post are simple things to address early on in the company and can have immediate and lasting positive impacts for the company and its founders.

Forming a Corporation or LLC to Limit Personal Liability

One of the first steps the initial partners should take is to form a limited liability entity (either corporation or LLC in most cases) in order to limit the owners’ personal liability. Forming the entity will also open the door to discussing the initial ownership percentages, vesting provisions, and management rights....

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Employee Equity Explained: Stock Options

Today, we are continuing our series on Employee Equity Explained by discussing stock options.

  Collin Roberts

Today, we are continuing our series on Employee Equity Explained by discussing stock options specifically.

Stock options are contracts that allow an employee to buy shares (this is called “exercising” the option) at a fixed price. Options are different than receiving stock because an option is exactly as it sounds; it’s an option to buy stock upon certain conditions being met, such as vesting (discussed below).

There are two standard types of stock options: Incentive Stock Options (“ISOs”) and Nonstatutory Stock Options (“NSOs”).

ISOs provide the recipient with certain tax benefits but they can only be provided to employees of the company, not independent contractors or non-employee board members. Additionally, only $100,000 in ISOs can be exercisable in any given year. NSOs on...

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The Definition of “Accredited Investor” and Why It Matters

Today’s post dives specifically into the definition of “accredited investor” as defined in Rule 501 of Regulation D of the Securities Act of 1933

  Gavin Johnson

The definition of accredited investor is a topic we’ve touched on briefly in several posts throughout the years, but today’s post dives specifically into the definition of “accredited investor” as defined in Rule 501 of Regulation D of the Securities Act of 1933. We’ll also point out why it’s important for you to understand who is considered an accredited investor.

Definition under Rule 501

The SEC states that the definition of accredited investor is “intended to encompass those persons whose financial sophistication and ability to sustain the risk of loss of investment or ability to fend for themselves render the protections of the Securities Act’s registration process unnecessary.” The definition of accredited investor under Rule 501 includes several types of individuals and...

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Non-waivable Provisions of the Washington Limited Liability Company Act

In today's blog post, we'll discuss the non-waivable provisions of the Washington Limited Liability Company Act in more detail.

  Charlene Angeles

Significant changes to the Washington Limited Liability Company Act went into effect on January 1 of this year. As I wrote in a previous blog post on the Washington Limited Liability Company Act changes, the changes were intended to make the law easier to understand and give members more flexibility in how they want to manage and operate an LLC. Under the old act, the non-waivable provisions were scattered throughout the act. Under the new act, the non-waivable provisions are all listed in one place for convenience— in Section 25.15.018 of the RCWs. In this blog post, we’ll discuss the non-waivable provisions in more detail.

The LLC Act allows members of an LLC flexibility in outlining through the LLC Operating Agreement how...

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Important Considerations When Transferring LLC Ownership Interests

Today’s post highlights important considerations when transferring LLC ownership interests, including transfer restrictions and the right of first refusal.

  Gavin Johnson

When buying or selling an ownership interest in an LLC, it’s important to consider several key issues that may affect the transaction. Today’s post highlights some of these important considerations when transferring LLC ownership interests.

Are there any restrictions on your ability to transfer the interest?

Most operating agreements will provide provisions that discuss the process for transferring a member’s interest. Many operating agreements require the member to provide notice of the transfer and often include a right of first refusal, which right allows the company to match the terms of a sale of a member’s interest (more on this topic below). And some operating agreements do not allow for a member to transfer his or her interest without unanimous member consent.

If...

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