Corporate Finance & Securities

An Overview of Laws Governing Bitcoin and Other Digital Currency

Bitcoin and other crypto currencies are currently subject to limited regulation. While lawmakers ponder the merits of new regulatory schemes targeted for crypto currency, we’ll take a look at some of the existing legal frameworks that could cause problems for Bitcoin businesses and Bitcoin users:

Money Laundering Laws

You can’t use Bitcoin to knowingly facilitate illegal purchases. For example, if you’re a payment processor and you know you are processing payments to facilitate purchases of heroin, you’re going to be subject to some serious penalties.

Washington’s money laundering law provides:

(1) A person is guilty of money laundering when that person conducts or attempts to conduct a financial transaction involving the proceeds of specified unlawful activity and: (a) Knows the property is proceeds of specified unlawful activity;...

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Corporate Finance & Securities

Taking a Look at the Washington State Crowdfunding Bill

As Gideon reported in last week’s news roundup, Substitute House Bill 2023 would bring crowdfunding to the state of Washington if it makes its way through the Washington legislature.

Background on Crowdfunding As a starting point, it’s worth noting what we mean here when we say “crowdfunding.” Crowdfunding is the exchange of company equity (usually stock) for cash from investors.

This can be contrasted with Kickstarter-type platforms where the person giving money to the company does not get stock, but instead gets some sort of swag or other tangible product in return. For example, a company may give a t-shirt in exchange for a small amount of cash from an individual.

Basics of Washington SHB 2023

All offerings would have to be either: (a) offered through a...

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Business Startup

iVLG News Roundup Week 5 2014: Washington State Advances Crowdfunding; Microsoft CEO Search Nearing End; Bay Area’s Tough Week

States, Including Washington, Take the Lead on Equity Crowdfunding through Intrastate Offerings

It has been widely reported that states are taking the lead on advancing legislation that gives startups access to capital through equity crowd funding. And this week Washington state joined the leaders as the crowdfunding exemption bill HB 2023 advanced through the Washington state house of representatives. The bill is designed to provide an intrastate exemption to Washington’s rules for certain smaller deals, which would allow some of the promise of Title III of the Jobs Act to be realized for intrastate offerings. The bill must still move through the senate, and if it does, Washington would join Wisconsin, Georgia, and Kansas in passing crowdfunding legislation.

Microsoft to Name New CEO

Microsoft announced that it will meet this weekend to decide...

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Corporate Finance & Securities

What is a Security and Why Does it Matter to Your Business?

When a company sells stock to raise money, the stock is called a “security.” But “security” is not just another word for stock. The term “security” can be many different things. And unfortunately there are scammers who try to sell phony company stock and other securities to raise money and give nothing in return. Consequently, securities are one of the more heavily regulated business practices. There are all sorts of restrictions on who and how and when and where you can sell securities. If you violate these restrictions you may face financial ruin or jail or both (see: Madoff, Bernie). Because securities are so heavily regulated, it is important to know whether something you sell or purchase is a...

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Business Startup

Guns in the Workplace: Managing Your Business’ Risk

The debate over firearm regulation is as old as firearms themselves. Recently, the debate has been brought to the forefront because of the actions of mentally ill people in Colorado, Connecticut, Washington D.C., and Arizona, among other places. But how does firearm regulation affect you day to day as a business owner or employee in Washington? That is, what should you know about guns in the workplace?

What can your employees do lawfully with their guns?

Business owners and employees are subject to the general carry laws in Washington. These gun laws allow a person to open-carry (visible in a holster) in most places or conceal a pistol while in that person’s fixed place of business without a concealed pistol license (“CPL”)....

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Business Startup

Back to the Basics: Choosing the Right Entity For Your New Business: Part 1: Sole Proprietorships and Partnerships

There are many considerations when you start a business: refining your products and services, developing your sales and marketing strategies to attract customers, securing a lease, and hiring employees. Because it can directly affect the other aspects of your business formation, one of the most important first steps in forming a business is organizing the business using the proper legal entity. To help you understand the issues and help you choose the right type of entity for your new business, we will discuss the various business types, including their pros and cons. Today’s post will cover sole proprietorships and partnerships, our next post will cover LLCs and corporations, and our final post will consider limited liability partnerships.

The Sole Proprietor A sole...

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Business Startup

Recent WA Case Highlights Importance of Compliance with State Taxes; Even When Conducting Limited Business in the State

A recent court of appeals case highlighted what happens if you don’t pay your business and occupation tax (B&O tax) to the state of Washington. In Space Age Fuels v. State of Washington, Space Age argued that the dormant commerce clause prohibits Washington from taxing its activities because they lack a substantial nexus with Washington. The dormant commerce clause is implied under Article I of the United States Constitution and prohibits a state from passing legislation that improperly burdens or discriminates against interstate commerce. The court of appeals disagreed with Space Age and affirmed the lower court’s ruling denying a refund of the paid B&O tax. If you do any business in WA, it may make sense (after this case)...

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Corporate Finance & Securities

Raising Capital in Washington State: Part 4

In a recent post I provided an overview of raising capital under Washington States WAC 460-44A-505 (Rule 505). Today, I’m going to explain another exemption provided for by Federal and State law under which a company can raise capital, Rule 506. The basics of Rule 506, codified in WAC 460-44A-506, are as follows:

1) There is no maximum offering amount;

2) You can sell to an unlimited number of accredited investors;

3) You cannot sell to more than 35 non-accredited investors (you don’t want to sell to any non-accredited investors, however).

Disclosure Requirements

As discussed in our last post, the Securities Act of 1933 and 1934 were primarily put into place to protect investors in the wake of the stock market crash of 1929. In light of this, the most important factor in any securities offering is...

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Corporate Finance & Securities

Raising Capital in Washington State: Part 3

Recently, I provided an overview of raising capital under Washington state’s WAC 460-44A-504 (Rule 504). Today, I’m going to explain another exemption provided for by federal and state securities law under which a company can raise capital.

The Washington Uniform Limited Offering Exemption (ULOE), codified in WAC 460-44A-505 (Rule 505), allows for an offering amount up to a maximum of $5,000,000 regardless of the location of investors. Additionally, this type of offering requires that:

1)      The offering cannot be sold to more than 35 non-accredited investors, regardless of residency;

2)      You can sell to an unlimited number of accredited investors;

Disclosure Requirements

As discussed in our last post, the Securities Act of 1933 and 1934 were primarily put into place to protect investors in the wake of the stock market crash of 1929. In light of...

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Corporate Finance & Securities

Raising Capital in Washington State: Part 1

You’ve exhausted all sources of funds for your business: family loans, bank lines of credit, and other sources of small business capital. However, you need additional capital to expand, grow and take your business to the next level. It’s time to start thinking about raising capital from investors through a securities offering.

This is the first post of my new series on raising capital and the various options available for your business.

As a brief primer, you should know that all businesses considering a securities offering must comply with federal and state securities laws. The Securities Act of 1933 and 1934 were put in place to protect investors after the market crashed in 1929 and prior to this point in time, securities were chiefly governed by...

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