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What is valuation cap   A valuation cap is a term of a convertible note or a SAFE. It is also a great way to attract investors to any startup, providing them with an incentive to invest. Starting a successful financing round for your business will expose you to a slew of new terms. It is essential that you grasp these terms and what they represent to secure finance on favorable terms for your company. If you’re thinking about obtaining financing for your startup or firm, you’ve probably heard the term “convertible notes,” “SAFEs,” or “value cap” before. Here’s an explanation…
How to add a member to an LLC Generally speaking, to add a new member to any LLC, you must first follow the operating agreement or the state law regarding LLCs. Though there are some additional things to take into consideration. Most operating agreements lay out how to add a new partner on their operating agreement. However, if your LLC doesn’t have an operating agreement, you would need to follow your state’s laws concerning LLCs. The process for how to add an LLC member involves amending the LLC’s operating agreement that brings in the new member. Current LLC members must then vote…
Subscription Agreements A subscription agreement is an investor’s request to become a member of a limited partnership (LP). It also serves as a two-way warranty between a corporation and a new shareholder (subscriber). The company intends to sell a specific number of shares at a fixed price in exchange for the subscriber’s promise to buy the shares at the same price. How Subscription Agreements Are Regulated Subscription agreements are generally covered by SEC Rules 506(b) and 506(c) of Regulation D. These stipulations define the method of conducting an offering and the amount of material information that companies are required to disclose to…
Stock Warrant Purchase Agreements Stock Warrant Purchase Agreements What is a stock warrant? According to Investopedia, warrants are derivatives that give the right -but not the obligation- to buy or sell a security at a certain price before expiration. The price at which the underlying security is sold is referred to as the exercise price or strike price. In this sense, a stock warrant gives holders the right to buy a certain amount of company stocks at a fixed price until the expiration date, receiving newly issued stock from the company. The goal of a stock warrant is to increase…
Filibuster and Federal Marijuana Legalization Filibuster and federal marijuana legalization Last years have been very important for cannabis legalization. Currently, fifteen states, two territories and the District of Columbia have legalized cannabis for adult recreational use. New York is the most recent state to legalize cannabis, which was passed in late March 2021, during New York’s 2021 session.  And the road ahead seems promising for states Cannabis legalization, with states like Virginia or New Mexico that have proposed the implementation of recreational marijuana legalization bills that would establish a regulated commercial market. More and more states are taking the…
Board Member Agreements & How to Control Corporate Owners Board Member Agreements & How to control Corporate Owners In the Cannabis Industry, having the right partners is essential. In practice, a lot of times you will be looking at a “49/51 deal” in which one of the partners has a 51 percent and there’s a second partner –or a number of partners- that share 49 percent ownership of the company. A partnership is a risky business endeavor because partners can fail to meet their obligations to the organization, which can cause relationships to sour. A partner who owns 51 percent…
Business Succession Planning with Trusts Free Strategy Session? Each day, I set aside one hour for a free strategy session for new clients. Book yours before it’s gone. Book Appointment Business Succession Planning with Trusts   Understanding how a trust can help with your business succession is key to assuring your financial stability, both in planned transitions and unplanned transitions of your business.   You may be looking ahead to retirement and wondering how best to transition out of your business and smoothly turn it over to a successor or want to ensure that at your death your legacy continues.…
When Is An LLC Needed Call Now We want to help you out on your business journey and explain to you when a corporate liability shield, like an LLC or corporation is needed or not. As small business owners it can be extremely valuable to find guidance in what you should be doing for your business and when. We are going over when you need to get a liability shield for your business. There is no requirement that you create an LLC before you go into business, it can be a smart move and highly recommended sometimes but is not…
How To Stop Check Kiting Scams Check kiting is one of the many ways your financial securities can be violated.   It constitutes a type of bank fraud very popular in the early 2000’s, that was in its majority shut down by a regulation called check 21 act.  Even though not as common as it used to be, check kiting is still present in many fraudulent transactions. Here we explain to you everything there is to know about this illegal procedure    Call Now Definition of Check Kiting Check kiting is the fraudulent procedure of deliberately issuing  a check for…
Fiduciary Duty Litigation in Corporate Law   A fiduciary duty is an obligation that exists in a relationship in which one of the parties has the best interest when acting on the other party/es behalf.  There are multiple types of fiduciary duties. Some examples can be the obligations between lawyers and clients; shareholders and directors; between business partners; and many others where special trust is part of the nature of the relationship, or a reliance on the one party exists to exercise its expertise or discretion on behalf of the others.  Breaches to fiduciary duties are extremely common, especially…
What Is An Accredited Investor What is an accredited investor? An accredited investor is a person or legal entity with a special status under financial laws, who is allowed to participate in non-registered investments, since being considered an individual with the experience and means to participate in riskier investments and bear any potential losses. The Securities and Exchange Commission (SEC) concedes companies and private funds the opportunity to not register certain investments as long as the firms sell these assets to accredited investors exclusively. Call Now Who Is an Accredited Investor?  In order to qualify as an accredited investor, a…
Buy Sell Agreements Why Do You Need a Buy Sell Agreement Lawyer? A buy-sell agreement is a legally binding contract between the owners of a business where they agree on what happens to a partner’s shares in the event of life-changing situations that may result in chaos that could potentially ruin the business and bankrupt its owners, assuring the remaining owners that the business will carry on successfully. Call Now A Buy Sell Agreement Lawyer Helps Transition the Business Ownership. The Buy Sell agreement is also heard of as a buyout agreement, a business will, or a business prenup. Comparing…
Victory for Hemp Hemp is completely legal to grow in Illinois with the proper state license. Illinois Hemp Ban Overturned in Rural Oakland The City of Oakland tried to ban hemp farming inside its city limits by claiming authority under the Illinois Municipal Code section regarding Urban Agricultural Areas. Collateral Base represented the prejudiced farmer and had the municipal ordinance tossed by an Illinois Court. Because the City of Oakland is not a home rule community Dillion’s Rule in Illinois barred the City from banning hemp due to its lack of authority.  Let’s touch on what is a “home rule”…
Agriculture Bankruptcy & Marshalling of Assets General marshaling principles. The equitable doctrine of marshaling rests upon the principle that a creditor having two funds to satisfy his debt should not be permitted to arbitrarily prejudice a junior creditor who may resort to only one of the funds. Meyer v. U.S., 375 U.S. 233, 236, 84 S.Ct. 318, 11 L.Ed.2d 293 (1963).  Bankruptcy and Ag Financing Issues The greatest challenge to any secured transaction arises when a borrower files a proceeding under the Bankruptcy Code. Originally enacted in 1986, Chapter 12 of the Bankruptcy Code provides a procedure by which family…
“Justifiable Reliance” Under Section 523 of the Bankruptcy Code Collateral Base Attorney Tom Howard recently won a $1.8 million dollar verdict in a bankruptcy case out of the Central District of Illinois. The case, Pliura v. Brady (In re Brady), concerned several novel issues of law, including the standard for “justifiable reliance” under §523(a)(2)(B) of the Bankruptcy Code.   Background: the Creditor, the Debtor, and the Loan   The case concerns the Chapter 7 Bankruptcy of Bob Brady (Debtor), a prominent home builder in Central Illinois. After earning his MBA and spending several years in banking, Bob Brady joined Brady…
Filing Financing Statements and Determining Priority Determining Priority in Perfected Security Interests Who’s on first? This question decides what creditor gets paid, and what becomes an unsecured creditor whose best option is to recover pennies on the dollar for the money loaned to a business that purportedly had collateral. Priority to collateral needs determination to see who can seize it in satisfaction of its indebtedness to the business.  How and Where to File UCC Financing Statements   As a general rule, in all secured transactions involving a security agreement executed by the debtor, the debtor authorizes the secured party to…