Profits Interests Explained

What is a Profits Interest? Profits interests are the most well-known and commonly used form of equity compensation used by partnerships and limited liability companies that are taxed as partnerships to incentivize key service providers to remain invested in the success of the company. Profits interests are granted to service providers or key employees in exchange for their contribution of services to the Read More

Key Considerations for Convertible Debt Financings

What is Convertible Debt?  Startups and entrepreneurs seek to raise early stage capital in a variety of ways, but one of the most common is through a convertible debt structure utilizing a promissory note that can be converted into equity securities of the issuing company on the occurrence of various events stated in the note.  In the last few years you may have also heard of alternatives to convertible note Read More

5 Ways You Can Help Your Business Attract Investors

Whether you’re just starting a new business or are preparing to scale your existing company to get to the next level, it’s common to seek out potential investors to provide the capital your company needs to take flight. Unfortunately, most founders can’t just make an appearance on Shark Tank and get top deep pocketed investors immersed in bidding wars over funding their companies. However, there are some practical Read More

Rollover Structures in M&A Transactions

Private equity (PE) investors often require certain founders or sellers to exchange or “rollover” a percentage of their equity into the buyer of the business (or into a fund or holding company controlled by the PE investor). A similar rollover structure might involve the sellers being required to “co-invest” with the buyer by directly reinvesting (or rolling) a portion of the cash received by the sellers into a Read More

Earnouts in M&A Transactions

Earnouts in private merger and acquisition (M&A) transactions provide for a portion of the purchase price to be paid to the Seller contingent upon the target company reaching certain financial targets or performance milestones following the closing.  Earnouts are typically among the most heavily negotiated provisions in a private company acquisition and are highly susceptible to disputes following the closing. In Read More

Practical Considerations Involving Drag-Along and Tag-Along Rights

What Are “Drag-Along” and “Tag-Along” Rights? “Drag-along” and “tag-along” provisions are staples of venture capital and other investment agreements.  They are often included in investors’ rights or shareholders’ agreements for corporations or operating agreements for limited liability companies.  The “drag-along” provision, sometimes called a “bring along,” gives a majority owner or owners the right to require the Read More

Boilerplate Clauses in Business Contracts: Why They Matter

Boilerplate clauses are those provisions typically placed at the end of a contract, often grouped together under a “Miscellaneous” or “Other” heading. They look like a lot of legalese that can continue for multiple pages. They do not relate to the substantive provisions of the contract, are mostly standardized, not controversial, and parties typically don’t spend much time negotiating them. Do boilerplate clauses Read More

Six Areas to Consider in Partnership Agreements

Are you considering a business partnership? When structured properly, a partnership can benefit your business in ways supported by the timeless adage that "two heads are better than one." Practical benefits of partnership might include access to a level of capital, labor, know-how, customers, or expertise not available absent partnership. However, just like personal relationships, business partnerships have their ups Read More

Selling Your Business? 3 Steps to Help Prepare

Merger and acquisition (M&A) activity is expected to remain robust in 2019. Qualified buyers are still able to access capital for acquisitions at relatively low cost. This, in turn, provides qualified sellers with leverage to command higher sale prices. Sellers who most successfully capitalize on these opportunities tend to be those who are most prepared.   The complete process for a business sale Read More

Joint Ventures 101

A joint venture (JV) is a business arrangement where two or more parties pool resources for a focused task, project or investment. Each participant is normally independently responsible for contributing toward the costs and labor based on the strategic value each participant brings to the venture, and they also have an agreed upon sharing percentage in any resulting profits of the venture. JVs can be documented in a Read More