Frequently Asked Questions

Should I operate my business through an entity instead of a sole proprietorship?

Generally, it is advisable to organize an appropriate entity within which to operate your business, if nothing more than to provide limited liability protection. Limited liability protection is twofold: first, an entity provides its owners with protection of their nonbusiness assets from the risks of the business; and second, an entity protects the continuity of the business against an individual owner’s liabilities incurred outside the business.

What type of entity should I use to operate my business?

Different entities can be used to operate a business. The correct entity to utilize depends upon the nature of each business and such factors as the number and types of owners, the predicted profitability of the business, the type of assets that will be acquired and utilized in such business, and the potential liabilities that could be generated from the business. Lavelle Law, Ltd. will assist clients in evaluating these factors and guide the selection of the appropriate business entity.

When is the best time to obtain capital for my business?

We encourage entrepreneurs to organize their business entity and raise initial capital from personal savings, family and friends. Use that initial capital to conduct critical activities such as organizing the entity, obtaining a domain name, creating a website, building any product prototype, conducting market research, selling your product or service and building customers. Once an entrepreneur can demonstrate recurring revenue over a few months, it becomes much easier to look for seed funding or other equity or debt financing. and should enable you to obtain a higher valuation for the company, as opposed to attempting to raise capital based on an idea alone.

How can you assist me with obtaining capital for my company?

We can make introductions to appropriate angel investors, banks, venture capital funds, and private equity firms, as well as represent the company in its securities issuance, guiding it with respect to its compliance with applicable securities laws.

What are some of the key issues to be negotiated with potential investors during an equity round of financing?

Some fairly common issues include the valuation of the company and how much is to be invested, liquidation preferences for investors (i.e., preferred versus common stock), how much equity is to be retained or earned by the founders, veto rights for investors, the type of preferred stock to be issued to investors, if any (i.e., straight, cumulative, participating, convertible etc.), and rights to appoint board seats.

How do I protect the intellectual property of my business?

We can apply for federal trademarks on your company’s behalf, help you negotiate and document appropriate licenses and can enlist patent counsel as needed to patent your product.

What can I do to attract and retain skilled employees for my business?

In the early stages of a company, employee compensation may be deferred or consist of a significant equity component, typically in the form of stock options. We can assist in drafting employee stock option plans and employment agreements with respect to key employees.

What if I want to use independent contractors?

We can assist with negotiating and documenting service agreements with independent contractors.

What about my relationships with suppliers?

Lavelle Law, Ltd. can help you negotiate and document supply agreements and manufacturing agreements which would govern the relationships between your company and its suppliers.

If my company takes off and becomes successful, can Lavelle Law, Ltd. assist me with crafting my exit strategy or business succession plan?

Yes, Lavelle Law, Ltd. assists entrepreneurs with their exit strategies and business succession plans, whether they involve strategic or portfolio mergers or sales of the company’s assets or equity to competitors, private equity firms or other investors, or key employees.