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The best advice you’ll ever get for starting a business

                                                 About the Author

Dov S. Rosen is a JUSTLAW network attorney who represents private and publicly-traded companies in negotiating mergers, acquisitions, private placements,  IPOs, and commercial contracts.  He also has an active practice negotiating commercial real estate loans,  property acquisitions, and commercial leases.                   

Dov graduated from Georgetown University Law Center in 2011 and, in 2020, founded The Law Offices of Dov S. Rosen. 

He can be reached at [email protected]

(This article is the first in a multi-part series. Stay tuned to The Verdict for the next installments!)

 

You’ve got a winning idea. You have a business plan set up. Maybe you even have some investors lined up.

Congratulations – you’re on your way to starting your own business.

What’s next?

Part I: Cash 101

Cash is the lifeline of any business. And the key question for your business is how that cash flows in and how it may be expected to flow out. This leads us to the first big choices your business will make: how to raise money, whom to raise it from, and what to give up in return.

 

Early-stage startup investors will often include family and friends, “angel” investors (generally, high-net-worth individuals who are willing to invest in early-stage companies in exchange for preferred equity), and – for particularly promising new companies – venture capital firms. Nowadays, crowdfunding platforms like GoFundMe are also becoming increasingly popular for early-stage companies (we will explore the advantages and limitations of crowdfunding in a later installment). For startups later in their business lifecycle, institutional investors may play a greater role, and for more advanced companies the public equity markets may become relevant.

 

Each of these investors will have different expectations about what they will receive in return for their money. Typical forms of startup capital include common equity, preferred equity (often with the right to convert to common at a later time), and convertible debt (debt with a right to convert to equity at a later time). Other equity structures like simple agreements for future equity, or “SAFEs”, offer distinct advantages and disadvantages and are becoming more common. And for many businesses, business loans (including SBA loans for qualified borrowers) are a good option for providing initial capital – but with their own advantages and disadvantages. We will discuss these various types of startup capital later in our series.

 

A note on securities laws:

Our focus is on early-stage startups engaging in private offerings that are exempt from registration with the SEC or other state regulatory commissions. Securities laws are not just for public companies – any company that issues equity to raise money is potentially subject to them and must fall within an exemption avoid registration and reporting requirements. In later parts of this series, we will speak about the various exemptions from securities laws and

how to make sure you stay within the rules throughout your business lifecycle.

Trade-Offs

Cash will almost always come at a cost. To make your idea a reality, you will inevitably have to trade a piece of ownership over the idea you have created and often a degree of control over the business you are building. But that does not mean all equity raises will have the same impact on the future of your business. The choices you make early on can determine the evolution of your business for years to come, preserving your flexibility and a large degree of your control. Conversely, a sub-optimal equity structure, poor entity choice, or improperly drafted company agreement can hamstring your ability to raise cash, leave you stuck with a bad partner, and even cost you the control you need to make your business grow.

 

But making necessary trade-offs is a natural part of the growth cycle of every business. The key is to establish clear expectations and to structure investments in a way that respects the needs of investors while preserving your ability to grow the business. The trade-offs you will have to make will generally come in the following areas: keeping cash in the business, keeping the flexibility to raise more cash, and keeping control over business decisions

Can you be fired for using of Social Media?

The new age of modernization arising over recent years has created an emergence of social media usage. Whether it is Facebook, Twitter, Instagram, Snapchat, or a variety of other forms of social media, people constantly document their lives and thoughts on the Internet. Therefore, the risk of termination of employment has increased, due to social media usage. In fact, in most recent months, terminations for social media posts have risen over content relating to COVID-19 and the Black Lives Matter movement. Thus, people should be aware of their rights, while employed, on social media platforms.

First and foremost as a general rule, employers have the right to terminate employees for any lawful reasons. Terminating an employee for their use of social media could be construed as a lawful reason. However, there are some protections afforded to employees who are facing possible termination for their social media postings.

Before we introduce you to these protections, please be aware that the law on social media usage relating to employment is changing every day. Therefore, it is crucial to hire an attorney if you plan on suing your employer for a potential wrongful termination claim.

 

Protections

 

Posts outside of working hours:

Unsurprisingly, social media posts during working hours are discouraged by employers. If you post something on social media during working hours–of which your employer is not happy with–it will most likely be grounds for termination. Employers have a reasonable expectation that you will put forth all of your attention to work and not social media, thus they generally will not have trouble in moving forward with a valid termination of your employment.

In contrast, if you post something on social media outside of working hours, you generally have more freedom from retaliation by your employer.

Thus, ask yourself: was this post you made during working hours? Was it on the weekend? Was it during a break? Was it after work? Be ready to answer these questions before you move forward with an attorney consultation on this matter.

Posts concerning the working conditions of your employment:

Employees have strong legal protection when they are discussing matters of workplace conditions. Such workplace conditions include, but are not limited to:

      1. Harassment
      2. Vacation time; sick days
      3. Union discouragement
      4. Pay rate
      5. Unsafe working conditions

However, there is not a generally established blanket rule for these types of posts. Instead, posts relating to any of the working conditions made above that are false or misleading are not afforded any protection. 

Therefore, if you claim on social media that your employer is stripping your vacation time, yet there is no such indication of that, you could be fired for a false claim relating to workplace conditions.

Final Thoughts:

First Amendment:
Some of you may be wondering, why doesn’t the First Amendment protect my posts on social media? Doesn’t the First Amendment afford everyone the general right of Freedom of Speech?

Unfortunately, the First Amendment only applies to the government. Private employers do not have to abide by the First Amendment. This is doctrine under the law of government/state action.

Privacy setting on social media:

Sadly, just because your social media account is set to private, does not mean an employer cannot fire you for what you post on your private account. Because of the public nature of Facebook, Instagram, and Twitter, courts have held there is not a general expectation of privacy when you post on social media. Therefore, be aware of this if you believe setting your posts and account to private will save your job.

Employment agreement/Handbook:

Employers are restrictive as to what you can and cannot post on social media. They will explicitly state those restrictions either in your agreement for employment or any employee handbook. Take a look at them to see where your employer stands on an employee’s use of social media.

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Remember, you should always consult an attorney. There’s no need to take these matters into your own hands when high quality legal advice has gotten so affordable. JUSTLAW is here to help. Feel free to schedule a meeting with one of our attorneys if you’d like to learn more.