Startup Lawyers for Fargo, North Dakota

It depends on the terms of the convertible note. If you don't want it to be transferable, then you should include a provision in the note prohibiting transfers, assignments, etc.

Start-ups do raise capital through the use of Convertible Notes. Convertible Notes are starting to fade as the preferred sort of convertible instrument for start-ups and as SAFES become more prevalent. Convertible Notes are still quite common in more "traditional" start-up industries, such as those that involve real estate, manufacturing and other legacy industries.

Hello, I can help you with this project. I’m a semi-retired, long-time Texas attorney with substantial experience in business and corporate law. I counsel startups and small businesses, help them set up corporations or LLCs across the country and draft a variety of contracts and corporate documents. You should have an LLC for liability protections, whether it's in Michigan or in Texas. Actually, you would be better off organizing a Texas LLC because your Michigan LLC would have to register in Texas so you would be paying extra fees. There is no licensing requirement for nanny agencies in Texas. If you are interested, I will make you a flat fee bid to set up an LLC for you here in Texas. Thx. JV PS For more information about business entities, download a free copy of my ebook "Should Your Small Business Become a Corporation or an LLC? A Look at Liabilities, State & Federal Taxation & More!" from my website types-of-business-ownership.com

Good question. Convertible notes (as well as SAFE's, discussed below) differ from equity in several respects. The most fundamental difference is that a convertible note is debt. A second major difference is that, although the note is debt, its terms include the noteholder's right to acquire an equity position in the future; if a certain event later occurs (defined in the note, but typically the sale of preferred stock to a future investor (e.g. a venture capital firm), but also a sale of the company can have a similar effect), this will trigger the note to convert into equity and the note is "satisfied" ... that is, the debt is extinguished when the note converts and the holder thereby becomes an equity holder (typically coming to own shares of preferred stock very similar to that issued to the future investors in that triggering event). These two differences are related to a third. A convertible note is often issued without a valuation of the company. For example, when a startup business has no operating history, it is impossible for the startup founders or the investor to decide what the company is worth. Equity cannot be issued for a fair market value (FMV), since there is no basis to determine what the FMV is. A convertible note resolves that by giving the investor (the note holder) the right to convert the note into equity later on, when another investor and the company can agree on a company valuation. In other words, the convertible note allows the company to "kick the can (of valuation) down the road" to be dealt with at another time. But, since a convertible note is debt, is has a repayment provision, and normally carries interest. This means that the note is carried on the company's balance sheet as debt, and presents the company with the future obligation to repay the note if a conversion event has not happened before the note's maturity date. So, SAFE's are often used, especially now that they have become so familiar to investors. (SAFE stands for Simple Agreement for Future Equity). Essentially, as SAFE is a convertible note without the debt features. A SAFE carries no interest and does not have to be repaid. The investor in a SAFE will normally be sophisticated and able to assess the chances the company will do well enough for a conversion event (the issuance of preferred stock, or a sale of the company) to result in the investor's SAFE converting, and thus give the investor comfort that would otherwise be lacking in an instrument that has no repayment obligation. Like a convertible note, a SAFE kicks the can of valuation down the road, where a valuation can later be determined by the company and a future investor. Founders should exercise caution in issuing convertible notes or SAFE's. Among other reasons, founders commonly do not appreciate the impact that convertible notes or SAFE's can have on the founders' own ownership. Convertible notes and SAFE's often include a feature called a "valuation cap." This can result in surprising dilution, as well as the issuance of equity to the converting note or SAFE holder at what is effectively a very low price per share, costing the company far more than the founders may have expected. Also, notes and SAFE's with very similar, but different, terms can result in a complicated capitalization table, making negotiations with venture capital firms later on more difficult, an equity transaction more complex, and thus the process more time-consuming and (therefore) more expensive.

Hi, congrats on starting a business! You're asking all of the right questions. The short answer is that your LLC operating agreement can spell out in as much detail as you want what decisions the Manager of the LLC is free to make on their own, and what decisions require a vote from the other Members. You can also elect to have a multi-manager LLC, in which each Manager is responsible for different aspects of the business, such as day-to-day operations versus overall business strategy versus capital raising. Again, each one of these Manager roles can specifically delineate what decisions and actions the Manager can take automatically, without other Members' prior approval. I specialize in business and corporate transactions and have drafted 100s of LLC operating agreements. I would be delighted to help you. Please reach out at talin@hitiklaw.com or call my office at (312)685-2292.