Fort Lauderdale Startup Attorneys & Lawyers

What Are Co-sale Rights?

Co-sale rights, also known as tag-along or (less often) take-me-along rights, are the rights of minority shareholders to join in when the majority shareholder or the founders sell their stock. Therefore, if the company's original owner sells his or her stock to a corporation for $20 per share, every investor with a co-sale right can get the same deal.

Co-sale rights are usually paired with the right of first refusal, or ROFR. With an ROFR clause, a company or its shareholders can buy the majority shareholder's stock if he or she decides to sell to a third party. This lets the current investors keep control of the company in case they don't like the third-party investor.

For example, say a company called Un

...

This article assumes that you already know what “seed money” means. But if you need more information on the topic, please take a look at this introductory article on seed money.

Are you looking to start a company? If so, you may be looking for seed money to get your business off the ground. While considering how to bring in seed money, here are some things for you to consider:

1. Understand the Difference Between Seed Funding and Venture Capital

Seed funding and venture capital are very similar, but there are three key differences.

• Seed funding arrangements give more flexibility than venture

...

Updated October 16, 2020: 

LLC Versus C Corp: What Is It?

An LLC is a business entity that is legally separate from its owners, who are known as "members." An LLC can have one member or many members.

A C Corporation refers to any corporation taxed separately from its owners. Unlike S Corporations, taxing of C Corporations occurs twice, once on the earnings and again on the salaries of the owners.

Similarities of an LLC and an S Corp

LLCs and S Corps have several similarities:

• Limited liability protection. In both an LLC and an S Corp, owners are not personally responsible for business debts or liabilities.

• Sepa

...

What is a Convertible Note?

A convertible note is a security instrument, typically used by an angel investor or a seed investor, that takes the form of a short-term loan, either secured or unsecured, to provide seed capital for a business. The convertible nature of the note allows the debt to be converted into equity in the company (typically in the form of preferred stock) at some specified future event, often in connection with the company’s valuation in a later round of funding. Convertible notes are often preferred by seed investors as a way to fund a new company while avoiding the need to value the company in its earliest stages when accurate valuation may be difficult.

Should a company fail before the note is converted, the investor’s interest in the convertible note has priority over an equity interest (st

...

What Are Tag Along Rights?

Tag along rights or "co-sale rights" are legal agreements that guarantee minority stakeholders the right to sell their shares in the company at the same time and under the same conditions as the majority stakeholder. These rights are often used when companies are founded and capitalized because it protects investors and encourages them to buy the company's stock at an early stage. This is especially true for most angel investors, who won't even think of joining unless there are tag along rights.

Why Are Tag Along Rights Important?

Tag along rights protect minority stakeholders by giving them a certain amount of control over their own investments. If a principal stakeholder of the company liquidates its share, smaller investors won't get a bad deal. In simple words: If

...