Sheboygan Startup Attorneys & Lawyers

What is an Earnout?

An earnout is a provision in a purchase agreement. It can also be a separate agreement that's part of a group of transaction documents in a merger or acquisition. It makes part of the purchase price dependent on the startup company reaching certain milestones within a specified time. When the company reaches the milestones, the seller gets the earnout in stocks or cash. Earnouts are popular among private equity investors who might not be able to keep a business running on their own after a purchase. They usually defer between 10 and 50 percent of the purchase price.

Reverse Earnout: What is it?

A reverse earnout pays the buyer an amount or percentage of a performance target. The payment is reduced if the target is missed, so it's the reverse of a standard earnout.

Why is an Earnout Important?

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What is Form D?

Form D is a filing with the Securities and Exchange Commission (SEC) that allows companies under a Regulation D exemption or Section 4(6) exemption to offer stock to finance their businesses without going through the IPO process and selling stock to the public.

Companies that sell securities typically have to register with the Securities and Exchange Commission (SEC) under the Securities Act of 1933. This is a long process and can make it complicated to follow and understand the law. Smaller companies seeking venture capital can instead file Form D - a process that is quicker, simpler and protects the company from potential legal problems.

Why Is Form D Important?

Form D is important because it keeps you within legal boundaries. You can't simply begin selling securities to fund your busine

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Statement of Work: What Is It?

A statement of work (SOW) is a document that lists all the work a supplier will do during a project. It will define the amount of work, the expected quality of the job performance, and the timeframe for completion.

A well-written SOW will help both parties understand the parameters of a successful project. A poorly worded SOW could lead to conflict. The parties may argue over unclear expectations and the definition of good work.

To avoid such arguments, a well-written SOW should include:

• A list of expected products and services
• A list of tasks leading to the product's creation
• Specifics regarding who will handle each of the listed tasks
• Due dates for deliverables
• Payment schedule and deadlines
• Determination of which party will helm the project and handle major

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“How should I structure my new business – as an LLC or as an S Corp?”

I get that question from time to time from clients who want to start a new business.

But there are really two separate questions embedded there:

Question 1 (State Law Form): Should I form my company under state laws as a “Limited Liability Company” or as a “Corporation”?

Question 2 (Federal Income Taxation): Should my company elect to be taxed under federal income tax laws as a “Partnership” or as an “S Corporation”? (The concept of “S”-vs.-“C”-Corporation is purely a tax distinction.)

To make the right decision about the form of your new business, it’s importa

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What is Your Principal Place of Business?

This question is not as simple as it sounds. For a sole proprietor or a one location company, the answer is straightforward – your principal place of business is your home, shop, office or wherever you primarily do  business. But large companies and corporations often have several locations spread out across the country, or even around the world. In these situations, the company headquarters is usually the principal place of business. This is not necessarily the same state as the state of incorporation.

The supreme court finally ruled that the “nerve center” of the company is the principal place of business. The nerve center test refers to the single place where a corporation’s officers direct, control and coordinate the corporation’s activities. In practice, it is usually where the headquarters are, as long as the headquarters are the center of direction, control and coordination. It

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