• August 2019
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Equity Financing

lawtrades services equity

Managing equity.

Use Equity Based Financing to exchange shares in your company for an investment with no repayment obligations.

– Confirm the best form of funding

– Learn about useful terms

– Avoid problems down the road


The legal behind equity

Equity financing is a method of raising capital by issuing stock in your company to investors. In exchange for the investment, the shareholders receive ownership interests in the company. If you’re starting a business, and are looking for an alternative to taking out a loan, equity financing is a solid option. Stock is a type of equity that’s commonly referred to as an equity investment. When investors buys stock as an equity investment, they’re expecting its value to increase and to derive income from its dividends or the profit you make from its sale (called capital gains).

Common investors of equity include friends and family, venture capitalists, and angel investors. Equity financing is a useful way to fund your business, provided you have the right type of business. Although it can be an alternative to bootstrapping or debt financing, there’s more to it than that. Be sure to consult a qualified equity lawyer before entering into equity financing.

The benefits
Confirm the best form of funding

There are other attractive options for companies – such as convertible notes – and a lawyer can assess if those sources suit your business better.

Learn about useful terms

An experienced lawyer has assisted startups with this process already and can suggest terms that have worked in the past.

Avoid problems down the road

By handling fundraising on your own, there’s a much greater chance of messing it up. Using an equity lawyer alleviates that concern, and we’re sure you’ll enjoy working with your equity lawyer at LawTrades.


FAQ


Do I need an equity lawyer to help my company with equity financing?

Equity financing is complex stuff. The documents used are typically filled with legal and investing terminology, making it hard for regular people to understand. Working with an experienced business lawyer will enable you to understand the financing agreements your company enters into and assure that the deal makes sense for your business.

Should my company raise funds by equity financing or convertible notes?

Both forms of fundraising have pros and cons and a skilled equity attorney is the best to gauge which route is most appropriate for your company. Equity financing allows you to raise funds without tying yourself down with the obligation to pay back a specific amount of money to investors at a specific time in the future. On the other hand, convertible notes allow you to retain control and ownership of your business, but require repayment. In terms of ease, a convertible note is certainly preferred over equity financing as it can be written in just a few pages whereas drafting an equity agreement requires due diligence, valuation assessment, SEC compliance, and negotiation.

What is a term sheet?

A term sheet is a document which outlines the general terms of a financing agreement between a business and an investor. It essentially serves as a blueprint for the final agreement between the parties, as well as a formal investment contract that documents the arrangement. The key offerings include amount raised, price per share, pre-money valuation, liquidation preference and more.

What is an angel investor? A venture capitalist?

An angel investor is typically a high net worth individual who provides an emerging company with capital, in exchange for equity (ownership) or convertible debt. On average, angel investors receive about a 15% post-seed equity position in startup companies. This percentage can be a bit higher or lower depending on the circumstances and negotiations. Venture capitalists (“VCs”) are individuals or firms that manage funds set aside to invest in new businesses. Modern VCs tend to focus on young, high-growth companies, which are usually tech startups. This type of equity investor differs from friends and family and angel investors in that they are usually only interested in high value investments.

Do I have to report equity financing to the U.S. Securities and Exchange Commission (SEC)?

Certain forms of equity financing are required to be registered with the SEC. A lawyer can help you with this potential reporting requirement.


Reviews 

 


Daniel, H. | ★★★★★

“Simple and trustworthy system. The project manager through text message is a good idea and helps a lot with the process, especially their timely response.”


Rafael, R. | ★★★★★

“I was very comfortable with the environment it was my first meeting and I knew it was on the right track I did understand my lawyer I was listening I did absorb the information given to me.”


Ori, A. | ★★★★★

“Great experience all around, LawTrades was just so much more personal and much better than other startup/online on-demand solutions for legal work,. Almost feels like I handpicked and hired the attorney myself. The Attorney was available to answer questions by phone or text message, so was the LawTrades rep who set the whole thing up. And when setting up new entities you always have questions, so this was a big deal for me. The Attorney assigned to my project was available on demand to help out explain things every step of the way and I think the guys at LawTrades have done a great job with making you feel extremely comfortable. After all was done I even got an email and a call from one of the co founders of the company to make sure I had a seamless experience. I never got a call from other companies I had used in the past like Legal zoom and the whole thing always felt so automated. Yes, granted Legal zoom probably have way more clients than Lawtrades and as such would not be feasible for their management to call everyone, however, that was a nice touch which I do appreciate. I will definitely be heading back to Lawtrades whenever I require legal assistance.”


Tamas, P. | ★★★★★

“Price. I know what I am paying instead of getting surprised. Transparent pricing I know what each bit costs instead of getting a big bill and not knowing what parts cost what and how much was for service vs hard fees such as filing fees. Also things progressed rapidly.”


Yash, P. | ★★★★★

“Amazing service, i cant get over texting to get a lawyer. it’s revolutionary and can legitimately improve the US justice system for people with no access to quality lawyers.”


Janet, S. | ★★★★★

“Quick and easy, I used LawTrades and worked with attorney Jonathan Hood to review a NDA. I got my questions answered right away. Arman was a great help making the connection. Would highly recommend the service.”