Our very own Don Baker has an article on LLC capital accounting in the Summer 2010 edition of the Michigan Business Law Journal.  Here’s the intro:

With the widespread adoption of the limited liability company as a preferred entity format for non-public entities, business practitioners are forced to grapple with provisions in operating agreements that adopt detailed accounting and tax treatments generally beyond the traditional expertise of non-tax lawyers. These accounting and tax issues are not present in forming a standard corporation, but are thrust on the practitioner anytime even the most basic multi-member LLC is formed. While the “standard” LLC operating agreement approaches to these matters are at this point generally familiar (though perhaps less well understood), they are not simply “boilerplate.” I fear that we (and of course our clients) are often insufficiently aware that these provisions mandate specific economic relationships and results among the members, i.e., who gets what money. It is entirely possible that use of these standard approaches can unknowingly mandate results that are inconsistent with the client’s business “deal.”

The Journal can be found here, and the rest of the article here.

–Matt

Safford & Baker PLLC is today’s spotlight in The Great Lakes Innovation and Technology Report for Monday, August 30, 2010.  Here’s the article:

Randy Safford and Don Baker are veteran lawyers, but they’re also veteran entrepreneurs, both in their law firm and in other ventures they have helped launch.

And that’s why they, joined by their colleague, Matt Bower, have created a law firm focusing on technology entrepreneurs, including startups – offering to technologists services they may not even realize they need, but which can prevent major headaches later.

They also offer fixed-price products for startups, and are willing to consider a flexible fee arrangement, deferring some fees until a startup starts generating revenue, or even taking startup stock as part of the fee.

But it’s those legal bumps in the road that startup managers may not foresee that they say they enjoy helping out with the most.

Baker and Safford recall one client, a company that developed unique software to help auto dealers keep accurate inventory. But they never thought to get contracts with their independent-contractor software developers, acknowledging that all the work and the software itself belonged to the company.

“That’s copyrightable work, the software code, and if you don’t have an agreement, and the person isn’t an employee — and in most startups they’re not, because you don’t want the overhead — then the law says the developer owns the code,” Safford said. “You can still fix that after the fact, if they’ll sign it.”

Added Baker: “If you don’t get that right, you might not be able to get financing, because you can’t prove to an investor that you own the intellectual property that your business is based on.”

The firm also offers special startup legal products for fixed or deferred fees.

A $750 Entity Formation package includes articles of organization (for an LLC) or incorporation, operating agreement or bylaws, designation of successors, obtaining a tax identification number, a minute book of formation documents, confidentiality and intellectual property assignment agreements and more.

A fixed-fee Seed Funding package gets a startup ready for investors. Companies seeking $250,000 to $2 million get a term sheet describing the basic agreements of the investment, restated articles of incorporation or organization to include a new class of preferred stock, a more complex set of bylaws a subscription agreement to document the actual investment, forms to let investors to elect a board member representing their interests, and more.

The firm still has many of its original entrepreneurial clients, including the payment and ordering kiosk technology developers Nextep Systems.

“We helped them form the company, we invested in it and are still investors, and they’re doing great,” Safford said. “They’re right in our sweet spot, because they have intellectual property, software IP, and they license it.”

To learn how Safford & Baker can help your startup thrive, visit www.saffordbaker.com or e-mail info@saffordbaker.com.

–Matt

The mission of the Mobile Monday Michigan Chapter is to “[e]ncourage innovation within the mobile sector and help Michigan-based companies participate in mobile initiatives through the import and export of visions, concepts, technologies, know-how and best practices, as well as the development of relationships related to the mobile industry.”  Mobile Monday Michigan is having its first “official” meeting on Monday (of course), July 19, 2010, at 6:30PM in the Celtic Room at Conor O’Neill’s Irish Pub (318 South Main Street – Ann Arbor, Michigan 48104).  Xconomy Detroit has an article on the group here.

I’ve been invited to present at this first meeting under the subject heading “Legal Issues in Mobile”.  Rather than run through a list of legal issues, I thought I’d talk a little more in depth about location-based services and consumer privacy and protection.  This issue came up most recently when Apple changed its privacy policy, prior to the launch of the iPhone 4, to allow the company to collect and share location information about its customers.  You can read more about that here.

I hope you can make it.

–Matt

Last year, early-stage venture firm Y Combinator “open sourced” the legal documents they provide to their startups to use with investors after Y Combinator’s seed funding.  The documents can be found here.  TechStars followed by releasing the legal documents they use as a starting point for seed-stage financing for their companies.  Those documents can be found here.  In both cases, the goal is to help young startups avoid at least some of the legal costs associated with first-round financing by simplifying, and hopefully standardizing, the negotiating process.

A client now points me to this TechCrunch article on The Funded’s release of its Ideal First Round Term Sheet for venture rounds (available here).  Like Y Combinator and TechStart, the goal is to reduce legal fees (which average $50,000 or more for a venture round) but also to protect founders by providing them with standard, founder-friendly deal terms for venture rounds.

–Matt

If you are an employer, are you monitoring your employee’s personal emails sent from work?   Can you?   Until recently, courts have generally accepted the argument from employers that they can monitor anything over their corporate computer networks, including personal emails sent from work.   The Wall Street Journal recently reported, however, that courts are now more likely to side with the employee, unless the employer has put the employee on notice that personal emails may be monitored.  In the absence of such notice, courts have said that employees have a reasonable expectation that their personal e-mails will remain private and will not be accessed by the employer.

The whole article can be read here.

–Matt