Corporate Insights
Analysis and practical guides on corporate.
174 articles, checklists, and guides on corporate law, written by the attorneys at MC Law. Every piece is general information, not legal advice—for a specific matter, contact the firm.
Buying and Selling a Small Business: From Letter of Intent to Closing
Most small business sales are the largest financial transaction the parties will ever undertake, and most are negotiated with less structure than a commercial lease. This article walks the deal from first conversation to post-closing, explaining what each document does and where the money actually moves. It covers the three deal structures and why asset purchases dominate the lower middle market, the tax and liability consequences that drive the choice, and the successor liability doctrines that can defeat the buyer's expectation of a clean start. It explains the letter of intent and why exclusivity is the seller's most expensive concession, how due diligence should be scoped and what it usually finds, and the purchase price mechanics that determine the number actually received: working capital adjustments, earnouts and their disputes, escrows and holdbacks. A long section addresses the purchase agreement itself, including representations and warranties, disclosure schedules, indemnification with baskets, caps and survival periods, sandbagging clauses, material adverse effect definitions, and closing conditions. It closes with employment and IP considerations, the closing and post-closing mechanics, a worked example, checklists, an FAQ, and related reading.
Equity Compensation: Stock Options, RSUs, Profits Interests, and Section 409A
Equity compensation is the most common way private companies pay people they cannot afford, and it is also the area where well-intentioned founders create the most expensive tax problems. This article explains the instruments and the rules that govern them. It covers stock options and the ISO-versus-NSO divide, restricted stock and the thirty-day Section 83(b) election that cannot be extended, RSUs and why private companies use double-trigger vesting, and profits interests, which are the LLC answer to options and work quite differently. A long section explains Section 409A: what it covers, why a discounted option is a violation, what a 409A valuation actually buys, and what the penalties are. Later sections address vesting and acceleration, repurchase and transfer restrictions, dilution and cap table hygiene, qualified small business stock, and the mechanics companies get wrong at exit, with a worked example, a design checklist, an FAQ, and related reading.
Venture Financing Toolkit: From SAFE to Series A and Beyond
A venture-backed company's legal history is a chain in which every link constrains the next, and the mistakes that surface at a Series B were nearly always made at formation. This toolkit walks the whole arc: forming the right entity in the right state with vested founder stock and filed 83(b) elections, raising on convertible instruments while understanding how they will convert, negotiating the priced round terms that determine economics and control, closing it, and then living with the covenants, valuations, and reporting the round created. It closes with later rounds, bridge and down-round mechanics, secondary liquidity, and the waterfall that translates every term above into what each holder actually receives at exit. It ends with the diligence and cleanup work that a later round or an acquisition will require, which is far cheaper to do continuously than retroactively.
Drafting an LLC Operating Agreement: A Practical Guide
The operating agreement is the constitution of a limited liability company, and the default statutory rules that apply in its absence rarely match what the members actually intended. This guide works through the document section by section, explaining what each provision does, where the drafting choices lie, and what happens if the section is omitted. It covers formation and capital structure including the difference between capital and profits interests, allocation and distribution provisions and the tax rules that constrain them, management structure and the major decisions list that determines who really controls the company, and the transfer restrictions and buy-sell mechanics that decide what happens when a member dies, divorces, defaults, or simply wants out. Later sections address fiduciary duties and their modification under the Delaware and uniform acts, deadlock resolution, dissolution and winding up, tax provisions including the partnership representative, and the drafting errors that recur most often.
Intellectual Property Licenses in Bankruptcy: Section 365(n), Mission Product, and Protecting Your License
When a licensor files for bankruptcy, the license that a licensee's entire business depends on becomes a contract the debtor may reject. Congress addressed part of that problem in 1988 by adding section 365(n), which lets a licensee of intellectual property elect to retain its rights after rejection. But the Bankruptcy Code's definition of intellectual property omits trademarks, which left trademark licensees exposed for three decades. The Supreme Court closed most of that gap in Mission Product Holdings v. Tempnology, holding that rejection is a breach rather than a rescission and therefore does not terminate rights the contract already conveyed. This article explains the whole framework: when a license is an executory contract, what rejection actually does, how section 365(n) elections work and what they cost, why trademarks were left out and what Mission Product did and did not fix, the separate and often more dangerous question of whether a license can be assumed and assigned over the licensee's objection under section 365(c), and what a section 363 sale free and clear means for a licensee. It closes with drafting and diligence measures that actually protect a licensee, a worked example, an FAQ, and related reading.
Surviving an IRS Audit: A Practical Guide for Businesses
An audit notice is not an accusation and is rarely a catastrophe, but the way a business responds in the first month determines how long it lasts and how much it costs. This guide walks the examination process from the initial contact through appeals and, if necessary, litigation. It covers the three types of examinations and what each signals, how to read an information document request and respond in a way that narrows rather than expands the inquiry, and the representation and privilege issues that arise when the accountant who prepared the return is also the person explaining it. It then covers the statute of limitations and the decision whether to extend it, the penalty structure and the reasonable cause defense, and the agreed and unagreed paths at the close of an examination. Later sections address IRS Appeals, the choice between Tax Court and a refund forum, employment tax and worker classification examinations, and collection alternatives.
Buying and Selling a Business Toolkit: A Roadmap for Small-Company Mergers and Acquisitions
Most small-company deals fail or become disputes for the same handful of reasons, and every one of them is visible before signing. This toolkit follows a transaction from the decision to sell through post-closing integration, written for both sides. It covers preparing a company for sale and why that work begins two years early, the structure decision and its tax consequences, the letter of intent and the leverage that disappears when it is signed, diligence organized around the findings that actually change price, the purchase agreement provisions that allocate risk, the price mechanics that decide who bears working capital and earnout risk, closing logistics, and the post-closing obligations that outlive everyone's attention. Illustrations run a single hypothetical acquisition through each stage.
Managing a Cap Table: Options, SAFEs, Conversions, and 83(b) Elections
A capitalization table is the company's ledger of who owns what, and it is the document most likely to be wrong at the moment it matters most. Errors accumulate quietly—a grant approved but never papered, a SAFE with a side letter nobody filed, an option repriced by email, an 83(b) election that was never mailed—and they surface during diligence when the leverage has already shifted. This guide covers the structure of a cap table and the difference between authorized, outstanding, and fully diluted shares, the instruments that populate it and how each behaves, the tax elections and valuations that must accompany them, the mechanics of converting SAFEs and notes at a priced round, and the waterfall analysis that translates ownership percentages into actual dollars. It closes with a maintenance discipline and the errors that recur.
Preparing Your Startup for Capital Raising—A Comprehensive Guide
This is the pre-raise readiness playbook for founders who want to walk into a fundraise already "diligence-ready"—the legal, structural, and record-keeping state in which an investor's lawyer can open your data room, run the standard checklist, and find clean, complete, internally consistent answers. It explains why venture-track companies choose a Delaware C-corporation, how to keep a cap table that reconciles to signed documents, and how founder vesting and the Section 83(b) election work, including the absolute 30-day filing deadline under Treasury Regulation Section 1.83-2(b). It covers IP chain of title from founders and contractors, employee equity (ISOs under IRC Section 422, NSOs, and the Section 409A valuation safe harbors of Treasury Regulation Section 1.409A-1(b)(5)), corporate housekeeping, good standing, financial statements, and the construction of a real virtual data room mirroring how diligence counsel actually work. It maps the securities-law exposure prior raises can leave behind under Regulation D, closes with the landmines that kill or reprice deals, a worked example, and a detailed FAQ, and cross-links to the related capital-raising and document articles in this series. It is written so a founder, a lawyer, and a judge can all follow it, and every term of art is defined in plain language the first time it appears.
Navigating the Capital Raising Maze: A Comprehensive Guide for Startups and Small Businesses
Raising money is one of the most heavily regulated things a young company will ever do, because nearly every dollar a startup accepts in exchange for stock, a note, or a SAFE is a sale of a "security" governed by the federal Securities Act of 1933. This guide maps the full terrain: the Section 5 registration requirement and why almost every private company instead relies on an exemption; the workhorse exemptions in Regulation D (Rules 504, 506(b), and 506(c)) and the meaning of "accredited investor" after the 2020 amendments; Regulation Crowdfunding, Regulation A+, and intrastate offerings; the integration framework that decides when two raises count as one; Form D, blue-sky notice filings, bad-actor disqualification, restricted securities and Rule 144, and the anti-fraud rules that always apply; and the practical menu of instruments, from priced equity and SAFEs to convertible notes, venture debt, and revenue-based financing. A worked example walks a hypothetical startup through a clean seed round. The article is written so a founder, a lawyer, and a judge can all follow it, and it is for general education only, not legal advice.
Securities Compliance for Startups: Regulation D, Rule 506, Blue Sky, and Form D
Every time a startup takes money for equity, a SAFE, or a convertible note, it is selling a security, and federal law makes it unlawful to sell a security unless the offering is registered or exempt. Most founders never register, which means every financing depends on an exemption, and exemptions have conditions that are easy to break by accident. This article explains the system from the ground up: what counts as a security under Howey and Reves, why Section 5 imposes strict liability with a rescission remedy that lets a disappointed investor demand its money back, and how the private placement exemptions actually work. It covers Regulation D in detail, including the difference between Rule 506(b) and Rule 506(c), what general solicitation means and how founders trigger it inadvertently, the accredited investor definition, verification obligations, Form D filing, and the bad actor disqualification rules. It then covers the state blue sky layer and federal preemption, employee equity under Rule 701, the crowdfunding and Regulation A alternatives, resale restrictions under Rule 144, the integration rules, the anti-fraud provisions that apply to every offering regardless of exemption, and the finder problem that traps more startups than any other issue. It closes with a compliance checklist, a worked example, an FAQ, and related reading.
Structuring an Employee Stock Ownership Plan
An ESOP is simultaneously a retirement plan governed by ERISA, an acquisition financing structure, a tax planning device, and a succession vehicle, and it fails when the parties treat it as only one of those. This guide covers the structure end to end: what an ESOP is and how leveraged transactions actually work, the tax benefits that make it attractive on both the seller side and the company side, the valuation and fiduciary requirements that generate nearly all of the litigation in this area, the repurchase obligation that determines whether the structure is sustainable, the governance arrangements that follow, and the ongoing administration. It also addresses when an ESOP is the wrong answer and what the alternatives are. It closes with a side-by-side comparison of an ESOP against a strategic sale and a private equity recapitalization, and with a caution about advisors who occupy multiple roles in the same transaction.