In my previous post about AI (specifically, AI large language models or “LLMs”) and its impact on the legal profession, I concluded that the current versions of LLMs would not replace lawyers but could serve as very able assistants. As our friends at Clausebase put it in a recent webinar: AI can take over a great many human tasks on the “production” side but the lawyer is still indispensable in carrying out key “creative” work.
Illinois employers take note: Illinois recently joined two other trailblazing states (Maine and Nevada) in requiring employers to provide a minimum amount of paid leave for employees. Thanks to the new Paid Leave for All Workers Act (the “Act”), effective on January 1, 2024, employees working in Illinois (but not Cook County) will earn and accrue up to 40 hours of paid leave each 12-month period. Employees working in Chicago are already, and will remain, subject to the Chicago Paid Sick Leave Act, and those in Cook County have the Earned Sick Leave Ordinance.
“Dilution” is one of the most discussed topics in the startup community. goodcounsel often advises startups on the implications of dilutions. In this post we describe some common scenarios, and explain what happens in terms of dilution.
Some clarification on confusing equity-related terminology
Founders often ask us about the meaning of certain equity-related terminology. We thought it would be useful to explain some commonly used (but frequently misunderstood and misused) terms.
In the olden days, customers signed agreements using quill and ink; for many, a handshake sufficed.
These days, customers purchase many services and goods online. How do customers give their consent to the terms of their purchases in cyberspace [cue eerie music]? Most of our startup clients require their customers to agree to online terms of use (TOU), whether for a website or mobile app. The TOU set out “rules of the road” for customers, such as usage rights and prohibitions, which our clients need the ability to legally enforce. This ability rests on legal acceptance of the TOU by customers – without this, there is no binding contract.
The behemoth General Data Protection Regulation (GDPR) governs the European Economic Area*. By contrast, no federal privacy regulation applies across all U.S. states.
A company must comply with regulations of the states in which it does business. As a practical matter, compliance is geared towards the state with the most stringent regulations. Effective January 1, 2020, the California Consumer Privacy Act (CCPA) remains the most comprehensive data privacy regulation in the U.S. (Maine and Nevada also adopted data privacy regulations recently, but both are narrower in scope than the CCPA.)
Much has been written about CCPA, and this post does not cover all (or even most of) the nuances of this law. Our goal here is to help you understand enough about CCPA to determine if it might apply to your business, or if you need to consult an attorney who can make this determination.
Founders often come to us before they have formed a legal entity, seeking advice about the type of entity to form –usually it is between the two most common entity types, limited liability companies (LLCs) and corporations. The type of entity will not determine whether the business succeeds or fails. Still, entity selection merits consideration. goodcounsel is adept at guiding founders through this decision.
Here are some of the more important issues to consider when deciding between an LLC and corporation.
Fundraising is essential for many startups, but the types of fundraising methods are limited. The traditional methods are bootstrapping, convertible notes, simple agreements for future-equity (SAFEs), and priced equity rounds. We have guided many founders through fundraising.
Equity crowdfunding is a newer option. Crowdfunding is meant to allow founders to accept small investments from a broad base of investors. True crowdfunding was not previously feasible: securities laws – intended to protect investors (discussed below) – made it difficult for companies to accept investments from investors not meeting certain financial requirements, a.k.a. “non-accredited investors” (discussed below).
In 2013, the Securities and Exchange Commission (SEC) proposed its first set of rules governing equity crowdfunding. However, equity crowdfunding has not been as popular as proponents had hoped. The cost of complying with the SEC’s restrictions often outweighed the capital a founder could raise through crowdfunding. (See our original posts about the proposed rules in 2014 and their efficacy.)
This blog post aims to help you understand equity crowdfunding in general and how the new amendments to Regulation Crowdfunding may make equity crowdfunding more attractive to founders.
One of my legal newsletters today included the following blurb, crediting TechRadar:
TikTok enabled its Android app version to collect millions of users’ unique identifiers for at least 15 months that could be used for ad tracking, which violates Google’s privacy rules, according to a Wall Street Journal investigation. A TikTok spokesperson said, “The current version of TikTok does not collect [media access control] addresses,” and a Google spokesperson said the firm is investigating the Wall Street Journal’s report.
As we’ve written about before, Android is an example of the high cost of “free” (or cheap) services. Google basically subsidizes these phones because their more important business is to monetize people’s personal information. This is different than Apple, whose main business is selling you hardware and associated services.
