How to Handle the Legal Implications of Your Company's Growth
As most companies begin to prove their business models, they also start to think about their long-term growth paths. For many, this means following a path that leads from venture funding to private equity and possibly going public or being acquired down the road.
The legal ramifications of such a plan calls for someone more than just a securities attorney. Take a look at how you should prepare for traveling down this path.
Organizing the Business Early
One of the fortunate things about how the American economy interacts with the country's legal system is that there's a lot of room to start small without getting into corporate issues. The thing is, however, a successful business almost always will get to the point that it needs to be organized with an eye toward corporate governance. That means issuing shares, appointing officers, possibly issuing bonds, and potentially taking on debt. A securities attorney can help you select the corporate structure that's right for where you're headed.
Expansion is rarely self-funded, which means you're going to need to actively seek money. Financing is certainly a part of that equation, but many firms that expect rapid growth curves choose to seek outside investment.
There are a lot of landmines you can step on, and that's one of many reasons why it's wise to hire a venture funding attorney. They can help you figure out how to value the company, offer shares, and take on capital from investors while not undermining what you've already built.
Likewise, a venture capital attorney can help you figure out what the reporting requirements are for certain investors, such as fund managers. Especially if you're trying to stay in stealth mode, keeping the reporting requirements to a minimum is an option worth discussing.
Cashing People Out
One simple reality of all of this investment is that the parties who put money into your business want to cash it out at a high ratio once you're riding the growth curve hard. For many businesses, that means they're either going public or getting acquired. Respectively, you'll need an attorney to handle securities, mergers, and acquisitions needs.
This step is often the scariest because it requires a lot of preparation. Securities laws strictly regulate the representations you can make during this process, and there is a legitimate risk of committing fraud if you don't walk a straight and narrow path. With consistent legal guidance, though, you can navigate the path, cash out the folks who want out, and keep building for a bigger future.