Community Empowerment Matters

  Introduction             For many small business owners, taking on debt in the form of a loan plays a big role in getting the business started or keeping the business running. [1] In many of these cases, the borrower, or debtor, is asked by the lender, or creditor, to put up some sort of property, called collateral, to “secure” the loan. [2] This is known as a “secured” transaction.   Although seemingly straightforward, entering into this type of relationship gives the lender certain rights, the most prominent being the right to repossess the collateral if the borrower defaults on the loan. Because a “secured” creditor has such a right, it is important for a potential debtor to understand how a secured transaction works and   the consequences of defaulting on a secured loan so they can take all factors into consideration when considering this type of financing.   What is a Security Interest? When a busi...

  As an LLC, there are many ways to secure financing to help grow your business. Financing and funding are crucial to scaling and reaching that next level of business potential. Entrepreneurs may not be aware of one powerful tool to security early investment: convertible notes. In this article, we will examine how LLCs can trade equity for investment by issuing convertible notes so that your LLC can thrive. A Key Distinction: Members & Membership Interest There is one key distinction we need to make between equity for LLCs and equity for other types of entities that will serve as a starting point for this conversation and help sharpen your use of convertible notes as a financing tool. The key is this: the people (or entities) who hold equity in an LLC are called “members” and their ownership is called “membership interest.” Unlike other entity types, a C-corporation for example, LLCs do not have “stock” or “shares” owned by “shareholders.” The terms “stock” and “shares” ar...

  Can a company generate profit and support social causes? Can a company pay stockholders and commit to improving the environment or supporting childhood education? Yes, and you have likely encountered such companies! Ben & Jerry’s, Allbirds, Cabot, Patagonia, and Eileen Fisher are just a few popular companies that have been certified as organizations committed to improving society. [1] Many organizations utilize one of two options (or both) to signal that they have a socially-minded mission and are acting with the goal of bettering society: benefit corporations and B corps. The two sound very similar and are often confused for that reason. However, benefit corporations and B corps differ in many ways that organizations should consider. Benefit Corporation   A benefit corporation is a relatively new legal entity that has become popular in the past few years. A benefit corporation is a legally recognized entity that is established by filing with the state, just as an ...

  Implications of securities laws on cooperatives  Securities laws remain complex, nuanced and vary across state lines and the federal government. Their implications are often difficult to understand and navigate alone, especially as a cooperative. Without an applicable exemption, securities need to be registered with the federal Securities and Exchange Commission (SEC) and/or a state securities agency. Registration requires additional time and funds, which carries a larger administrative burden on your end, a burden that could be detrimental to your co-op as you’re getting it off the ground.  Securities law implications on cooperatives are not always clearly defined, especially at the state level. This is likely due to the fact that several states do not mention shares in a cooperative in their definition of securities. And because securities laws vary across states (and there remains no presiding federal cooperative statute), what might be true regarding treatment ...