Table of Contents

• General Mail Payment Rules
• What is the Mailbox Rule?
• Are There Mailbox Rule Variations?

The recent USPS postmark rule changes may impact legal deadlines, contract acceptance, bill payments, and other time-sensitive mailed documents for businesses and individuals alike. 

On December 24, 2025, the U.S. Postal Service revised its franking and USPS postmark rules.

The updates are intended to modernize mail delivery systems with new technologies and redesigned post office retail spaces. The redesign includes centralizing certain sorting and processing functions at regional hub centers, rather than processing all initial mail activities at the local post office where the mail starts its journey.

But how might these updates affect your legal rights, responsibilities, and expectations for mail you send and receive?

First, these changes affect mail you drop in a mailbox or post office box (blue canister). Before the changes were made, mail collected from these drop locations was transported to a local post office and postmarks were applied with the date the mail was collected.

Now, collected mail is transferred from local post office collection points to a regional sorting facility. Postmarks (franking) are not applied until the mail reaches and is processed through the regional center.

This means your mail probably will not be postmarked on the day you drop it in a mailbox. Early reports indicate franking may happen between 1-4 days after mail is initially deposited. 

General Mail Payment Rules

In most situations, mail generally is recognized as being sent as of the postmark date. This applies to bill payments, tax payments, ballots, final paycheck delivery, and similar date-dependent activities.

However, this general rule can be replaced with unique deadline terms for specific situations, such as invoice payments, transaction closing terms, certain debt payments, and contractual offer and acceptance transactions.

One such rule that affects whether a contract is legally binding is the Mailbox Rule.

What is the Mailbox Rule?

Under contract law, a legally binding contract must have four basic elements: 

1. Mutual assent (offer and acceptance)
2. Consideration (something of value is exchanged)
3. Capacity (contracting parties are old enough to form a contract, of sound mind, and have the authority to enter into the contract)
4. Legality (the contract is made for a lawful purpose).

In most states, the mailbox rule determines when an offer is accepted – establishing the first required contractual element. According to the mailbox rule, an offeree accepts an offer from the offeror the moment the offeree mails its acceptance, not when the offeror receives the acceptance.

Further, the mailbox rule applies to other forms of communication, such as a fax, telegram, or email, if it is irrevocable once it is sent.

Are There Mailbox Rule Variations?

Yes! First, the type of contract is a variance. In most states, the Mailbox Rule in contract law applies only to bilateral contract – agreements in which both parties have an obligation to perform under the contract.

Some states have limited the Mailbox Rule to also apply to option contracts – agreements that give one of the parties the right to take a future action, but not the obligation to take the action.

The Mailbox Rule also can be superseded by terms included in contracts, term sheets, memorandums of understanding, and similar deal-management documents.

These terms can establish automatic expiration or revocation circumstances, as well as require specific types of mailing (certified or return receipt delivery), address delivery locations, and third parties who also must receive copies of the mail. 

Ultimately, it is important not to presume that mail, and written communications in general, follow a single delivery rule.

But they do not! Do not get stuck confused about local Mailbox Laws. Let 91¶¶Ňő guide you in your legal mail deadlines, what delivery methods to use, and prevent costly disputes before they even arise.

The post Did You Mail It On Time? USPS postmark rule appeared first on 91¶¶Ňő Business Law Firm.

Table of Contents

• The Mechanics of the Equity Dispute
• The Pretext of Cause in a Founder Dispute
• Fiduciary Duties and the Board’s Overreach
• Navigating an Equity Dispute

In the high-stakes world of startups, equity is more than just compensation; it is the realization of a founder’s vision and years of sweat equity.

However, a troubling trend has emerged where boards of directors use for-cause terminations as a predatory tool to strip departing founders of their vested interests, often leading to a high-stakes founder dispute.

The Mechanics of the Equity Dispute

Most founder common stock purchase agreements (commonly referred to as “CSPAs”) include a repurchase option, allowing the company to buy back the shares upon an individual’s departure.

While this is standard for unvested shares, for-cause terminations are often leveraged to try to force the forfeiture of vested shares for a nominal sum, sometimes as low as a fraction of a penny per share.

For example, one might see a co-founder who dedicated years to building an enterprise from the ground up, only to find their significant block of vested shares targeted for repurchase by the company at a total price of just a few dollars.

This can occur even when the company’s most recent valuation cap suggests those same shares are worth hundreds of thousands, or even millions, of dollars.

Such a gross disparity between market reality and a nominal buy-back price is almost always the catalyst for a complex equity dispute.

The Pretext of Cause in a Founder Dispute

To justify such a massive clawback of value, boards may orchestrate a for-cause exit without providing documented justification or evidence of misconduct.

Under California law, terminating a fellow director or officer specifically to facilitate the forfeiture of vested equity is considered an act of bad faith and a breach of fiduciary duty.

Fiduciary Duties and the Board’s Overreach

Directors of a corporation owe a fiduciary duty of loyalty and good faith to all stockholders. When a board acts to consolidate control or minimize the ownership of a stakeholder through a forced buyout, they are transforming a simple separation into a legal founder dispute.

When managing a founder dispute, it is critical to understand that boards must act with intrinsic fairness whenever they deal with the vested interests of stockholders.

In California, this duty of good faith is significantly heightened when the board is dealing with minority shareholders in close corporations, where the potential for a lopsided equity dispute is greatest.

Furthermore, directors should be acutely aware that orchestrating or causing such violations can lead to significant personal liability for the individual officers and directors involved, as the corporate veil does not always protect those who act in bad faith.

Navigating an Equity Dispute

For founders and early employees facing a potential founder dispute, the lessons are clear: you must rigorously scrutinize your repurchase rights to understand exactly what happens to your vested shares if the company claims “cause.” If a company moves toward termination, you should demand formal documentation, as the board must provide clear evidence to back up their claims; without it, their position in a dispute remains legally vulnerable.

Finally, it is vital to recognize the true value of your contributions and never accept a nominal settlement that fails to reflect the fair market value of your holdings, especially when recent financing rounds have established a clear valuation cap that defines the stakes of your equity dispute.

Equity represents the foundation of what you’ve built. Don’t let a for-cause pretext strip you of your hard-earned rights in a lopsided dispute.

If you are involved in a founder or an equity dispute and believe you need legal assistance navigating through, please contact 91¶¶Ňő.

The post Vesting and Vengeance: How “For Cause” Terminations are Used to Claw Back Equity appeared first on 91¶¶Ňő Business Law Firm.

Table of Contents

• The Myth of the Voluntary Waiver
• The Danger of Personal Liability
• Lessons for the Road

In the early days of a startup, the culture is often defined by sacrifice.

Founders and early employees frequently work for “free” or for sweat equity, viewing their unpaid labor as a badge of honor or a necessary bridge to a seed round. But, this team player mentality is actually a legal time bomb waiting to explode. 

The Myth of the Voluntary Waiver

Many founders believe that if a team member agrees to work for free in the early stages of a startup, that agreement is a binding contract.

Under California law, this is a fallacy. Minimum wage and overtime protections are non-waivable statutory rights. Even if a co-founder signs a document stating they are happy to work for equity alone, that agreement is void as a matter of law. 

Performing full-time services from the inception of a company without receiving a paycheck creates an immediate, significant liability for the enterprise before the first product is even finished.

The danger of unpaid wages grows as a company succeeds.

When a company finally does start paying a salary and then issues raises, it doesn’t just increase the employee’s take-home pay, it increases the cost of potential penalties in a wage and hour claim the employee might later submit to the California Department of Industrial Relations. 

For example, if an employer willfully fails to pay all wages due at termination, the employee’s wages continue as a penalty for up to 30 days.

Because these penalties are calculated based on the final rate of pay, a salary increase prior to termination significantly raises the daily penalty rate. This is known as the Multiplier Effect.

Ultimately, failing to settle initial unpaid founder hours allows a base wage claim to balloon into a massive demand when it’s combined with statutory penalties and interest. 

The Danger of Personal Liability

Perhaps the most sobering lesson for startup directors is that they cannot simply hide behind the corporate entity. Under California Labor Code section 558.1, any owner, director, or officer who causes wage and hour violations can be held personally liable. 

When a Board of Directors decides to withhold pay or orchestrate a “for cause” termination to avoid paying out earned wages or equity, they are putting their personal bank accounts on the line. 

Lessons for the Road

1. Pay Something: Even if it’s just the state-mandated minimum wage, getting people on a regular payroll immediately mitigates massive future penalties. 
2. Document Everything: If a termination is “for cause,” it must be supported by documented justification. Using “cause” as a pretext to claw back vested shares is often viewed as an act of bad faith and a breach of fiduciary duty
3. Equity is Not a Substitute for Wages: You can give equity in addition to wages, but you cannot give equity instead of minimum wage. 

Working for free might feel like the ultimate startup sacrifice, but in the eyes of the law, it’s just an unrecorded debt and one that usually comes due at the most expensive time possible. 

If you are involved in a founder dispute and believe you need legal assistance navigating through it, please contact 91¶¶Ňő.

The post The Founder’s Fallacy: Why “Working for Free” is a Legal Time Bomb appeared first on 91¶¶Ňő Business Law Firm.

Table of Contents

• The Document Matters
• The Words in the Document Matter
• The Look of the Words Matters

Last week, you asked your business attorney to take a quick look at a short contract you received from a new service provider.

You believe it shouldn’t take your attorney more than a few minutes to review and confirm that everything makes sense, and you can sign the contract.

It only took you half an hour to read and understand the terms of the contract completely.

Then why did it take your attorney more than two hours to review the agreement and make a few changes?

Here is a peek inside the mind of an attorney as they review a legal document.

The Document Matters

The purpose of a legal document is to clearly communicate the rights and responsibilities of everyone involved (the parties).

If a dispute arises, the authority in charge of resolving the dispute uses legal documents to form a final solution.

A well-written document provides a clear path for the authority to follow.

A poorly written document creates opportunities for the disputing parties to argue “their interpretation” of missing or ambiguous content.

The Words in the Document Matter

A well-crafted legal document contains precise, indisputable, clearly defined words and phrases. Each reader’s unique background of experiences affects their interpretation of words and phrases.

In some situations, TOU means “terms of use” e.g., a service agreement.  Others may define TOU as “time of use” for consumable products or “tactical operations use” for action-dependent activities.

Terms of art and best practices are industry specific words and phrases.

These tools allow document writers to use shorthand language for situations where the parties share commonly accepted vocabulary unique to the applicable document’s purpose. Common legal terms of art include:

• Exploitation: In many contexts, exploitation denotes a negative experience. However, in industries that collect royalties for intellectual property licensing, it means the active commercial use, monetization, or licensing of intellectual property and refers to the revenue generated through these activities.

• Agent: Generally, an agent is a person or a company representing another party in a transaction. More specifically, when an agent is involved in a contract, it may be presumed that the agent has the authority to sign contracts on behalf of the party the agent represents.

• Intellectual Property: People tend to reference any licensable material as intellectual property. Because intellectual property encompasses numerous categories, legal documents should define the specific types of intellectual property relevant to the document – such as copyright, trademark, wordmark, patent, or trade secrets.  

Grammatical application affects how legal documents are interpreted.

There is a significant difference between “Company A will pay the vendor on the first day of each month,” and “Company A may pay the vendor on the first day of each month.” Passive voice in legal documents can also lead to disputes.

Active voice clearly identifies which party is required to take an action or receives a benefit in the document. Consider the following examples:

“Vendor will be paid on the first day of the month,” where no specific party is identified as the payor or “Company A will pay the vendor on the first day of the month.” Where Company A clearly is the party obligated to make the payment.

“The agreement will be delivered to the parties…” versus, “Company A will deliver the agreement to the parties…” 

Defining terms reduces confusion that might arise if a word is not a standard term of art, or the parties using the document don’t recognize the same terms of art.

Common examples of how defining a term in a document helps include:

• Business Day: Business Days typically do not include weekends and recognized holidays. When the parties recognize different holidays (by city, state, nation, etc.) defining the exact days that constitute Business Days can help avoid disputes arising from missed deadlines, delayed payments, and similar circumstances.

• Year: When parties use a fiscal year that is different from a calendar year, it is important to define whether deadlines in the document are based on fiscal or calendar years.

• Payments: Payment obligations create many dispute opportunities. Clarify the due dates, the currency, which party pays conversion or processing costs, conditions upon which payment is made, whether a disputed amount can remain unpaid while the parties resolve the dispute, if payment amounts depend on gross or net sums and if net sums, and if net sums, what fund categories are subtracted from gross to equal the net amount.

The Look of the Words Matters

Finally, a review attorney will check document terms that are highlighted within the document in different font styles, formatting, punctuation, and category groups.

Legal documents often use ALL CAPITAL TYPE or bold type, or BOTH to bring attention to information that

• (i) must be included due to applicable laws,
• (ii) may contradict common use or application,
• (iii) allocates or waives rights or obligations for the parties, or
• (iv) otherwise includes content that might be unexpected within the context of the document.

While processing these basic review applications, the attorney may also fix typos, correct document formatting, and revise other aspects of the document contents – all in an effort to ensure the parties have a comprehensive and consistent understanding of the true intentions and purposes of the final, executed document.

Legal documents can be daunting, and meticulous verbiage is crucial! 91¶¶Ňő helps you read your documents with confidence and expertise.

Reach out today so that you can focus on what you do best: your business! Let us handle your legal documents, offering you transparency, clarity and simplicity. 

The post Literally – What Your Written Document Says, Matters appeared first on 91¶¶Ňő Business Law Firm.

With so much uncertainty in the market, many employers are asking the same question: if the business needs to cut costs, how can a workforce reduction be done lawfully and strategically?

And for employers with remote teams, an equally important question follows: does a fully remote workforce make the process easier, or more complicated?

For California employers, the answer is often the latter.

A reduction in force (RIF) may seem like a straightforward business decision. Headcount needs to come down, roles are eliminated, and the company moves forward.

But from an employment law perspective, a RIF is rarely just about reducing payroll. It is about how the company decides who is affected, how those decisions are documented, whether notice obligations are triggered, and how the separation process is carried out.

This is where employer risk often hides.

Even when the business reason is legitimate, a poorly planned RIF can lead to claims of discrimination, retaliation, inconsistent treatment, inadequate notice, or failures in the final separation process.

And when employees are spread across homes, cities, and states, those risks can become even harder to manage without a clear legal strategy.

Why California Employers Should Pay Attention

In California, a RIF should never be treated like an ordinary termination decision.

A true RIF is generally driven by business realities such as restructuring, declining revenue, loss of funding, operational consolidation, or elimination of work that is no longer needed.

But even when the decision makes business sense, the process still matters.

If the selection decisions are vague, inconsistent, or poorly documented, a former employee may argue that the “RIF” was really a pretext for discrimination or retaliation.

That risk increases where affected employees recently engaged in protected activity, requested accommodations, took protected leave, or fall into categories that may be disproportionately affected by layoffs, such as older or longer-tenured employees.

In other words, a legitimate business reason is not enough by itself; employers also need a defensible process.

Why Remote Workforces Can Create More RIF Exposure, Not Less

A common misconception is that remote employers face fewer legal complications because they do not have the same traditional office structure.

That assumption can be costly.

For employers with California employees, remote work does not eliminate the need to evaluate WARN triggers, notice obligations, selection criteria, and California-specific separation requirements.

In some cases, remote workforce reductions can be even riskier because decision-makers may rely too heavily on subjective impressions, such as who seems most responsive, most visible, or most engaged.

Employees working flexible schedules, reporting to quieter managers, or simply operating with less visibility may be unfairly disadvantaged if the company has not clearly identified which roles, functions, or business needs are actually being reduced.

That is why employers should first define what is being eliminated, whether that is a department, a business function, duplicated work, management layers, or roles tied to declining demand, and only then determine which positions are affected.

Where Employers Commonly Get in to Trouble

Most RIF-related claims do not arise because an employer intentionally pursues an improper motive; they arise because the process was not tight enough.

For example, an employer may say the reduction was based on business need, but the supporting documentation may be thin. A manager may say a role was selected because it was less critical, but there may be no objective criteria showing how that conclusion was reached.

Or a company may move quickly to implement layoffs across a national workforce without separately analyzing California notice rules, final pay requirements, or higher-risk employee issues.

That is especially dangerous where employees selected for layoff recently complained about workplace issues, requested leave or accommodation, or are among the oldest employees in the affected group. In those situations, timing and documentation matter enormously.

If severance is offered in exchange for a release of claims, employers should also be sure the agreements are carefully drafted and appropriate for the circumstances, particularly in a group termination setting.

A Practical Reduction-in-Force Plan for California Employers

The most effective RIF planning usually starts well before anyone is notified.

Employers should begin by identifying and documenting the legitimate business reasons for the reduction.

From there, they should determine whether WARN or other notice issues may be implicated, particularly when California employees are concentrated in the same function, reporting line, or operational group.

Next, the employer should establish clear, business-based selection criteria and apply them consistently.

Those criteria should not be backed into after the fact. They should reflect the company’s real operational needs and should be supported by documentation that explains why particular roles or positions were selected.

The company should also review whether any affected employees present elevated legal risk, including those who recently engaged in protected activity, took protected leave, requested accommodations, or may be part of a group that appears disproportionately impacted by the reduction.

Finally, employers should plan the rollout itself. That includes communication strategy, severance and release documents, final pay coordination, benefits information, return-of-property procedures, and a consistent process for managers delivering the message.

In a remote workforce, those details matter even more because a poorly coordinated rollout can create confusion, inconsistent messaging, and avoidable legal exposure.

Where Employer Liability Risk Hides

Most RIF mistakes are not dramatic. They are procedural.

Common problems include using vague or subjective selection criteria, failing to document the business rationale, overlooking protected-leave or retaliation issues, assuming a remote workforce avoids notice obligations, and using a one-size-fits-all layoff process for California employees.

The problem is usually not that the employer intended to do something unlawful. It is that the process was not structured well enough to withstand scrutiny after the fact.

How Our Office Helps

If your company is considering a reduction in force, legal review should happen before the rollout begins, not after employees have already been notified.

Our office advises California employers on RIF planning with a focus on practical risk prevention.

That includes reviewing business justifications, evaluating selection criteria, assessing California-specific notice and wage-payment issues, reviewing severance and release agreements, and helping employers build a defensible implementation strategy for in-person, hybrid, and fully remote workforces.

A reduction in force may be necessary, but it should not be improvised.

Contact Jennifer Mancera at jennifer@sutterlegal.com to learn more about legally compliant RIF planning in California, or for assistance with:

• RIF strategy and risk assessment
• Selection criteria review and documentation
• WARN, California Mini-WARN, and notice analysis
• Severance and release agreement review
• Remote-workforce implementation planning
• General California employment compliance counseling

The post Planning a Reduction in Force in California? Remote Work Does Not Reduce the Risk appeared first on 91¶¶Ňő Business Law Firm.

Don’t Miss The Deadline To Issue New 

With all the attention on immigration and workplace rights, how are laws changing? And how can you protect your employees, yourself and your company?

California employers have a new annual notice obligation under SB 294. As a California employer, February 1, 2026 is a date you need on your compliance calendar.

Signed into law on October 12, 2025, SB 294 creates an annual, stand-alone employee notice requirement, known as the Workplace Know Your Rights Act, that includes immigration-related workplace protection information, along with several other employee rights topics. It also pairs that annual notice with emergency-contact procedures that take effect on a separate timeline.

This is the kind of change that can slip through the cracks because it doesn’t feel like a “big” policy overhaul, at least not until you’re asked to prove you delivered the notice.

As a practical, business-focused overview of what’s required and how to comply with employer obligations, SB 294 requires employers to provide a stand-alone written notice to all employees before February 1, 2026 for current employees, upon hire for all new employees, and annually thereafter.

Why Employers Are Paying Attention: Immigration Protections Are Front and Center In California

Given the nature of Immigration-Rights employment issues in California, rather than being buried in a lengthy employee handbook or posted on a wall, the Workplace Know Your Rights Act notice must be provided as a separate, affirmative notice.

Although the Notice covers multiple workplace-rights topics, the piece getting the most attention is the immigration-related protection information, which educates employees on their rights and the limitation on what employers may do when immigration enforcement issues arise in the workplace.

Particularly, the Notice informs employees about:

• Worksite immigration inspections (including notice obligations regarding announced I-9 or employment records inspections), and
• Prohibitions on certain immigration-related retaliation or unfair practices tied to employees exercising workplace rights.

Beyond what the notice contains, how you send it to employees matters.

The Notice must be provided to employees in a language the employee understands, on or before February 1, 2026. The California Labor Commission’s Office currently has template notices available in English and Spanish, with translation to additional languages to be released soon.

In planning to distribute Notices, employers should:

1. Select a distribution method (i.e., email for admin staff; paper hand-delivery with signed acknowledgment for field or hourly teams.)
2. Match the language you normally use for employment communications
   If you regularly communicate workplace policies in Spanish (or another language), you should plan to deliver the notice in that language as well.
3. Document it- the most common failure point we see with notice requirements is not intent, it’s proof. Ensure that employees sign an acknowledgment of receipt for the AB 294 Notice. 

Emergency Contact Designation and Notification Procedures

In addition to the Notice requirement, SB 294 adds a separate compliance track tied to designated emergency contacts.

When authorized, employers must notify an employees’ designated emergency contact if the employee is detained or arrested while at the worksite or while performing job duties outside of the worksite.  

No later than March 30^th, employers must:

• Give employees a way to designate an emergency contact and indicate whether the employer is authorized to notify that contact if the employee is arrested or detained in connection with workplace enforcement activity; 
• Be prepared to make that notification if the employer has knowledge of an arrest/detention scenario covered by the law.

Although enacted as a response to the federal immigration enforcement posture, being prepared to contact an employee’s emergency contact is always recommended.  Having a procedure that can be executed consistently, without improvisation, reduces risk for harassment, retaliation, or discrimination claims.

A Practical Compliance Plan for Small and Mid-Sized California Employers

To ensure compliance with SB 294, consider implementing a compliance plan including: 

1. An annual Employment/HR compliance calendar. In addition to annual harassment training and employee handbook, include SB 294 notices and other compliance tasks (i.e., EEO-1 reporting, California Pay Data Reports…)
2. Build a “Notice Day” workflow. Identify one day each year to deliver the notice, capture acknowledgment of receipt, and process for retaining documentation in a centralized HR compliance folder.
3. Add “Know Your Rights” Notices to onboarding plans immediately. New hires should receive the Notice during onboarding, alongside wage notices and required policy acknowledgments.
4. Train Human Resource Department staff on the emergency contact process. As a sensitive notification, Human Resource staff should train and practice for issuing such notices to an employee’s emergency contact. 
5. Pressure-test your process. If required to demonstrate compliance in 10 minutes, would you feel confident in your practices and documentation procedures?

Where Employer Liability Risk Hides

Most noncompliance is accidental; common missteps include:

• Assuming a poster or handbook reference is enough (it’s not)
• Sending the notice but failing to retain an acknowledgment of receipt as proof
• Not matching language practices with workforce needs
• Not integrating new requirements or processes into onboarding, 
• Leaving managers without a clear protocol for enforcement-related scenarios

How Our Office Helps

Contact Jennifer Mancera at jennifer@sutterlegal.com to learn more about SB 294 and how to comply with Know Your Rights Notifications, or for assistance with 

• A compliant distribution and acknowledgment workflow
• Onboarding packet updates
• Emergency contact designation forms and procedures
• Manager training on “what to do / what not to do” if enforcement activity occurs
• General Employment Compliance plans

The post Annual Immigration-Rights Notices To Employees appeared first on 91¶¶Ňő Business Law Firm.

Have you ever wondered how a small company can raise capital without having to register with the SEC?

Are you a sophisticated investor or not?

The legalities involved can be intricate and daunting, but 91¶¶Ňő is here to take care of you.

Let’s dive into the requirements. 

Regulation D of the Securities Act (Reg D) allows companies to raise capital by offering equity or debt securities to investors, without having to register those offerings with the SEC.

Reg D is usually used by smaller companies and it enables the issuers to raise capital quickly and at a lower cost.

When a company raises money through Reg D, it must still meet some specially created state and federal regulatory requirements, including those set out in Rules 506(b) and 506(c) of the Securities Act regulation D.

Rules 506(b) and 506(c) came about when the SEC divided Reg D into a pair of sub-regulations to accommodate smaller companies under the Jumpstart Our Business Startups (JOBS) Act.

The SEC did this to make it easier for smaller companies to attract investors.

Under Section 4(a)(3) of the Securities Act, Rule 506(b) grants an issuer the ability to offer an unlimited number of securities.

However, those offers must be made without solicitation or advertising, and there must also be a pre-existing relationship between the issuer and the investor. 

Investors must either be accredited or meet the criteria of a “sophisticated investor.” This is an accredited investor who earned more than $200,000 in income (or $300,000 together with a spouse or spousal equivalent) in each of the prior two years.

They should reasonably expect the same for the current year. Or they can have a net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person’s primary residence), or hold in good standing a Series 7, 65 or 82 license. 

A sophisticated investor is a person who has – or the company offering the securities reasonably believes them to have – sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment.  

Any issuer offering or selling securities must ensure that the securities transaction is compliant with both the federal securities laws and state securities laws.

For a small business, undergoing a qualification process at the state level and registration at the federal level may be cost prohibitive, but exemptions may still be applicable to the securities transaction.

Applicable exemptions:

Rule 504 is an exemption from the registration requirements and allows certain companies (excluding investment companies and blind pool companies with no specific plan of business or purpose) to offer and sell up to $10 million of their securities in a 12-month period.

In contrast with Rule 506(b) and Rule 506(c), Rule 504 is only an exemption from federal securities laws and an issuer relying on Rule 504 must comply with state securities laws.

Therefore, an issuer must ensure that their offering is either qualified in California or exempted under the state securities laws.

California Disclosures:

In California, a business selling securities to a non-accredited and unsophisticated investor is subject to strict disclosure requirements under the SEC’s Rule 506(b) exemption. 

The company must provide comprehensive disclosure documents, similar to those required in Regulation A, including detailed financial statements and other information about the business. 

The company also needs to provide a way to answer questions from the investor and must file a notice with the SEC on Form D after the sale. 

Regulation A Disclosure Requirements:

Regulation A disclosure requirements center on filing a comprehensive offering statement on Form 1-A with the SEC, which includes non-financial information about the company and the offering, plus a detailed “offering circular” for investors. 

Financial statement requirements depend on the tier.

Tier 1 offers up to $20 million in a 12-month period and generally requires review but not auditing financial statements.

Tier 2 offers up to $75 million in a 12-month period and requires audited financial statements. Both tiers require the SEC to qualify the offering statement before sales can begin.  

In summary

You avoid full SEC registration by using Reg D, but you must meticulously follow its specific requirements, especially concerning investor types and advertising, plus state laws, to stay compliant. 

Are you a small company looking to raise capital without having to register with the SEC?

Or are you an investor wanting to make sure your investment is legal and safeguarded? Our Attorneys at 91¶¶Ňő are equipped and ready to guide you in this. Reach out today!

The post Raise Capital and Avoid Registering the Offerings through the SEC’s Regulation D appeared first on 91¶¶Ňő Business Law Firm.

Table of Contents

• What Does a Co-Sale Agreement Actually Do?
• Why Should You Care?
• How Co-Sale Fits Into the Bigger Picture
• The Bottom Line

Imagine this: your startup is finally being acquired. The founders and lead investors are cashing out, champagne is popping, and then you find out you’re stuck holding your shares. No liquidity, no payout, no party.

This is exactly the scenario co-sale agreements are designed to prevent.

Co-sale rights, also called tag-along rights, give minority investors the power to sell their shares when majority shareholders, typically founders or lead VCs, decide to sell theirs. In other words, if someone is getting out, you get the chance to go with them.

What Does a Co-Sale Agreement Actually Do?

At its core, a co-sale agreement levels the playing field. It says, If you’re selling your shares, I get to sell mine too. That means when there’s a big exit, such as a merger, acquisition, or IPO, minority shareholders aren’t left behind. Instead, they’re entitled to sell a proportionate amount of their shares alongside the major players.

This right is usually baked into the original investment documents, often appearing in the shareholder agreement or preferred stock purchase agreement. It’s negotiated early, before anyone is thinking about exits, because that’s when it matters most.

Why Should You Care?

For investors, especially early-stage angels or small funds, co-sale agreements are a critical safety net. They ensure you don’t get locked out of a payout just because you didn’t have board seats or veto rights.

For founders, co-sale rights are often part of the give and take that comes with accepting outside capital. They may seem like a small concession, but they build trust with investors and show that you’re committed to fair dealing.

How Co-Sale Fits Into the Bigger Picture

Co-sale rights don’t operate in a vacuum. They often work in tandem with drag-along rights, which let majority holders force a sale of all shares under certain conditions, and voting agreements, which coordinate control over major decisions.

Together, they create a legal ecosystem that balances power and protects everyone’s stake.

The Bottom Line

In the high-stakes world of startup equity, co-sale agreements are more than just legal boilerplate.

They are an essential protection that can make or break an investor’s return. Whether you’re an entrepreneur negotiating your next term sheet or an investor writing your first check, make sure co-sale rights are part of the conversation.

Because when the exit finally comes, you want to be on the invite list, not watching from the sidelines.

The post Co-sale agreements Matter More Than You Think appeared first on 91¶¶Ňő Business Law Firm.

Did you know most startup founders filing their initial public offering  (IPO) are identified as large traders? Then the clock begins ticking. Are you confused about whether you are considered a large trader and what to do next? Keep reading.

The basic obligations for large traders stem from the Securities and Exchange Commissions’ Large Trader Rule (Rule 13h-1) and apply to a “large trader,” which is generally defined as a person (including an entity or natural person, domestic or foreign) whose transactions in NMS securities meet or exceed certain thresholds.

1. Registration Threshold

A person becomes a “large trader” and is required to register as such if their transactions in National Market System (NMS) securities equal or exceed one of the following identifying activity levels:

• 2 million shares or $20 million during any calendar day.
• 20 million shares or $200 million during any calendar month.

NMS securities generally include publicly traded equity securities listed on national exchanges.

2. Filing Requirements

Once reaching the required threshold, large traders are required to self-identify to the SEC by making several types of Form 13-H electronic filings on through the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system:

1. Initial Filing (Form 13H) Must be filed promptly (which the SEC interprets as within 10 days under normal circumstances) after first reaching the identifying activity level. A person may also make a voluntary initial filing before reaching that threshold.

2. Annual Filing (Form 13H-A): A mandatory annual filing is due within 45 days after the end of each full calendar year.

3. Quarterly Filing (Form 13H-Q): Must be filed within 10 days after the end of any calendar quarter if the information in the most recent filing has become inaccurate or has changed.

3. Large Trader Identification (LTID)

Upon the initial filing of Form 13H, the SEC assigns the large trader a unique Large Trader Identification Number (LTID), which the large trader must then disclose to all U.S.-registered broker-dealers that effect transactions on their behalf, along with all accounts to which the LTID applies.

4. Inactive Status.

If a registered large trader fails to meet the activity thresholds in the previous full calendar year and determines that they do not expect that they will meet the threshold again, they can declare their inactivity by filing a form 13H-I for inactivate status, which allows the large trader to reduce their filing burdens. 

In the event the trader exceeds the filing threshold again, they can reactivate their large trader status by Filing a Form 13H-R. 

If you have been contacted by the SEC about your trading status, you will need immediate assistance.

91¶¶Ňő’s experienced Business Security Attorneys are ready to step in on your behalf. Reach out today to speak to us, and let us handle the legalities so that you can focus on what you do best: your business.

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Startups often struggle with how to offer equity to employees in a way that’s fair, motivating, and affordable. Two of the most common options are Restricted Stock Purchase Agreements (RSPAs) and Employee Stock Ownership Plans (ESOPs).

While both give employees some ownership in the company, RSPAs are usually a better fit for early-stage startups because they are simpler, cheaper, and more flexible.

RSPAs vs. ESOPs

Why RSPAs Are Better for Early-Stage Startups

For most early-stage startups, RSPAs offer a simpler and more cost-effective way to provide equity-based compensation.

Startups usually don’t have the resources to deal with the legal, tax, and administrative complexity of an ESOP. In contrast, RSPAs can be implemented quickly and give employees a clear sense of ownership and upside potential.

Additional advantages of RSPAs:

• No need to create a stock option plan early on
• No requirement for annual third-party valuations until much later
• Employees get shares immediately (subject to vesting), creating a stronger sense of ownership
• Flexible for small teams, consultants, and advisors

Before a priced equity round, RSPAs are the most practical and founder-friendly option. After raising institutional funding, investors may require the creation of a formal option pool or ESOP, but until then, RSPAs are often the best tool available.

Conclusion

If you’re an early-stage startup looking to attract and retain top talent, RSPAs provide a lean and effective way to grant meaningful equity.

They are easier to manage than ESOPs, less expensive to implement, and better aligned with the fast-moving nature of startup life.

ESOPs have their place, but usually only once a company is profitable, stable, and prepared to handle the ongoing costs and legal requirements. Until then, RSPAs offer the flexibility and simplicity most startups need to grow their teams without getting bogged down.

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