Flat Fee Indiana Business Attorney - Why I Do it

Attorneys and law firms are notorious for charging by the hour.  In some instances it is necessary, such as when very adversarial negotiations are involved.  My practice deals with mostly all transactional matter such as private funding, contract drafting, mergers and acquisitions, and general corporate legal advice -  and for all of those and more I offer flat fees.  Sure, are there instances when adversarial negotiations merit billing by the hour - but even then - I employ a hybrid flat fee / hourly billing method.  For example, in the M&A context, a proposal might look like this for a small $1,000,000 asset purchase when I represent the buyer:

• Flat Fee  include initial draft of an Asset Purchase Agreement, one round of revisions, and initial drafts of up to 4 ancillary documents (i.e. a bill of sale, assignment and assumption agreement, consulting agreement...etc).
• Everything above and beyond is billed hourly, unless we agree ahead of time on additional levels to the flat legal fee.

The key is defining the scope of the representation that is included in the quote for flat fee legal services.  

Don't settle for a retainer / hourly rate unless you have to.  Make sure you at least ask for flat fee legal services when you are looking for an attorney.

Goldman Sachs to its US Clients - NO [FACEBOOK] SOUP FOR YOU!

Yesterday I was interviewed by the New York Post regarding my thoughts on why Goldman Sachs yanked its offer to its US clients to invest in Facebook, indirectly via a special purpose entity it set up that would act as a single shareholder of Facebook.  You can see the article here.  Here is the comment and quote they attributed to me:

Still, some legal experts said that Goldman is being overly cautious as there is little precedent for halting a private deal due to media attention.

"There's just no precedent for a deal being blown up because of hype in the media," said Brian Powers, an attorney specializing in private placements.

My understanding of the deal is that Goldman Sachs was offering shares of the special purpose entity to its high net worth, pre-qualified (i.e. accredited) investors.  The deal has been all over the media, as is anything that involves Facebook - and obviously anyone and everyone wanted in on the deal.  Problems arose on two fronts.  First, the SEC apparently was raising an eye over the requirement that private companies maintain no more than 500 shareholders.  I have no idea how many shareholders Facebook has, but the SEC was apparently concerned about this even though technically the Goldman Sachs deal was only creating 1 additional shareholder.

Second, and more importantly the reason being cited by Goldmans Sachs, the intense media attention made Goldman Sachs fear they would run afoul of the proibition against general solicitation and advertising in a private placement of securities - which this was intened to be.   The applcable regulation is rule 502(c), which states:

[N]either the issuer nor any person acting on its behalf shall offer or sell the securities by means of any form of general solicitation or general advertising, including, but not limited to, the following:

1) Any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio; and 

2) Any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

The SEC and courts are pretty clear that an issuer can't just go out and advertise an offering to the general public in the newspaper..etc.  What is different here, though, is that there was no solicitation to the general public or even any sort of "advertisement" in general circulation - there was simply media attention - just lots of it.  The other difference here is that, despite the media attention, Goldman Sachs had no intention or desire to open the offering to anyone other than its own prexisting and pre-qualified clients.  On the surface, then, it doesn't seem like Goldman Sachs has done anything in contravention of SEC rules.

 

But that is a view from the outside, and I admit that I know very little about the facts here other than what has been reported in a few different media reports.  I don't know how the media attention started - did Goldman Sachs initiate it via a press release?  Was it leaked?  Did it offer the deal to its clients before the story broke?  A safer approach would have been to confidentially open the deal up to its clients BEFORE the story was released (or leaked) to the media.  If, instead, Goldman broke the story in the media BEFORE taking it to clients, the exposure to potentially blowing its exemption from the registration requirements is probably greater.

There is no way of really knowing what action the SEC may have taken had the offering remained on the table to Goldman's US clients. If I had to guess, though, this was simply a matter of eliminating an unecessary risk.  Media reports are saying that the offering was fully subscribed many times over, and I am guessing the entire offering can easily be subscribed via foreign clients. Rather than run the risk of drawing the ire of the SEC - I am betting Goldman decided to simply eliminate that risk and take the much less risky foreign money.

Buying or Selling a Business – Tips from an M&A Attorney

The RocketLawyer Press posted a guest blog post from yours truly today with some tips to consider when buying or selling a business.  You can find the entire post at this link.  In the article, I give a brief overview of some M&A options, a few legal considerations, and a few practical considerations.  M&A work is something I really enjoy.  Check out the post and shoot me a message if you have questions.

Virtual Lawyer Spotlight - Brian Powers (hey thats me!)

Last week I was profiled on The Sociable Lawyer blog regarding my "virtual law practice."  The blog is running a series of posts regarding the changes on how legal services are obtained and delivered online, and I had the honor of being the first attorney profiled.  I have included a few highlights from the article below, but you can click here to read for the full article.

Tell us a little about yourself and your practice:

I am a solo practitioner – my practice focuses on corporate transactions including M&A, private capital raises, corporate formation, technology related transactions, and general contract work. I work with startups and established businesses of all sizes from all over the world.

What does the term “virtual law practice” mean to you?
A virtual law practice is a practice that utilizes technology to increase efficiency and reduce much of the needless overhead associated with the traditional practice of law. This doesn’t necessarily mean that in-person contact with clients and other attorneys is eliminated, but when possible and appropriate, communication is conducted electronically via email, phone, or a secure client website. Paper is minimized, physical file storage is reduced, the need for staff is reduced, and the need for traditional brick and mortar office space is all but eliminated. The result is a very efficient way to practice law as a solo practitioner.

What is your business model? (i.e. who are your clients and how do you serve them?)
My clients tend to be technology companies, although I have clients from a wide range of industries. I use my efficient practice model as a sales pitch to prospective clients – i.e. – I provide top notch legal services, I am very attentive to client communication, and turn client work around quickly. I can do this at affordable rates and fixed fees by virtue of my practice model. That is really what most clients want – quality work, good communication, reasonable turn around time, and affordability. I also have a portion of my practice that exists almost exclusively online by using web based document assembly software.

Selling Your Business? Here's a Checklist (Part 1).

In my M&A Law Practice, I work with clients who are selling a business all the time.  This can be an exciting and stressful time for business owners - and often times they become overwhelmed by the process.  In addition to the legal advice and services I provide, I always try to help them the other aspects of this process.  Below I have created a simple checklist of the things I usually share with business owners to help them wrap their mind around the process of selling a business.

Some Practical Considerations

1. Make sure you think through the reasons you are selling a business.  This may sound obvious, but there are lots of implications to selling a business.  Are you tired of the business?  Do you want to retire?  Do you want to remain involved with the business, but just need/want the capital from the sale?  All of these sorts of things should be considered when working with your M&A attorney and other advisers in determining the terms of the sale of the business. 
2. Is this a "family business" in which your children or other family members have an interest or expectation of long term involvement?  Sometimes people sell off a closely held business without considering the options of keeping the business in the family for future generations.  While this might not be a possibility or option for some, it is something I always recommend people give some thought to.  There are ways to step away from the a business, generate passive income, and still hand it over to family.
3. Is finding the right buyer important to you?  A business owner who has spent years building a business might often be reluctant to sell the business for fear of a potential buyer not maintaining the business in the vision of its founder.  Some business owners don't care about this - but if you do - finding the right buyer for your business becomes very important.
4. Determine what you want to get out of the sale of your business before you begin negotiating terms.  Don't let a buyer dictate the terms when you sell a business. Before you begin the process, put a great deal of thought into what you want or need to get out of the sale. Use that as the primary driver as you negotiate terms.  For people selling a business out of desperation, this might not help things all that much - but still - it is important to remember why you are selling your business as you work through the details.

Check back soon for  a checklist of some legal stuff you should add to your checklist when selling a business.

How to Spot an Attorney Trust Account Scam Artist

There is an internet / email scam that has been preying on attorneys for some time now that usually involves the following fact pattern or something very similar:

1. Attorney (usually a solo practitioner or small firm) gets an unsolicited email from an alleged creditor (usually a foreign company) claiming that the creditor is owed a substantial amount of money from a debtor located in that attorney's home state.  The creditor states that it is interested in retaining the attorney's services for a very large contingent fee.
2. Easy Money?? If it looks too good to be true....After a response from the attorney, the creditor then states that the debtor is very close to settlement, but that the creditor still would like the attorney to stay involved and essentially oversee the settlement. To make things appear legit, the creditor may ask for an engagement agreement from the attorney.
3. As soon as the engagement happens, the creditor sends another email (note the trend of no phone calls at all) saying that, low and behold, the debtor has given in and will be sending a check to the attorney ASAP for some or all of the debt.  The creditor also will provide wiring instructions to a foreign bank and instruct the attorney to keep his substantial fee (for doing nothing - wow- quick, easy money).
4. A check arrives, usually a bank draft/cashiers check (or at least it appears to be).
5. Attorney deposits check into trust account, initiates wire to foreign bank, and withdraws contingent fee. Happy days - right?
6. Wrong.  Turns out the original check was either bad or counterfeit, there were never any good funds in the trust account, the funds that were wired overseas are long gone, and the attorney is completely screwed for the amount of the funds that were wired out (of course the easy money fee is gone too).

 I get these all the time, and occasionally respond for shits and giggles.  Recently, I received a fairly sophisticated one where the creditor claimed to be a business in Colorado that was owed a debt from a business located just a few miles from me.  This guy used the name of an actual Colorado business, the name of an actual Indiana business as the debtor, actual names of the owners of each business, and even provided a Colorado phone number to call.  I did some research on both businesses - and noticed that the phone number and email address the scammer gave me was different from that which was listed on the creditor's website.  So I called the number on the website - and of course the creditor business guy had no clue what I was talking about.  

So I decided to mess with the scammer just to see what would happen.

Here is some of the original email chain (names of course have been changed to protect the innocent):

The original contact email and ensuing emails:

Your Name: Andrew Scammer

Your Email: andrewScammer4u@gscammerbla.com

Subject: Collection Matter

Message: Dear Counsel,

On behalf of Scammer Machinery Inc., we request your legal services

and possible representation on a Debt Recovery matter

involving Scammer Machinery Inc and a client in your jurisdiction.

Our legal representative won't be able to take on this

matter since it is out of their jurisdiction.

Do let us know if you are currently accepting new clients.

We look forward to a prompt response from you.

Thank you very much.

Sincerely,

Andrew Scammer

Scammer Machinery Inc.

--------------------------

Mr. Scammer:

Thank you for the email.  Do you have any availability to chat about this sometime on Tuesday - perhaps in the morning?

Best Regards,

Brian Powers

--------------------------

Dear Brian Powers,

Thank you for your prompt response to my email.However,this is an official request for your services on behalf of my firm towards debt recovery.I will be calling your office to further discuss this matter with you or you can reach me via the telephone number below at your earliest convenience.

 

We are currently facing severe pressure from our supplier to pay up the balance funds that we owe to them.This debt is as a result of an outstanding payment for goods supplied to Debtor Machinery LLC ,valued at $485,760.00. (Four Hundred and Eighty Five Thousand,Seven Hundred Sixty Dollars).The said outstanding payment was for goods delivered in good condition. Due date for payment was set for the 27th of October,2009 as stipulated in our supplier's invoice. After this agreement was breached,we had a lengthy negotiation,and consequently agreed to extend payment to a deadline of 27th of January, 2010.

Quite unfortunately, the extended deadline was not also honoured.We will like to draw your attention to the relationship with our customer which has been cordial and we have had a successful business relationship over the past few years,and it is in our position to maintain this relationship after collection of the outstanding sum owed to us.

If your firm is retained, our expectation of your services for now will be within the scenario of a phone call or demand letter to our customer. This approach will trigger the much needed response from our customer towards payment,Otherwise,litigation will be the next option.We intend to give out a certain percentage of the payment if a lawsuit is not filed before we reach a settlement with our debtor.To be precise we are ready to give out 10% of any amount collected before a lawsuit is filed, this will compensate for your retainer amount and all other legal expenses.We do hope our customer responds to this informal approach of resolution,otherwise,we will pay up your retainer amount and all other charges before we commence the litigation process.I will also provide you with all relevant documents as soon as we are ready to go into the litigation process.

If this is acceptable to you and its a case that you can handle,please do let me know as soon as possible and also provide me with an engagement letter.We look forward to your prompt response.

Thank you

Sincerely,

Andrew Scammer

Scammer Machinery Inc.

Sweet - new business.  Lets get this rolling - not even going to ask for an engagement letter...

Andrew:

I do not need a formal engagement letter, just please reply that you agree that any debt collected on your behalf will be paid directly into my attorney trust account, from which I can deduct a 10% fee and then wire the balance directly to your account.  The amount of my fee would be 10% of anything collected on your behalf.

Also, I would need to see a copy of any relevant invoices and /or contracts with the debtor.  Please scan those in and send them to me via email.

Best Regards,

Brian Powers

---------------------------------------

Dear Brian Powers,

Thank you for your email,however my firm will prefer a formal engagement letter stating the agreed terms for documentation purposes.

Please do email it to me for my review and signature.

I look forward to hearing from me.

Regards

Andrew Scammer

-----------------------------------------

Mr. Scammer:

I appreciate the fact that you require proper documentation prior to the begin this process, therefore I look forward to receiving your signature to the attached engagement letter. Once we are engaged, please also provide any documentation regarding the outstanding debt.

Best Regards,

Brian V Powers, Esq

Wow - this guy must be legit if he is demanding an engagement agreement.  Well ok....

Dear Brian V. Powers,

Attached is the signed copy of the fee agreement.Please,do acknowledge receipt.

I am looking for a way forward in this matter and I am satisfied with the details portrayed in the agreement.I will be sending a hard copy of the documents in the mail to your office.

We have been communicating with our debtor Mr. Larry Debtor of Debtor Machinery LLC,over the past few days regarding our intention to take legal action against them,we have informed them that your firm will be handling this case from henceforth and that any further communication should be directed to your office.However,they have stated clearly that they want an out of court settlement,thereby pleading for more time to set up the payment.As I have earlier anticipated,We prefer to reach an informal resolution and still maintain a good relationship with our client. 

This morning, I received a call from Mr. Larry Debtor,that he will be making a partial payment of the money owed to us to avoid any legal action against them.We strongly believe that they have resolved in making this payment due to our recent legal stance.

They have promised that they will be sending the partial payment directly to your office on or before 30th of July, 2010 and the balance will be sent out on the 6th of August, 2010 to avoid any lawsuit.

I suggest we give them the requested time to come up with the payment,and if they should fail to make good their promise this time,then you can send out the demand letter and consequently litigation.

Please,be rest assured that if your office should receive this payment as promised by our debtor,your 10% fee still stands according to our agreement.

I await your acknowledgment of this email and also give me a call if you have any question.

 

Thank you for your services.

 

Sincerely,

Andrew Scammer

Wow - this is going to be some easy money - I'll believe it when the check shows up...

Dear Brian Powers, Esq.

I have been reliably informed by my debtor that payment has been delivered to your office.Please confirm this payment and as well deposit it in your firm's trust account pending further instructions.

I look forward to your timely response.

Thank you.

Huh - ok - I'll still believe it when the check shows up...then POOF:

Wait a minute, why is this debtor with an address right across town from me sending me Air Mail from Canada?  Wierd.

Wait a minute - looks like someone is not as sneaky as they thought.  The bottom of the letterhead has a Canadian address.  Or maybe the scheme here was to say they have a Canadian division that was responsible for sending the check - who knows.

Eager to make some quick money, I got greedy and tried to change my deal:

Andrew Scammer,

Sorry to hear about your dilemma with the supplier in Duck Dong. I will deposit the check into my trust account and await further instructions.  Although, Hong Kong is really far and across an ocean?   Are you certain a wire transfer would make it that far?  We can try, and if the wire can't go that far, I could always fed ex a check. I would also be happy to review the contract with your supplier to see if you have any cause of action, butt that is unlikely.  

Finally, please be advised that I must adjust my fee to 33% for the additional admin work of negotiating a settlement with your supplier and for initiating an international wire(that can't be easy to do...just so far).  

Best Regards,

Brian V Powers, Esq

To that, I got nothing but crickets. 

Needless to say, I did not deposit the check, nor did I ever have any intention to do so. I made some law enforcement contacts to no avail. It is crazy to me that (a) people are falling for this, (b) the banking system is set up in a way that would allow this scam to happen, and (c) that there is little or no recourse for an attorney when it does happen.

So, the best way to avoid this whole mess is to spot the scammer at the get go.  Some tips:

• Be wary of ANY potential clients that contact you via email to collect a debt and immediately offer up a substantial contingent fee.
• Be especially wary of such a potential client if it is an international client (or claims to be).
• Do some due diligence on the potential client before you email them back.  Google them.  Look for websites, yellow page listings, LinkedIN entries...etc.  But don't trust just what you find easily on the Internet.  
• If there is a website for the potential client, run a Whois search to see how long the domain name has been registered - and to whom it is registered.
• Try to find contact information for the potential client that is independent of what you received in the email - then use that information to contact the potential client.
• ALWAYS call the potential client - don't just rely on email.
• If you receive mail from the potential client, pay attention to the postage markings - if mail is being sent from somewhere other than the address the potential client is claiming (especially a foreign address) - stay away!
• Never, ever wire funds from your tryst account until all funds have completely cleared from any underlying deposit.

The Change to the Accredited Investor Definition - Exclusion of Primary Residence from Calculation of Net Worth

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was signed into law.  Among the slew of provisions contained in the legislation, is a change to what constitutes an accredited investor under the Securities Act of 1933.  

As I have blogged about in the past, one way to qualify as an accredited investor under Rule 501 of Regulation D is to be:

a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase

Section 413 of the Dodd Frank Act changes that, by requiring the SEC to adjust the definition of “accredited investor” under Regulation D to exclude the value of a natural person’s primary residence when calculating that person’s net worth (emphasis added):

The Commission shall adjust any net worth standard for an accredited investor, as set forth in the rules of the Commission under the Securities Act of 1933, so that the individual net worth of any natural person, or joint net worth with the spouse of that person, at the time of purchase, is more than $1,000,000 (as such amount is adjusted periodically by rule of the Commission), excluding the value of the primary residence of such natural person, except that during the 4-year period that begins on the date of enactment of this Act, any net worth standard shall be $1,000,000, excluding the value of the primary residence of such natural person

This is obviously an important change for anyone out there with a private placement of securities - who should seek legal counsel to make sure they are obtaining the appropriate representations from individual investors.

It will be interesting to see exactly how the SEC implements this, and how it will treat, for example, a mortgage on a primary residence in the determination of person's net worth.  There are a lot of people out west with upside down mortgages - so this change may actually help some people qualify as accredited investors depending on how the SEC interprets and acts on this.

Indianapolis Attorney Brian Powers (that's me) Quoted in Article Regarding Equity Financing

Bank of America has a website called Small Business Online Community, the mission of which is to "create a thriving online community that empowers people in building a successful business."  A few weeks ago, a gentlemen called me, after reading some of my posts on IndianaStartup.com and interviewed me regarding the raising capital and potentially giving up control in the process.  The article, which you can find in its entirety here, is pretty good, and give some interesting perspectives (other than just mine). 

Here are some excerpts quoting yours truly:

Still, Indiana business attorney Brian Powers, who also runs the blog http://Indianastartup.com, points out that such a power-sharing arrangement can work-it just depends upon the individual circumstances of the parties involved. "Investor control is not necessarily a bad thing, especially if you have a young business that will be gaining partners that have greater industry expertise and business connections than you do," he explains. But if a business owner can't take an emotionally detached look at his company's real long-term needs, he or she might be better served by bringing in a third party to help facilitate offers and find the best match. "That's what I often do," Powers explains. "I end up helping companies through the process of figuring out that what they're usually being offered is a pretty good tradeoff for the money." 

What helps Powers assess what is or isn't a pretty good tradeoff is the fact that he's been on the other side of the table. "In 1998, I was part of a dot-com startup company that raised $1 million in capital through an equity round," he explains. "Back then, though, we got ridiculous valuations and didn't have to give up control to get it. Those days are long gone now." For a short primer on these valuations and their role in determining equity investment, check out Powers' blog: http://indianastartup.com/business-funding/raising-venture-capital/raising-venture-capital-how-much-should-you-give-up/.) 

My Law Practice - Through the Eyes of Google.

Simple Estate Planning and Last Wills - Online - myIndianaWill.com

Today I am launching a new website that provides online simple estate planning services to Indiana residents - myIndianaWill.com.  Simple estate planning is essentially estate planning for people with - well - simple estates.  A simple estate plan is a great way to make sure that your wishes are carried out in the event of death or disability.  myIndianaWill.com provides documents that can help you create your simple estate plan, including:

Last Will and Testament

With this Indiana Last Will and Testament, you can leave specific property to certain people or children via a written list or memo that you attach to your will. From there, this Indiana Will contemplates that the remainder of your estate be distributed to your surviving spouse, and if no spouse survives you, then to your surviving children.

Living Will / Advance Directives / Healthcare Directive

A Living Will / Healthcare Directive / Advance Directive protects your right to refuse any medical treatment you do not want, or to request any treatment that you do want, in the event that you lose the ability to make decisions for yourself.

Power of Attorney

A Power of Attorney lets you name someone to make certain decisions (healthcare, financial...etc) on your behalf in the event you are unavailable or not able to speak for yourself.

Simple Estate Planning Packages

Our Indiana Simple Estate Planning Packages provide essential documents for you to create a simple estate plan to ensure that your estate is handled properly in the event you become disabled, incapacitated, otherwise unable to manage you estate yourself, or pass away. The Indiana Simple Estate Planning Packages include:

• Indiana Last Will and Testament (for Married individuals).
• Indiana Living Will Declaration.
• Indiana Durable Power of Attorney.
• Indiana Healthcare Power of Attorney (with optional appointment of Healthcare Representative).
• Indiana Life Prolonging Procedures Declaration.