Whether you are starting a small business or running an established company, it is vital to understand business laws and regulations. But that is easier said than done. My goal is to provide business-related legal services so that you can spend more time dealing with the actual business and less time with legal intricacies of operating your business. My services include:

Business formation

You have a new and innovative product or service and you are interested in forming a new business. You may have concerns about liability, taxes, investors and other considerations. As your small business lawyers, we will assist you in deciding whether your startup business should organize as a limited liability company (LLC), partnership, S corporation or C corporation. We will form the most appropriate business organization for your new business and register the business in all jurisdictions in which it will conduct business.

Mergers and acquisitions

If your business is fortunate to thrive and become a merger or acquisition target, we can represent you as the seller; or if you are on the other side and looking to acquire a business, we can assist with the due diligence in purchasing a business. We will review various approaches in purchasing a business through merger or acquisition. We will discuss with you various structures in purchasing the stock or purchasing the assets of an acquisition target. In either case, your business will need thoughtful and comprehensive representation in all aspects of a merger or acquisition.

Government contracting

Government contractors face numerous issues when contracting with the government. And with a hands-on approach and substantial experience, we will help you navigate those legal issues. We prepare teaming agreements, subcontracts and joint venture agreements and can handle a variety of other government contract matters. As government contract lawyers for your small business, we can assist you in applying for programs for HUBZones, service-disabled veteran-owned small businesses or women-owned businesses. If your company is facing debarment or suspension because of allegations of corruption or bribery, we can assist in your defense before the U.S. government or the World Bank.

Business transactions

Once you have an ongoing business, however organized, you will have a host of various commercial transactions. We prepare agreements with lenders, lessors, partners, customers, employees, and consultants. We provide business legal services for your company, preparing confidentiality agreements, nondisclosure agreements, licensing agreements, distribution, employment agreements, independent contractor agreements, lease agreements, and many others. We will help you understand what each part of these agreements require and make sure that these agreements provide protection to you and your business.

Corporate law

Once your startup business has been created, your company will have ongoing requirements to maintain its separate status. We will assist in guiding you on how to prepare corporate minutes or resolutions of the company to maintain the corporate form and other steps to protect the limited liability of your company. You will also have to make sure that your bylaws or operating agreement continues to reflect the needs of the business organization. We are available to assist you in addressing these issues. And once your company is ready to raise additional capital from investors, we can work with you to determine whether you are subject to securities laws or fall within one of the exemptions.

Business disputes

Few businesses are immune to business disputes. If your small business was well-advised, you have an agreement that will provide guideposts on how to resolve your business dispute. If you are unable to settle your dispute, you may have a dispute resolution mechanism such as mediation or arbitration in the agreement. An alternative dispute resolution mechanism such as arbitration or mediation generally can provide a relatively quick resolution of your business dispute. If not, then you may have to consider litigation. We handle business disputes, including pre-litigation matters, mediation, arbitration and litigation.

Anti-corruption compliance

Every company should have procedures and policies to minimize its exposure to allegations of corruption or bribery. An integrity compliance program (ICP) is essential for businesses doing work internationally for the United States government or work financed through one of the development banks. We can assist in reviewing or preparing an ICP to assure that is consistent with the anti-bribery and anti-corruption guidelines from the World Bank. If your company is facing debarment or suspension because of allegations of corruption or bribery, we can assist in your defense before the U.S. government or the World Bank.

Non-profit law

We work with organizations to obtain their tax exempt status under Section 501(c)(3) of the Internal Revenue Code. There have been recent changes to obtaining 501(c)(3) status and we have worked with organizations in submitting successful applications on the simplified track by filing a 1023-EZ and the more rigorous 1023 application for larger organizations. Nonprofits also face similar legal challenges to assure that they comply with business requirements and additional requirements to assure that they do not jeopardize their tax exempt status. As a law firm for nonprofits, we work with nonprofit organizations to guide them through these issues.

FAQ Small Business Attorney in DC

What is considered a small business?

Almost all our clients fall within the definition of small business/startup as determined by the Office of Advocacy of the U.S. Small Business Administration. Under this definition, a small business has fewer than 500 employees. Small businesses encompass about 99.9% of all business organizations in the United States.

Which industries do you serve as a small business attorney?

Most of our clients are service providers such as consulting companies, law firms, accounting and bookkeeping services, cybersecurity consultants, video production companies, and lobbyists, just to name a few. We also represent foreign and domestic manufacturers and software developers.

As a small business lawyer in DC, we represent some retail operations, such as bookstores and restaurants. We also represent numerous nonprofits with varying missions. Our government contractors clients hold various IDIQs (Indefinite Delivery, Indefinite quantity Contracts) and GSA schedules.

In which areas of the law does a small business or startup need legal assistance?

Most times, small businesses/startups need the services of outside general counsel. As outside general counsel for small businesses, we can handle most matters as a small business attorney that small businesses generally encounter. Usually, anything with the word agreement or contract is within our practice areas. This includes operating and shareholder agreements, which are used for small businesses and startups that are formalizing their relationships with their owners. Once a business is formed, then we prepare and review a host of other agreements, such as service agreements (which may be referred to as client agreements or consulting agreements), independent contractor agreements (which may be referred to as subcontracting agreements), employment agreements, teaming agreements, purchase and sale agreements, merger agreements, option agreements, license agreements, lease agreements, and the list goes on.

What factors should a small business and startup look for in retaining the services of a lawyer for small businesses?

With our extensive experience of working as a small business attorney in DC for decades now, background and experience should come right at the top of the list when looking for a small business lawyer. We think that accessibility and communication are essential for a successful relationship between an attorney and a client. Hourly rate is important but not as important as quality of service.

What kind of experience do you have in advising small businesses as an attorney?

Keith Rosten has not only legal experience but also business and practical experience that allows him to relate to the trials and tribulations of a small business owner. Keith has BigLaw experience before working for small and medium-sized businesses, first at his own law firm focused on small businesses and then with Berliner Corcoran & Rowe LLP.

Keith has substantial business experience. He received an MBA from the Tuck School at Dartmouth College. During his business studies, he worked on several group projects with small businesses, including a furniture manufacturer, a manufacturer of leak location precision equipment, real estate developer. After business school, Keith operated a successful real estate business in California and overcame numerous issues, such as asbestos abatement and underground storage tank remediation.

Keith worked as a legal adviser to a government contractor and was a legal adviser to a major initiative in Russia. Keith ran another small business, selling and marketing solar energy equipment. The business had an e-tailer component, hosted the largest solar energy forum online, and sold solar energy equipment to the government. Keith negotiated two GSA schedules for the business and obtained HUBZone certification for the business. Keith was also president of the Dartmouth Entrepreneurial Network – Washington, a networking organization for small businesses in the greater Washington, DC community.

Keith has also volunteered for Compass Pro Bono, working with local business professionals to conduct long-term consulting engagements for local nonprofits in fundraising, governance, and strategy.

With this breadth of legal and business experience, Keith is attuned to some of the challenges facing small businesses, which allows him to provide effective advice and guidance.

As a small business lawyer, do you take in-person meetings only?

Yes. We are located in downtown Washington DC and host many of our clients. For those clients who cannot come into our offices, we usually meet over Zoom or by telephone.

How do you charge for your services as a small business attorney?

We charge our clients based on hourly fees. We usually provide a budget of how much certain matters cost so that startups and small businesses know in advance the ballpark cost of the matter.

What if a client does not like our services?

Clients can terminate our services anytime if they don’t find it satisfactory.

Should my small business lawyer or startup lawyer be in the same state as me?

No, not always necessary and may depend on multiple factors. For example, though we are an expert small business lawyer in DC, we have also provided consultation to other cities’ clients.

Primer on seed financing for small businesses

Most entrepreneurs are constantly looking for money to support their small businesses. Startups have three major options for funding: self-funding; loans; and equity. If they had their druthers, most small business owners would not deal with investors. But if the business wants to grow, then usually outside funding is necessary. In this article, we discuss seed financing, when owners give up equity in their small businesses in exchange for funding from third parties.

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Related article: Investors for Startups: Terms of Engagement

Internal resources are sufficient

Many small businesses do without any additional financing. Say you are the owner of a restaurant and do not have any intention of expanding. You pay the restaurant’s expenses and what ever is left over, you bring home to feed your family.

What happens when the restaurant can’t meet payroll in any particular month? If one of the owners can simply write a check when the business’ bank account is low, then you do not need outside funding. If the small business owner cannot simply cover payroll, usually the restaurant owner has a line of credit that may be secured by the owner’s personal assets.

Organic growth may support the expansion of the company

If you have a startup that you intend to grow, you may think that you can rely on organic growth. The company does not need external resources because the business itself can support the growth of the company. Alternatively, possibly the owners have sufficient resources to fund the expansion of the company. Most startups, however, don’t have owners with deep pockets.

Organic growth is ideal if you can simply reinvest the operating profit from the company back into operations. The business will throw off enough cash to allow the business to grow.

Usually a startup is not going to be generating excess cash. Most startups are lucky to pay their impecunious founders a meager salary. And most startups intend to expand. Growth in revenue generally means that that you will need to expand the capital of the company. A general rule of thumb is that if you want to double revenue, you have to double the assets. Where are you going to get the capital to purchase those additional assets?

Debt financing is not without strings

The other alternative is for debt financing such as a loan from the Small Business Administration. Or you may apply for a line of credit with your local bank. But these and other loans have strings attached.

Lenders such as banks want to minimize their own risk so they will inevitably require the owners to provide security or otherwise to guarantee the loan. If you have a home and you and your partner do not care that you may lose the home if your business falters, then a loan secured by your home may be a good option.

A friend or family member may provide a non-recourse loan, meaning that if the business doesn’t pay it back, the lender cannot go after the individual owners of the business. But generous and rich family members are a rare breed.

Giving up equity to investors

If the other options are not available, then you need to consider outside investment. Outside investment can take several forms. Giving up equity is high risk to the investor. Most startups are going to fail and the investor may never see the investor’s money again. Some investors understand this; others do not.

The investor needs to match the risk with the potential reward. If the startup is successful, the investor at this stage will want to enjoy a generous reward for making an investment of very risky capital.

Investors in the seed round

You probably have talked with other small business owners who have horror stories to tell about their investors. They are correct that you need to pick your investors carefully. You as the owner decide to give up partial ownership in the startup. We have grouped investors at the seed stage into four major categories.

The most common investor at the seed stage is the friend or family investor. There is a pre-existing relationship usually based on trust.

The second kind of investor is the angel investor, usually a high net worth individual. An angel investor is constantly looking for companies to invest in usually at pitch events or through various networking organizations.

The third kind of investor is a private equity company or sometimes a venture capitalist. These are institutional investors that create funds through which to invest in individual companies.

And finally, there is the corporate investor or strategic investor. The strategic investor is usually a corporation that has a strategic interest in your business. A customer or supplier with which you have a good relationship may see synergies between the investing company and the target.

Amount of seed investment

Obtaining seed investment is usually the most difficult kind of equity investment for the amount of investment. Entrepreneurs may attend countless pitch events or send off innumerable copies of a business plan. And even if you are successful in attracting seed investment, the amount of money may not be substantial.

The typical seed round is in the $500,000- $2 million range. This money should support the startup for at least 12 to 24 months before the next round of funding is required.

Each individual investment may vary depending on the kind of investor. There are no hard and fast rules of how much each investor may put into the company.

Friends and family may only invest in the $10,000 to $25,000 range. An angel investor will typically invest more, possibly in the $25,000 to $100,000 range. A private equity company or strategic investor may take up the entire round.

Kinds of seed investment

The three most typical types of securities for a seed round are convertible notes, SAFEs and preferred stock, although preferred stock is usually reserved for the next found of funding

Common stock such as founder’s shares can also be used during the initial round of funding. Common stock is usually less appealing to investors because common stock does not usually have investor-friendly terms. Issuance of common stock will set a price for grants of options and restricted stock to employees. A savvy prospective key employee being recruited for a startup will have less enthusiasm for a priced common round.

Let’s talk about the three most common types of seed rounds and their advantages and disadvantages. In general, and there are many exceptions, it is easier for companies expecting to through various rounds of funding to opt for a corporate structure, usually a Delaware corporation.

Related article: Forming a New Business: Corporations vs LLCs

Convertible notes

Convertible notes are a special kind of loan that can “convert” into an equity interest in the company based on certain triggering events. The conversion event is usually a qualified subsequent financing (such as a preferred stock financing over a certain threshold like $1 million to $5 million), a merger or acquisition, or sometimes a maturity date.

Founders like convertible notes because they are common and easy to understand for both the equity holders and the investors. And the owners are not giving up any equity. It is a loan until the triggering event occurs. Convertible notes are not secured, so the founders will not lose their personal assets if the company is unable to pay the note back.

Another advantage is that the owners can defer negotiating a valuation for the company until a priced preferred round.

There are some disadvantages as well. The owners may not like a convertible note because as a loan, the loans may need to be repaid. Investors may extend the maturity date, but there is a date certain on which the investors need to be paid back. The existing equity holders may also not like a convertible note because they, the equity holders, may be diluted. The notes are included in the pre-money capitalization in the next round of financing.

Simple agreements for future equity (SAFEs) have captured the attention of the investing community

If you are going to networking events, you no doubt have heard about SAFEs. Y Combinator, a start-up accelerator, introduced SAFEs in 2013 as an alternative to convertible notes. As its name applies, a SAFE is supposed to be simple, although lawyers are having a field day in amending their provisions. But assuming that the investor and company do not change the provisions of a SAFE, they are indeed simple and easy to negotiate.

Valuation cap and no discount. There were originally four different kinds of SAFES and Y Combinator added a fifth kind in 2019. The first kind of SAFE has a valuation cap, but not a discount. A valuation cap is the maximum value imputed to the company. In a qualified financing, the SAFE converts at the lower of the price per share calculated using the valuation cap and the actual price per share of preferred stock sold in the financing.

Valuation cap and conversion discount. The second kind of SAFE has both a valuation cap and a discount, leaving it to the investor to decide which is more advantageous at the time of the subsequent financing round. The conversion discount is the amount the price per share in a qualified financing is discounted for determining the price per share at which the SAFE converts.

No valuation cap and conversion discount. The third kind of SAFE has no valuation discount, but it does contain the conversion discount.

No valuation cap and no conversion discount and most favored nation status. Under this version of the SAFE, the investor enjoys the same preferential terms received by any subsequent purchaser of convertible securities of the company.

One major criticism of the SAFEs from the perspective of founders has been the dilution of founders in a subsequent financing round. The 2019 new SAFE forms that Y Combinator introduced provides more clarity to the founder based on post-money valuations.

SAFEs have now become a staple in any entrepreneur’s kitchen because they are quick and simple. They are not debt so there is no need to pay interest and there is no set term. And you don’t need to gather all of your investors in a stuffy conference room to close the round at one time. The SAFEs are stand alone agreements, allowing individual investors to close as they are ready.

Preferred Stock

You as the founder may also want to consider issuing preferred shares. Preferred stock can have attributes of both debt and equity. Preferred stock does not come with voting rights. But preferred shareholders are guaranteed a fixed dividend.

Important to the investor is what happens if the company goes belly up. The preferred shareholders may enjoy a liquidation preference, meaning that they have a greater claim to the company’s assets than the common shareholders if the company falters.

At the seed stage, it is less common to see preferred stock. A preferred round is typically significantly more expensive than a SAFE or convertible note. Preferred shares require the negotiation of numerous documents. There may not be a lead investor so the founders are left to negotiate with multiple parties.

Founders have options

Founders of startups have options to seek outside funding. But they need to formulate a strategy and be prepared for lots of rejections before landing an outside investor.

The simplest way to grow your company is to be rich or have a lot of wealthy relatives. For most entrepreneurs, however, they need to hone their business plans and be prepared to pound the pavement.