Is It Legal For Me to Find Investors For A Friend’s Business?

Investor Introduction Maybe you have a rich friend who is looking to invest in something interesting or fun or worthy. And you have another friend who has just built a better mouse trap, but is living in his mom’s basement.

Together, the two could make millions. So you consider playing business matchmaker. Nothing wrong with that, right?

Even better… maybe you can get a cut in the business or a fee for a successful transaction. That’s just being enterprising. And your inventor friend is enthusiastically willing.

Someone tells me this story casually at least a few times a year.

And every time, I have to be a wet blanket.

Because if you are going to connect an investor with a business, you may be violating the securities laws. If things go wrong, you could be held responsible. Or worse, you could be prosecuted by the SEC and fined or put in jail.

Like many things in law, something with such good and innocent intentions can surprise the people involved by being illegal.

Watch the video to see what I mean.

Video Transcription:

Say you have a friend who wants you to introduce him to potential investors in your industry in order to raise money for his new start up business.

Can you take a percentage if he successfully raises money from my contacts?

Unfortunately, no.

Federal securities law requires a broker’s license for any person who gets paid any fee for obtaining an investor.

This is meant to protect investors from being scammed.

Even if you just make the introduction, you must still comply with this law.

If you are not licensed, the investor can later sue you for a return of his or her money.

You can still make a simple introduction to help out your friend, so long as you aren’t paid for it.

And, of course, you shouldn’t make any representations or guarantees about the wisdom of investing money in your friend’s venture.

Would you like to have a lawyer at your beck and call without it costing you an arm and a leg? Learn about our Peace of Mind Plan or call us at 800-449-8992 to find out how.

Things to Consider When Getting A Business Credit Card

Old man puzzling over chess boardNo matter what sized business you are, cash flow is a major consideration. In fact, I’d say that cash flow is the King Kong issue of any business.

Whether you are just starting out, or you’ve been running a business for several years, you’ll find that ensuring ongoing cash flow is hard and requires vigilance.

Having access and carefully managing a line of credit can be the answer to short term problems (and there are always problems!).

There are many options, but the rewards available on credit card purchases make it an attractive way to manage expenses. You just need to be careful not to get into debt. Do your due diligence as an employer and know what to do for your business.

Things You Must Consider

1. It is easy to get into debt on a credit card.

Sure, a credit card means that your company will have additional funds available when you need them. But it also makes it tempting to take on debt through spending.

Debt can be a good thing if you leverage it for a return on investment. So, for example, if you buy advertising on your credit card for $500 and it returns a measurable result of $1000, then the debt was worthwhile.

Pay off the card before it incurs interest and repeat.

But if you are buying nicer throw pillows for your office, ask yourself whether that is worth paying interest on or tying up your credit cushion (no pun intended). Everyone likes a nice office, and maybe those throw pillows will make you money somehow. But if they do not have a measurable ROI, then wait to buy them until you have surplus cash.

The key is, don’t use a credit card to “consume” goods and services. Use it to keep your business in growth. If you can keep to that discipline, a credit card is an excellent tool.

2. Consider the cost of the card versus the benefit.

Here’s a simple example:

My husband immigrated to the United States when we got married. When he got here, he had no credit. In order to establish credit, we wanted to get a credit card for him. After that, we got an offer for a 1% cash back rewards card.

The card had an annual fee of $99. In order to break even on the fee after the 1% cash back was applied, we would have to use the card over the year for a total of $9,900 in purchases, or $825 per month.

And since he had no established credit, they only offered a line of $500 to start.

Doing the math, we would be losing money on the card unless we maxed it out and paid it off twice per month.

Needless to say, the card was not worthwhile. So we chose a card without an annual fee that was also without rewards, until his credit could get established.

As you can see, evaluating a credit card goes much deeper than just comparing interest rates and policies. You need to know your business, your spending habits, and what type of rewards program would be the best fit for you.


  • Annual Fees
  • Grace Periods
  • Late Payments
  • Interest Rates
  • Reward Types and Restrictions
  • Insurance and Charge-back Policies

3. Whether you should give your employees access.

There are two ways to handle expenses with your employees. Way one is to give them permissions to use the company card. Way two is to make the advance expenses and turn in an expense report.

Personally, I do both, depending on the employee. For purchasers or key managers, having a company card makes more sense. I can’t ask them to order $1000 worth of office supplies on their own cards and expense it.

But for employees who have expenses related to sales or travel, a separate card is a good idea. It makes expense accounting must easier. But, just so you know, the employee gets to keep perks such as mileage or points.

To schedule a consultation about a business law issue, contact our attorneys at (800) 449-8992 or contact us online.

A Comparison of Buying vs. Leasing a Car

yellow porche and leasing a carI hear a lot that businessowners should lease cars for tax purposes. The tax treatments of leased versus owned cars for businesses and entrepreneurs is, unsurprisingly, confusing. I’m not a tax expert, even though taxes touch everything I do as an entreprenuer. But here’s a link to the best explanation I could find on how the deductions work, by an actual tax expert (or so she says… I don’t personally know her). She basically recommends buying over leasing.

The other day, I counted and learned that I have owned 10 cars and leased 1. I far prefer to buy (even though my lease was my best car ever). Like most Libertarians, I like tangible assets and don’t trust banks. But there are some definite perks to leasing.

The conclusion I made after going through more than a dozen car transactions in my life (I also help family members buy cars) is that buying is more financially sound but also more austere. A friend of mine recently said that he wanted a Tesla (and test drove one) but paid down his mortgage instead. He said “future me will appreciate that decision more than current me.” That’s what the buy vs. lease decision boils down to: you have to balance future and current happiness factors.

Advantages to Leasing

  1. No depreciation

For most people, buying a new car stands as the second largest financial decision they make.  Only the purchase of a home tends to rank higher than buying a car. The bottom line is that new cars do depreciate instantly once they are driven off the lot; this fact is not a myth. Opting to buy a used car to avoid depreciation may be a savvy financial decision, but is not nearly as much fun. Leasing negates this issue.

  1. No worries about maintenance

You don’t have to worry about maintenance when you lease a car (well, some contracts have you pay for oil changes and tires). There’s definitely a pampered feeling when you go to the dealer and drop the car off and they give you a loaner of some really high-end car — it’s a different experience than my normal Jiffy Lube run. And the car is under warranty the whole time. When the warranty runs out, poof, new car time.

  1. Always have a new car

Do you love the look, smell and feel of a brand new car? With leasing, you’ll never have to worry about driving a car that feels outdated. This also means you’ll always be able to benefit from the newest safety features and technological innovations.

  1. Change cars as your needs in life change

The one time I leased, I did so because I wanted a big firm lawyer car without the long term commitment. I planned someday to have a family, and so my sporty little Mercedes wasn’t going to cut it. Three years was the perfect amount of time to enjoy it. By then, I got a sporty husband and a sporty dog, and a truck became necessary.

With leasing, you don’t have to worry about making a huge mistake by picking the wrong make or model. If you end up selecting a car that you don’t like for one reason or another, your lease will simply run out and you will not be stuck with the car.

Advantages to Buying

  1. No mileage restrictions

Regardless of whether you opt for a new car or used car, the bottom line is that mileage matters.  If you know that you will be driving your car many miles on an annual basis, then buying is likely to be the superior option.

Leases have mile restrictions, which tend to be 9000, 12,000 or 15,000 miles a year. They charge overage if you go over these amounts. This factor can quickly turn leasing into a losing proposition.

2.  Free yourself from car payments

If you are hoping to some day be without a car payment, then buying is the way to go. I haven’t had a car payment (or a mortgage payment) for years and that gives me a lot of happiness. I highly recommend it.

  1. No wear and tear fees

Leasing can be stressful if you are prone to accidents or you want to put a spoiler or racing stripes on your car. If you spill your coffee or degrade the inside of the car, you’ll be charged fees to clean it up. That’s why people with small children or pets should probably buy. You can also be charged high fees for small dings and dents in your vehicle.

In the end, both options have their advantages, and the right pick depends on your needs, lifestyle and financial goals. If you do decide to lease, be sure to read the fine print in your contract to make sure you thoroughly understand the terms.

Why Do 80% of Businesses Fail In Their First Year?

rows of silouhettes of diverse peopleEric is really angry. Less than a year ago, he started a business with four guys he knew from friends of friends. They shared the dream of opening a sports bar dedicated to soccer that would serve international beer and bar food.

They found the perfect spot and signed a lease. Eric personally guarateed the lease and put $30,000 down for a deposit. He paid for all the kitchen equipment and hired a contractor to bring the building to code.

His partners (they were all equal according to the one page document he typed up) chipped in for a little while. One brought in some TVs. Another bought some beer and tended bar sometimes. Another pitched in a few thousand dollars to buy some advertising to announce their grand opening.

After a month, the first partner was run out by Eric after taking cash from the till. He never came back.

Then one of the partners got sued for pinching the waitresses. Eric became embroiled because they were not a registered partnership or corporation.

Six months in, Eric ran out of savings before the bar started turning a profit and he got behind on rent. He asked the third partner for money. Instead, the third partner took all the TVs and left.

The waitresses quit because they were paid late. There was no cash for food or beer. And the landlord said that Eric was personally responsible for the five year lease — a debt of $250,000 at least.

After a few more months of barely scraping buy, Eric closes the doors to his dream bar. And the landlord sues.

Although this is a fictional story, I get a call from someone like Eric at least once a month. The details vary, of course. But the story is more or less the same: an erstwhile entrepreneur gets burned by less-than-honest partners or landlords and now has major problems. He’s broke, depressed and ruined.

It’s a really depressing story for an optimistic entrepreneur like me. But sadly, 80% of businesses fail within their first year. And the blow up is usually spectacularly devasting for an owner like Eric.

I am CONVINCED that many businesses would not fail if they had simply started off right. New business owners make a lot of the same mistakes that lead to failure. These include:

  • Not organizing legally, following ALL the steps necessary (e.g. just filing an LLC is not good enough)
  • Failing to keep professional accounting records from Day 1 and getting into tax problems
  • Not having good contracts with business partners and investors (this is one of the biggest mistakes)
  • Getting stuck in a bad commercial lease
  • Not having adequate resources to deal with all the things a new business must do because of lack of planning or education, which destroys cash flow because of constant traps and problems
  • Failing to follow good employment and pay practices from Day 1
  • Underestimating what starting and running a successful business takes

Eric didn’t call me before starting his business. If he had, I would’ve given him my ebook, How to Start A Business… Legally: A Quick and Easy Checklist.

I cannot stress this enough. Getting set up right and under the guidance of someone who has started or help start many businesses will save you thousands of dolalrs and help prevent failure.

Someone like Eric spends $100,000 to open his bar, only to crash and burn in just a few months. Now he’s liable for another $250,000 just with a broken lease…. There are still employee liabilities and taxes to deal with (and that’s if the partners all just disappear). His legal fees with me are going to be a minimum of $50,000. Alternatively, he will bankrupt and lose everything.

In a more perfect universe, Eric would have come to me a year ago. He would have hired me for between $5000 and $18000 and I would’ve helped him set up everything and given him the benefit of my years experience in business start ups.

He would’ve avoided the bad partners, the bad lease, the sexual harassment lawsuit and the waitresses quitting.

He also would have been on track to avoid the plethora of other problems that come from starting a business.

And then his $100,000 investment would not have been such a hopeless risk!

If I practiced law just for money, I would rather have people like Eric pay me $50,000 or more to pick up the broken pieces of their dreams and help them move on.

But I’d rather more small businesses be successful. And the odds of that are much improved when you invest in the foundation when you start up.

Either way, you’ll be calling me.

Equipment Finance and Leasing Attorneys

Excellent Equipment Financing and Leasing Advice, San Diego, CA

Depending on factors like the size of your workforce, the industry you work in, and the degree of funding available to your business, it may be more advantageous for your company to temporarily lease equipment rather than commit to a purchase.  This is particularly true of organizations which operate equipment requiring frequent replacements or repairs, or which are limited in their purchasing power by budgetary constraints.

While renting equipment often proves beneficial in terms of tax considerations, ease of making upgrades, and overall productivity of the workforce, it is also a major decision with long-term effects, and must be weighed carefully by a critical eye.  Before you rush into signing a deceptive, ambiguous, or outright unfavorable contract, let the experienced business lawyers of Bellatrix PC review the transaction.  Our knowledgeable legal team will walk you through all of the options and potential outcomes, and will negotiate aggressively to protect your company’s best legal and financial interests.

To start discussing your options in a private legal consultation, call the attorneys of Bellatrix PC at (800) 449-8992 today.

industrial piping and vats or silos

Why Should Companies Lease Equipment Instead of Buying?

For tax or affordability reasons, some organizations may choose to lease or finance rather than making a permanent purchase.  For example, some business owners prefer the flexibility of a lease because it allows them to replace or update their equipment more frequently.  Other employers choose to lease because it grants the opportunity to make a cost-efficiency evaluation before investing in a purchase.

Sometimes, it is simply not possible from a cash-flow standpoint to make an outright purchase, while leasing or financing allows your business to grow using leveraged debt.  In other cases still, leasing equipment creates more immediate tax write-offs than purchasing and depreciating capital assets, though of course, it is always prudent to consult with a qualified accountant before making a decision.

Some common examples of materials companies tend to lease rather than purchase include, but are not limited to:

  • Computers and Servers
  • Copy Machines
  • Farm Machinery
  • Furniture
  • Heavy Manufacturing Machinery
  • Industrial Appliances
  • Vehicles

Companies operating within certain industries may have greater need to lease than others.  For example, the owners of a small office containing just a few desks, chairs, and a single copy machine may not have a strong financial motivation to lease — but for the owners of a large restaurant containing numerous industrial appliances and dozens of tables and chairs, the financial considerations are very different.

The decision to buy or lease comes down to determining what will best meet the objectives of each particular organization.  Our attorneys will work closely with your team to help you make informed decisions that maximize efficiency and foster growth.

Drafting and Negotiating Commercial Contracts

In addition to weighing the financial calculations which inform the decision to rent or buy, as well as the quality of the material itself, it is also important to consider the supporting contracts and documentation.

As with any other contracts, it is critically important to have your lease agreements reviewed by an experienced attorney.  For instance, consider the following questions:

  • What happens if your building is flooded, and the property or material is damaged?
  • What if an employee gets hurt while using the equipment?
  • What if economic conditions change, and you need to terminate the lease or contract?
  • Who is responsible for maintenance and upgrades?
  • Is the lease in your corporation’s name?
  • Do you have to buy insurance?
  • Is there a personal guarantee?
  • What happens if one party is involved in a breach of contract?
  • In a collection scenario, will you be waiving your rights to dispute a breach, or can the renting party repossess the materials?

Of course, you want to negotiate the best possible terms for your organization, from both a legal and financial standpoint. For example, you want to avoid or minimize personal liability.  Having a well-constructed property or equipment lease or contract can also indemnify your business for liability to third parties if the equipment is defective.

You also want to pursue a favorable tax scenario.  You may want flexibility to upgrade, terminate, or maintain the equipment.  If you leased in order to conduct a “test run” before making a commitment, you will also want an option to purchase at the end of the lease.

Simply put, there are countless scenarios in which an unclear, unethical, or unfavorable contract could harm your bottom line.  By having an experienced contracts attorney review the paperwork for problematic terms and clauses, you can avoid a costly case of buyer’s remorse, or rather renter’s remorse, in the future.

Contact Our Business Attorneys

The lease and contract attorneys at Bellatrix PC are prepared to draft or review commercial real property or equipment leases and contracts, and will educate you on your rights and responsibilities, as well as the advantages and drawbacks associated with each of your options.  We are effective negotiators, precise draftsmen, and creative problem-solvers, and are ready to help companies of all sizes and structures make the most of their contractual agreements.

When your organization needs trusted and dependable legal advice, you can count on Bellatrix PC for assistance.  Call our law offices at (800) 449-8992 today to schedule a review of your equipment finance or lease deals.

Sarbanes-Oxley Attorney


In 2002, Congress passed a law known as the Sarbanes-Oxley Act, or SOX.  SOX applies to both publicly- and privately-held companies, and imposes a rigid list of corporate best practices in an effort to deter acts of fraud. Companies who violate these standards risk exposure to a long list of civil and criminal penalties, as well as investment and loan denials.  In short, failure to adhere to the provisions supplied by SOX presents allegedly non-compliant corporations with a battery of devastating legal and financial problems.

Whether your business needs experienced legal representation to challenge claims of non-compliance, or you are simply unsure whether your current practices align with SOX best practices and would like a closer review of your policies, the knowledgeable employment attorneys of Bellatrix PC are here to help.  Our business risk review will identify and improve upon vulnerable areas in your employment and record-keeping policies to better protect you against legal claims in the future.  If your organization has already been targeted by a lawsuit, our aggressive commercial litigation lawyers will prepare tactical defense strategies to protect your company’s best interests.

To arrange for a private legal consultation, call Bellatrix PC right away at (800) 449-8992.


What is Sarbanes-Oxley in Employment Law?

In response to the controversial and heavily publicized Enron and WorldCom bankruptcies, Congress passed the Sarbanes-Oxley Act into law in July of 2002.  This act, which was quickly nicknamed “SOX,” is also known as the Public Company Accounting Reform and Investor Protection Act, or the Corporate and Auditing Accountability and Responsibility Act.  These names provide a good idea of SOX’s general purpose.

The act has two primary objectives:

  • To deter and punish corporate fraud, accounting fraud, and acts of corruption among corporate executives.
  • To protect whistleblowers in whistleblower lawsuits, making the destruction of evidence and impeding federal civil investigations a crime.

It is crucially important for business owners to know that, contrary to common misconceptions, this act applies to privately held companies — not just publicly-traded companies.  This means private companies may not destroy evidence or interfere with federal civil investigations by agencies such as OSHA, the EEOC, or the IRS, which implicates employment law.  SOX also imposes specific restrictions on private placement securities solicitations, which is particularly important if you or your organization is raising capital from investors.  Private companies must demonstrate full compliance with SOX before going public.

Sarbanes-Oxley also establishes corporate “best practices,” which include:

  • Maintaining and archiving corporate records and email.
  • Maintaining audit-worthy financial records.
  • Maintaining legally sound corporate records.
  • Establishing business policies and codes of ethics.
  • Monitoring conflicts of interest.
  • Establishing independent directors on the Board of Directors where appropriate.

Civil and Criminal Penalties for Violating SOX Best Practices

It is critically important for employers and business owners to note that the best practices delineated by Sarbanes-Oxley are not merely recommendations.  On the contrary, failure to comply can result in a variety of debilitating civil and even criminal penalties being imposed on non-compliant companies.  For example, depending on the severity of the offense, a maximum prison sentence can range from 20 to 25 years: nearly three decades of incarceration.

It is also important to remember that, in addition to the formal civil and/or criminal penalties imposed by judges or regulatory agencies, organizations which fail to comply with SOX best practices are often highly unappealing to lenders, venture capitalists, and other investors.  If your company’s practices are deemed to be unethical, unsound, or otherwise fall short of the act’s requirements, the likely result is the denial of a loan or investment, or ongoing investor disputes.  In other words, the negative financial consequences of non-compliance extend far beyond fines and penalties imposed by the government: they extend to your business opportunities and daily operations as well.

Finally, because SOX provides whistleblower protection provisions, a whistleblower whose rights are violated may seek special damages, back pay, reinstatement, and attorneys’ fees.

Contact Our Business Attorneys

SOX convictions can devastate even the most stable and robust of corporations.  If you are at all concerned that your current employment or accounting practices are not in alignment with SOX provisions, it is absolutely crucial that you take immediate action to address the issue now before it is already too late. Failure to resolve legitimate concerns at the outset only increases the likelihood that costly, disruptive, and time-consuming litigation will arise in the future, draining your financial resources and damaging your organization’s reputation as a trustworthy and ethical business.

Let our team help yours.  To start discussing your organization’s legal situation in a completely private consultation, call the experienced Sarbanes-Oxley lawyers of Bellatrix PC at (800) 449-8992 today.