Buy An Internet Business But Avoid Microsoft’s LinkedIn Mistake

By | Buy Internet Business, Featured Articles, Texas Internet Lawyer | No Comments
microsoft-linkedin-acquisition

Did Microsoft overpay to buy an Internet business?

As an Internet Lawyer who represents ecommerce companies, I know there are deals to be had, particularly when you decided to buy an Internet business that is privately owned.

However, large publicly traded companies like Microsoft (MSFT) can rarely take advantage of these types of profitable acquisitions because the dollar amounts involved aren’t enough to create public relations buzz that boosts stock prices. Instead, these large tech companies are generally limited to buying other large businesses that generate media headlines and related changes to stock value (at least short-term) that make investors happy.

The Microsoft Mistake

That being said, Microsoft made a mistake that any existing or prospective small business owner can easily avoid when buying an online business.

What was the error?

Microsoft is purchasing a company that isn’t profitable. LinkedIn generates revenues but doesn’t really have a profitable business model because of international expansion costs and declining ad revenues. Corporate recruiting as a source of additional revenues is a dicey proposition given the ongoing slowdown of the global economy.

Some cheerleaders of the announced acquisition claim there will be “synergy” between the two companies and that this constitutes a “win” for Microsoft because of the access to LinkedIn’s data for its business users.

Yet if LinkedIn can’t turn a substantial profit on the roughly one-quarter of its 400 million accounts that are active, what’s the likelihood Microsoft is going to do so? Nil and none.

Companies this size change direction at the speed of a loaded oil tanker in choppy seas, not fast like a startup.

Even assuming Microsoft has an unlikely sound game plan to successfully monetize LinkedIn data in order to recoup the $26+ billion to be paid, the purchase price is simply ridiculous by any valuation standards.

Paying about 7 times annual revenues (not profits) is reminiscent of the Dot Com 1.0 bust circa 1999/2000. Frankly, this deal reeks like the Alibaba IPO and the AOL/Time Warner merger.

The conventional wisdom is that other large tech companies like Alphabet Inc.’s Google have to step up their game and make similar acquisitions.

Why?

When your competitor does something stupid, there’s simply no reason to follow like a lemming over the cliff just because some English lit major working as a tech pundit says you must do so.

As a practical matter, my clients often look at several potential Internet businesses to buy before even making an offer to purchase one. If the fundamental financials don’t make sense, there’s no reason to bail out a seller by acquiring an unprofitable venture. And it certainly doesn’t make sense to pay a premium to a seller for a business that might turn profitable in your hands but isn’t making money right now.

When You’re Ready to Buy an Internet Business

When you decide the time is right to buy an Internet company, before submitting a nonbinding letter of intent (LOI), be sure to discuss your possible acquisition with a qualified Internet business lawyer. The legal advice you’ll get can save you a lot of time and money.

Disclaimer – Stock imagery used for editorial purposes.
Neither Attorney Young nor his law firm makes any claim to
the intellectual property respectively owned by Microsoft and LinkedIn.

Texas Attorney General Ken Paxton Indicted for Alleged Tech Securities Fraud

By | CyberCrime, eCommerce and Technology, Internet Lawyer, Texas Internet Lawyer | No Comments
texas attorney general ken paxton indicted

Attorney General Paxton was indicted for alleged securities law violations

When a client starts talking about raising funds for an Internet startup by selling equity, it’s time for a reality check because of federal and state securities laws.

Quite simply, you can’t run around selling stock in your company without dotting a lot of legal i’s and crossing regulatory t’s. And you can’t pay commissions to your buddies for bringing investors to you.

Securities law is so complex that even most lawyers avoid it like the plague.
Which makes it all the more interesting that Texas Attorney General Ken Paxton has just been indicted by a grand jury on charges related to his alleged solicitation of investors for tech company Servergy, Inc. The three felony indictments accuse him of securities fraud and failing to register with the State of Texas to sell securities.

I don’t know if Attorney General Paxton violated the law. Some call the charges a political witch hunt. Others say he crossed the line.

Regardless of what did or did not happen, the important thing to learn from Paxton’s predicament is that you have to be extremely careful when raising funds for your tech startup. If you’re selling equity, get a securities lawyer on board to advise you before you even solicit investors.

For many entrepreneurs, the safer (and cheaper) course of action would be to do crowdfunding through sites like Kickstarter and IndieGoGo.

Disclosure: I dealt with Paxton’s office on an unrelated matter last year when he was a State Senator, and I voted for him when he ran for Texas Attorney General.

7 Keys To Picking The Right Internet Lawyer For Your Business

By | Featured Articles, Find Internet Lawyer, Internet Attorney, Internet Law Firm, Internet Lawyer, Texas Internet Lawyer | No Comments

7 Keys To Picking The Right Internet Lawyer For Your BusinessThe purpose of this article is to help you identify the right type of Internet lawyer to represent your online business needs.

Why am I giving you this information?

For two reasons…

1. If you’re not a good fit for legal representation by our  law firm, I want you to quickly find another attorney who can help you.

2. If you decide to become a client, I want you to know what you’re getting. No surprises.

Fair enough?

Let’s get started. Be sure to take notes so you can quickly identify what’s right for you.

1. Your Internet Lawyer’s Location

your internet law firm's locationUnfortunately, there aren’t enough attorneys practicing Internet business law on a full-time basis for most people to find one in their home town. Unless you live or work in a large city, you’re probably going to have to look elsewhere to find an attorney who really understands e-commerce law.

U.S. Website with U.S. Customers

In the United States, many online legal matters are governed by federal law instead of state or local law.

This means you can hire someone who doesn’t live near you to represent you in many Internet legal matters. In fact, there’s a good chance you may never even meet your Internet lawyer face-to-face.

If there’s a state or local legal issue that comes up (e.g. sales taxes), your Internet lawyer can help you get the right legal counsel to handle that particular issue on an as-needed basis.

Foreign Website with U.S. Customers

If your business is located outside of the United States but you have U.S. customers, you’re going to want a U.S.-based Internet lawyer to make sure you’re not violating U.S. laws when doing business with those customers.

U.S. Website with Foreign Customers

What if you’re in the United States and have foreign customers too?

You’ll want to have a U.S.-based Internet lawyer protect you here and have that lawyer work with foreign legal counsel to protect you as-needed in other countries where you do business.

Lawsuits

When it comes to Internet-related lawsuits, you have a variety of issues to consider when finding the right legal help.

For example, if you’re suing someone in another location (another state or country), your Internet lawyer can help you determine if you need to hire another lawyer (and where) to represent your interests in the lawsuit. If you have been sued, your Internet lawyer can help you identify an attorney to represent in the court where you’ve been sued…
business lawyers discussing contractsMany Internet lawyers know business law but few business attorneys understand Internet law.

For instance, if you talk with the typical business lawyer about pay-per-click (PPC), search engine optimization (SEO), a Google “slap,” or affiliate compensation disclosure requirements, the attorney will probably give you a blank stare followed by “I’ll have to do some research on that issue and get back to you on it.”

Although there’s nothing wrong with research, why should you pay for a business lawyer to educate himself on basic Internet legal issues when an experienced Internet attorney already knows the answer?

Related Article: How to Make Effective Internet Advertising Disclosures

There’s a good chance your average business lawyer doesn’t know much about Internet law. This means you can either pay for his education or talk with an Internet lawyer when you have e-commerce legal issues come up.

Does this mean you should fire your local business lawyer? Of course not…unless your lawyer claims he’s an expert in all types of law and can represent you in everything that comes up in your business and personal life. A jack-of-all-trades is a master of none…
attorneys meeting at large law firmWant to scare the pants off of someone in an Internet business dispute? Hire one of the largest law firms in the world and have a nasty letter sent to that person on stationery that lists at least a dozen locations for that law firm around the world. Bonus points if the business’s website lists more than a 1,000 attorneys working for it globally. It’s like you’ve inflicted a plague of lawyers on your opponent.

This is one of the best uses for a large law firm…scare someone into doing the right thing out of fear. Your big business attorney may not know Internet law. It’s just mistakenly assumed by the person who receives the letter you paid to have sent.

What’s the Risk?

If the other side decides to fight, you will probably pay a fortune in legal fees. Big law firms have large overhead costs. They rent premium office space with nice downtown views, have lots of support staff, country club dues, and lots of other costs most law firms never pay.

Because of these extra expenses, you can expect to pay a large law firm 2 to 3 times what an Internet lawyer working at a smaller law firm charges. Internet attorneys are not cheap so it rarely makes sense to pay extra simply because the firm is large with lots of expenses that don’t benefit you.

Education Costs

There are also the hidden “education” costs you get with large law firms. As discussed before, many business lawyers don’t know Internet law…and that’s true in large law firms too. The difference is that you’re paying at least twice as much for lawyers in that big firm to learn what an experienced Internet attorney already knows.

Time Costs

attorney research time and costIn addition, there’s the extra time factor.

Junior attorneys with 6 or 7 years of “experience” at a large law firm may never have tried a case in court, drafted an e-commerce contract from scratch, or negotiated any business deal. Some serve as gofers or paralegals for senior attorneys instead of being real lawyers practicing law.

If you’re involved with a lawsuit or need Internet legal documents drafted, these junior attorneys will take more time than an Internet lawyer at a small law firm that does this type of work nearly every day.

Junior attorneys at big law firms often have their work reviewed by a senior lawyer. So, in addition to paying for the junior lawyer’s education and extra time, you’ll probably pay additional fees for the time it takes for a senior lawyer to review the work…and you better hope the senior attorney knows something more about the Internet than how to send and receive email.

When Should You Retain a Big Law Firm

So when should you consider using a big business law firm instead of an Internet lawyer at a smaller firm? There are two common situations.

First, there’s the “fear factor” scenario described above. This works when you’re trying to scare someone into doing the right thing. But for it to work, your opponent must be small and smart enough to fear going up against the big firm. If you can’t afford to pay the big law firm for more than sending that letter, it’s a bluff so use this tactic wisely.

Second, when your Internet business becomes large enough that you’re considering going public or selling out for a fortune, it’s probably time to bring in a big firm to handle securities law and related issues. The large firm may not know Internet law but it will have lawyers who can guide you through the process of taking your company to the next level or cashing out.

Hint. When lawyers for a publicly traded company (e.g. Apple or Google) come knocking on your door with a buyout offer, that’s a good sign it’s time for you to get a big law firm involved to represent you as you either sell or take the company public.

On the other hand, if you’re paying for a big law firm to represent your company on an ongoing basis, but there’s no reason to do so, you’re essentially burning money. You’re overpaying for an expensive ego trip…
barrister lawyer preparing for trialThere are several different types of Internet lawyers. If you can’t identify the type you’re dealing with, there’s a good chance you’ll pick the wrong one to represent your business.

Defamation Lawyers

There are lawyers who like to represent plaintiffs or defendants in civil lawsuits. Sometimes they specialize in defamation (libel and slander) cases. As the Internet has grown, these attorneys have found clients to represent who have been defamed online or have been accused of defamation.

These attorneys are not really Internet lawyers but are instead trial lawyers (litigators) who represent individuals and some businesses in lawsuits involving defamation. The fact that the defamation occurred on the Internet instead of in a printed newspaper or on television really isn’t very relevant to these lawyers.

Business Trial Lawyers (Litigators)

There are trial attorneys who focus on handling civil lawsuits involving businesses. These can be anything from contract disputes to ownership issues. Although they may handle online defamation cases too, their focus is primarily normal business disputes.

Few focus on the Internet exclusively. Instead, most Internet business litigators will represent your company in court whether or not e-commerce is part of the dispute.

Good business trial lawyers have transferable skills that can persuade a judge or jury on your behalf regardless of what’s at stake. Ideally, however, you want legal counsel who understands your Internet business enough to have a competitive advantage in the courtroom against a trial attorney on the other side who doesn’t.

What’s the down side to trial lawyers?

trial lawyers are like a hammerThey’re a hammer looking for a nail to hit…and everything looks like a nail. In other words, because they’re skilled at going to court, they’re heavily biased toward using lawsuits to solve business disputes that might otherwise be resolved to your satisfaction without ever getting involved in a lawsuit in the first place.

When you are hunting for an Internet trial lawyer to represent you, you’ll want one who has the experience to win in a court room but also the wisdom to recognize that sometimes you’re better served by settling your dispute without a lawsuit or before trial.
internet lawyer mike youngAn experienced Internet transactional attorney is the closest thing you’ll find to a colleague. These are the deal makers who try to make sure their clients don’t get involved with lawsuits in the first place.

This type of attorney focuses on making sure you have the right legal documents in place – from your website legal documents to your e-commerce contracts. This type of attorney is going to encourage you to have the right type of legal entity in place to protect your personal assets while running your business online. If you’re looking to make a private purchase or sale of an e-commerce company, a transactional lawyer can put the right paperwork in place to make the deal go as smoothly as possible while protecting your interests.

Related Article: About Internet Attorney Mike Young

You’ll often find these attorneys not only understand what you do online but they also own their own Internet companies in addition to representing clients. In other words, they’re online entrepreneurs who also know Internet business law.

When you’re looking for a Web transactional attorney, be sure that you check out if there’s a basic understanding about how e-commerce works and related laws and regulations.

If a lawyer doesn’t know about U.S. Federal Trade Commission guidelines that affect the Internet and lacks a basic understanding of spam laws, Internet sales taxes, online privacy, etc., you should keep hunting until you find someone who is qualified to represent your business interests online.

You will also want an Internet transactional attorney who has the wisdom and connections to refer you to a good trial lawyer in case you have a dispute that results in a lawsuit.

It’s a warning sign if an attorney who doesn’t litigate pretends he can handle lawsuits simply to keep you as a client. The same is true when a trial attorney pretends to be a transactional attorney. They are very different skill sets.

Intellectual Property Attorneys

Intellectual property (IP) lawyers focus on copyrights, trademarks, service marks, and sometimes patents too. They handle these intellectual property rights for offline and online businesses.

Related Article: About Intellectual Property Lawyer Herbert Joe

about intellectual property lawyer herbert joeHowever, their practices aren’t exclusively focused on Internet law. In fact, IP lawyers often don’t know a lot about online businesses except for issues related to intellectual property.

There is a blurring of the lines with this category though.

For example, there are Internet litigators who focus on lawsuits involving intellectual property (e.g. trademark infringement). There are also Internet business transactional lawyers who can handle your copyright and trademark registrations…
attorney client initial phone consultationWould you buy a car without test driving it first? Why would you hire an Internet lawyer to represent you on an ongoing basis without seeing if there’s a good fit?

The Test Drive

Your initial legal consultation (often a virtual meeting by telephone) is your first “test drive” to see if there’s a good fit. This has a lot to do with chemistry between you as a prospective client and your Internet lawyer.

If you have questions, get them answered during the initial consultation. If it doesn’t “feel” right to you, then look elsewhere. Regardless, you will obtain valuable information during the consultation so it wasn’t a waste of time. If nothing else, you’ll get answers to some legal questions and understand more about yourself and what you’re looking for in legal representation.

Date But Don’t Propose Right Away

proposalIt’s rarely wise to ask someone to marry you on the first date. Even if the answer is “yes,” you’re making a long-term commitment without really knowing the other person.

Similarly, you’ll ideally want to hire the Internet lawyer for one or two projects to see whether there is a good fit before committing to a long-term relationship as a client.

Sometimes you simply won’t “click” so it makes sense to cut your ties after a project or two and find someone else that meets your business’ Internet legal needs. In other cases, you’ll quickly discover the attorney really doesn’t know Internet law but pretended to in order to get your business.

If you’re happy with the work done, you can consider establishing a long- term relationship where you pay for Internet legal representation on an ongoing basis by the Internet attorney. Like a good marriage, your Internet attorney will learn a lot about you over time and accordingly be better able to represent your interests…
attorneys offering free legal advicePresident Abraham Lincoln (a business lawyer who represented railroads) once said that a lawyer’s time was his stock in trade. In other words, a lawyer sells his irreplaceable time as inventory.

What’s this mean to you when hiring an Internet lawyer?

Free Lunch Syndrome

The Internet has conditioned some people to be freebie seekers. But there’s really no such thing as a free lunch, free healthcare, or even free legal advice. Someone pays for each of these.

Now you might find a lawyer who is dumb enough to subsidize your online business by representing you for free.

But would you trust the quality of “free” brain surgery by a neurosurgeon? Why trust your legal needs to “free” either? Chances are that legal help is going to be extremely expensive when you discover after the fact how much it cost you because of the mistakes that were made.

Will Your Internet Attorney Charge an Hourly Rate or Flat Fee?

attorney client fee agreement for retainerWhen you’re involved in a lawsuit or in ongoing negotiations, your Internet attorney will likely be able to give you a guesstimate of fees but it doesn’t make economic sense to quote a hard flat rate. There are too many variables involved because no one knows how much time is going to be involved handling the legal matter.

In these types of Internet legal matters, your attorney will likely ask for an evergreen advance deposit to bill against at an hourly rate (typically billed in ¼ hour or 1/10th hour increments). When the deposit dips below a certain amount because of the amount of work done, you replenish (evergreen) it.

In addition, the time spent fielding phone calls, voice mails, and emails for a “quick question” aren’t free either. You can expect to pay for the time involved reading your emails, analyzing your legal issues based upon the attorney’s knowledge, possible research, and responding to your questions with the right answers.

On the other hand, there are matters that can be billed at a flat rate. For example, you can pay a flat fee for your initial consultation with an Internet lawyer.

If you need website legal documents drafted (e.g. privacy policy) or a technology contract that doesn’t require negotiations by your attorney, you can often get this work done by a qualified Internet lawyer for a flat fee.

Related Article: Privacy Policy 101 – What Every Website Owner Should Know

The amount of that fee can vary based upon the unique needs of your business. For example, some businesses require more complex Internet legal documents to protect them than others. Regardless, you can get the work done for a flat fee based upon what you’ve described to your Internet lawyer during a consultation…
There are two common types of clients – bargain hunters and relationship builders.

Bargain Hunters

bargain hunterFirst, there are the bargain-hunting clients who are always looking for a better deal. To them, legal representation is a commodity rather than a professional service. They will switch lawyers at the drop of a hat if they think there’s a better deal to be had.

Bargain hunters are constantly searching for excellent legal representation at discount prices. For these clients, attorneys are the hired help (a necessary nuisance) but there’s no real relationship between the client and the Internet lawyer.

Price is usually mentioned in the first or second sentence of any initial contact with the lawyer. And as soon as the work is done, chances are the client will simply disappear. If you’re price shopping for cheap help, our law firm isn’t going to be a good fit for you.

Relationship Builders

attorney client handshakeOther clients are looking for an Internet lawyer to represent their interests long-term. As time goes by, the attorney learns more about the client’s businesses and can often warn the client about new Internet laws.

This type of client treats the Internet lawyer as a trusted advisor looking out for the client’s business interests.

Which type of client are you?

There’s no “right” answer to this question.

However, you should answer it truthfully before you start your search for an Internet lawyer to represent you. Otherwise, you won’t know what you’re really looking for…

Remember these three key points when hunting…

  • There are attorneys who will work for bargain-hunting clients and treat them accordingly. Legal services are traded for money. As soon as the project is done, both attorney and client forget each other.
  • Some attorneys who don’t know Internet law will pretend to be Internet attorneys in order to represent bargain hunters because these attorneys are hungry for new clients. They usually are identified when they claim to be able to represent clients in just about any area of law.
  • There are also attorneys who focus on building long-term “win-win” relationships designed to protect and grow their clients’ businesses. If you want that type of business relationship with your Internet lawyer, perhaps we should talk.
follow these steps to hire the right internet lawyerWhen you’re ready for an Internet lawyer to protect your online business, here are four steps that you will want to take…

1. Identify whether you’re a bargain-hunter or relationship-building client.

2. Identify the type of legal professional you need (e.g. ecommerce trial attorney, intellectual property legal counsel, or Internet business transactional lawyer).

3. Find an experienced Internet attorney using the criteria you have identified in Steps 1 and 2.

4. Schedule your initial telephone consultation with the lawyer you selected.

How To Set Up A Texas Business In Just A Few Steps

By | Business Entities, C Corporations, Featured Articles, Internet Lawyer, Internet Sales Tax, Limited Liability Companies, S Corporations, Taxes, Texas Internet Lawyer | No Comments

set up texas businessIs it time for you to set up a Texas business?

The Lone Star State has created one of the most pro-business climates in the world. For example, there’s no state personal income tax. To the extent there are other costs, they’re typically lower than most other states.

In fact, Texas is one of the few states where the Governor spends a lot of time poaching businesses from other states, convincing them to relocate because of the many economic opportunities available here.

How does Texas’ economic climate compare to other states?

And, of course, there are significant advantages for your company when half of the national economic growth is in Texas and the remaining half is split between the other 49 states.

For example, over 130,000 Californians have fled to Texas in the past two years seeking a place they can live and prosper, that rewards work rather than punishes it.

Did you know that Texas now exports more technology than California does?

Now, whether you live in the Lone Star State or elsewhere, maybe it’s time for you to take advantage of Texas business opportunities like so many other entrepreneurs.

So how do you set up a Texas business?

Typically you’ll want to speak with a qualified lawyer who understands Texas business law as well as Internet law.

By the way, this can take place via a telephone appointment rather than face-to-face. During your consultation, you’ll be able to determine the type of business structure and tax structure that makes the most sense for your unique needs.

Filing the Certificate of Formation with the Texas Secretary of State

Whether you’ve chosen a Texas limited liability company (LLC) or a Texas corporation, your Texas business lawyer can file the Certificate of Formation for your entity. If everything is okay, the Texas Secretary of State will issue a Certificate of Filing for your approved new entity in just a couple of days.

What about U.S. federal and Texas state business taxes?

For the federal government, you’ll want to apply for a Taxpayer Identification Number (TIN), which is usually an Employer Identification Number (EIN). This can be done online at the IRS’s website. You may also elect in some instances to have your entity taxed by the federal government as a Subchapter S corporation.

You can also apply online for a Texas sales tax permit at the State Comptroller’s website. After formation of your Texas corporation or limited liability company, the Comptroller’s office will also mail you information about state franchise taxes. Many small business owners pay little or no franchise taxes.

Should you set up a Wyoming, Nevada, Delaware, or other business entity instead?

It depends.

Did you know that many times this is mistakenly done by entrepreneurs who have been sold on false tax or privacy advantages of forming an business entity in one of these other states?

As a practical matter, unless you’re actually running your business in that state, there’s a big risk that the so-called advantage is in reality a legal danger when you fail to observe the required formalities.

Now, naturally, this can include getting hit with back taxes and penalties from the state where the entity should have been formed or at least registered to do business, and the potential that a court will disregard the entity’s shield and hold you personally liable in a lawsuit.

Whether you’re tired of being penalized for doing business from one of the lesser 49 states, or are in another country but looking to own a business in the United States, there’s never been a better time for forming a Texas business entity.

So, if you’re ready to set up a Texas business, it’s time to schedule a telephone consultation with Texas Internet Lawyer Mike Young.

Texas Internet Lawyer: How to Find the Right One for Your Business

By | Internet Lawyer, Texas Internet Lawyer, Web Attorney, Web Lawyer | No Comments

texas internet lawyer

What is a Texas Internet Lawyer?

A Texas Internet Lawyer is an ecommerce attorney licensed to practice law in the State of Texas.

This means the attorney has a legal practice focusing on the business side of Internet business law and related areas.

Your ideal Texas ecommerce attorney will have a strong background with Internet law plus business and regulatory law, especially in the areas where the two fields overlap.

Things to consider when selecting a Texas Internet Lawyer.

When selecting a Texas Internet attorney, you are going to want to find an attorney who has worked in the field for some time and who has a good handle on how ecommerce law has grown and developed over time.

Attorneys who have practiced ecommerce law for a while will know how the law has developed and, while assisting you with your Internet law needs, will be able to rely on their knowledge to determine how past and continuing developments in ecommerce law will affect you while working to resolve current legal problems.

Did you know that Internet law is a relatively new field? This means many cities and towns are actually chronically short-staffed when it comes to ecommerce law.
In working to come up with the best Texas Internet lawyer for you and your company, you will also want to go ahead and select one with whom you can have a good working relationship with on an ongoing basis.

Why? Instead of bargain hunting for a cheap rate for every legal issue that comes up for your business, you will be better served by building a relationship with one ecommerce law firm.  Over time, you are going to benefit both from your attorney having gotten to know you and your business, and their consequent ability to take that knowledge into account when figuring out how to best address your legal needs.

Do You Need a Texas Internet Lawyer?

Located in a suburb of Dallas, Texas Internet Attorney Mike Young has been working in the field of internet business transactional law and providing guidance to entrepreneurs on ecommerce legal matters since 1994. No matter where your business is located in Texas, the first step to get legal help is to schedule a telephone Legal Strategy Session.