Articles
Stephanie Francis Cahill, Start-ups Need Lawyers, Too, Student L. 3, (Jan. 1997).
John M. Cunningham, Helping Businesses Get Started: In Praise of an Unsung Legal Specialty, Bus. L. Today 9 (Nov/Dec. 1995).
Mirit Eyal-Cohen, Down-Sizing the "Little Guy" Myth in Legal Definitions, 98 Iowa L. Rev. 1041 (2013).
Abstract (by author): What is a “small business” in the eyes of the law? There is not one standard definition. Current legal definitions of a firm's size are inconsistent and over inclusive. They vary from one area of the law to another and within various sections of the same law. They create a skewed picture and result in data distortion that reinforces favoritism toward small entities, as studies on the contribution of small businesses to the economy are greatly dependent on these studies' delineation of the term “small.” In this time of huge deficits and rise in economic inequality, a lot of money is being spent based on the entrenched belief that small firms are the essence of our economy, which is not necessarily true. Therefore, this article argues that the current focus on size in many legal definitions is a waste of both time and money. This article provides a comprehensive survey of legal definitions of small entities and the policy considerations that underlie these delineations. This article concludes that the historical emphasis on magnitude no longer functions effectively. Current legal demarcations concentrated on “smallness” generate undesirable distributional effects, produce inefficient allocation of government resources, and defeat policy considerations of promoting entrepreneurship and economic growth. The recent proposal to integrate the Small Business Administration with other federal commerce and trade agencies into one super pro-business agency is yet one more step toward this proposed shift from a size-centered to a goal-driven approach.
Andrew C. Fink, Protecting the Crowd and Raising Capital Through the Crowdfund Act, 90 U. Det. Mercy L. Rev. 1 (2012).
Abstract (adapted from author): You are an entrepreneur with an innovative business idea, but you have no assets. You need cash to bring your idea to the production line, but no bank or wealthy investor will listen. Would you think it possible to raise over $200 million from five million strangers using just your idea, a website, and social media? That is exactly what happened in 2009 when marketing executives Michael Migliozzi II and Brian Flatow solicited individual investors using their website, BuyABeerCompany.com, to fund a potential purchase of beer company Pabst Blue Ribbon. The average pledge from individuals was just $40, and in return, investors were promised “a certificate of ownership as well as beer of a value equal to the amount invested.” The Securities and Exchange Commission (SEC) stepped in to halt the campaign because it violated securities law, but the message was clear: business ideas can be funded by connecting the entrepreneur to the masses through the Internet and social media platforms. Entrepreneurs and investors took notice of the event, and in July 2010, the Sustainable Economies Law Center sent a petition to the SEC requesting a federal securities exemption for small businesses seeking up to $100,000 in funding with individual investments of $100. Congress could not ignore the economic potential of this untapped resource, and (for once) is attempting to position itself in front of social media transformations. The Jumpstart Our Business Startups Act, commonly referred to as the JOBS Act, is an amalgamation of prior proposals. Title III of the JOBS Act is called the “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012,” or in shorter form, the CROWDFUND Act. The bill was signed into law on April 5, 2012, and stands to revolutionize small business and entrepreneurial capital-raising by permitting any individual to invest in private companies over the Internet with limited regulatory hurdles. While crowdfunding in the form of charitable contribution and political fundraising is not a new concept, the notion of equity crowdfunding, where investors have an expectation of profit, is a young solution to the financing problems that small businesses and entrepreneurs face. Lawmakers have spent the last two years brainstorming ways to promote crowdfunding investing as a responsible capital raising avenue and potential jumpstart to the economy. The JOBS Act, as cemented into law, will create a new and largely unexplored market for raising capital. Part I of this Article introduces the Crowd and the crowdfunding concept, and also discusses the U.S. legal framework that has yet to account for the global influence of the Crowd. Part II analyzes the JOBS Act and the proposals that led to its creation. Part III analyzes crowdfunding concerns and the efforts to balance investor protection with capital raising.
Leah Chan Grinvald, Resolving the IP Disconnect for Small Businesses, 95 Marq. L. Rev. 1491 (2012).
Abstract (by author): Small businesses are an important component of the American economy. In fact, the jobs created by small businesses could assist the United States in overcoming its most recent economic downturn. Paradoxically, though, the failure rate of small businesses is quite high. Although various factors contribute to this high failure rate, one of the factors the U.S. government has focused on has been the disproportionate impact that intellectual property laws, policies, and their enforcement may have on small businesses. While the U.S. government has paid attention to the impact of domestic intellectual property laws on small businesses, the government has paid little attention to the impact that the implementation of international intellectual property obligations may have on small businesses. This disconnect threatens to undo the efforts of the U.S. government, as implementation of these obligations in the United States pose similar hurdles to success for small businesses. One recent example of this disconnect and potential for serious harm to small businesses is the Anti-Counterfeiting Trade Agreement (ACTA), where the U.S. government has seemingly all but ignored small businesses. This Article uses ACTA as an example of how the U.S. government should be analyzing and negotiating international intellectual property agreements with an eye toward the impact on small businesses, which would thereby resolve the disconnect and create a coherent policy approach.
David Groshoff, Moore's Law Versus "Man's" Law? How Cybersecurity and Cyber Terror Government Policies May Help or Hurt Entrepreneurial Startups, 19 Chap. L. Rev. 373 (2016).
Abstract (adapted from author): This article first briefly provides an historical framework - including contextualizing recent events - regarding cybersecurity. Next, the article discusses what options are available to businesses, due to the many recent breaches and failures of government to defend against cyber hacking and cyber terror, and then bifurcates the options available to established businesses and startup entrepreneurial businesses. Third, the article discusses existing material cyber laws, regulations, and executive orders, as well as proposed laws. Fourth, the article uses those existing and proposed rules to examine the pros and cons of applying a public-private partnership to combat cyber threats versus employing a purely market-based solution.
Finally, the article argues, and underpins with policy proscriptions, that due to the huge differences between established businesses and entrepreneurial startups, their legal responsibilities should be placed under the rubric of a sliding scale of fiduciary duties of care relative to personally identifiable information ("PII") and cyberattack mitigation, based on a business's size, scale, and duration since formation. This Part also proposes that each state mandate corporations, limited liability companies, and other owner liability-shielded entities require a risk management committee of its board of directors or governing body. The article concludes that, due to the many moving parts that exist in this area, the private sector should lead the way in cyber protection, including self-policing and certifying.
Darian M. Ibrahim, How Do Start-Ups Obtain Their Legal Services? (Univ. of Wisconsin Legal Studies Research Paper No. 1196, 2012), available athttp://ssrn.com/abstract=2055723.
Abstract (from author): This Essay is the first to examine, using responses to online surveys, the use of in-house versus outside counsel by rapid-growth start-up companies. It also explores, from the vantage point of the start-up’s entrepreneur, some reasons for that choice. The Essay tests several hypotheses derived from the economic and entrepreneurship literatures about the benefits of in-house versus outside counsel in the unique context of start-up firms.
Gjalt de Jong et al., Which Entrepreneurs Bribe and What Do They Get From It? Exploratory Evidence from Vietnam, 36 Entrepren. Theory & Prac. 295 (2012).
Abstract (adapted from journal): This article investigates whether bribery in emerging economies matters and whether such bribery has a diminishing return to performance. Bribery allows entrepreneurs to develop and foster a network of informal relationships with public officials, and reap the accompanying benefits; but it may also have disadvantages, such as an inefficient allocation of resources. The relationship between bribery and performance was estimated using unique data derived from a survey of 606 Vietnamese entrepreneurs. The authors controlled for various entrepreneurial, organizational, and industrial characteristics. The exploratory results provide support for a hill-shaped non-monotonic relationship between bribery and revenues.
Beth Kregor, Innovation and Inequality: Conservative and Libertarian Perspectives, 39 Harv. J.L. & Pub. Pol'y 39 (2016).
Abstract (adapted from author): Advances in technology have changed the way we work and the jobs that are available. Many occupations have become obsolete quite recently, but entrepreneurship is not. The comparison between wealthy entrepreneurs and the endangered species of laborers raises real concerns about inequality, especially because these high-flying entrepreneurs come from a narrow slice of society. If society and the economy allow only certain individuals who are deemed "tech geeks" to succeed, then we are cutting many people out. There is some evidence of that kind of discrimination built into the entrepreneurial ecosystem. Inventors in the technology sector are often free to experiment and grow huge because the law has not regulated cyberspace, while innovators in traditional service sectors - who may be more likely to come from less educated or less wealthy sectors - are regularly handicapped by legal restrictions. Venture capital firms are much more likely to fund ventures started by people who fit a certain mold and are missing out on people who may have great ideas but do not look the way that entrepreneurs are expected to look or sound the way that they are expected to sound. As a result, people with equally excellent ideas have wildly unequal chances at achieving economic success.
What should the government do, if anything, about the shift in the job market created by new technology replacing humans in various lines of work? One answer to this question might be to make sure displaced workers can become entrepreneurs, too. Nearly one in three occupations in this country now require obtaining some kind of permission from the government. And the need to obtain permission is growing more burdensome year after year; the law needs to be cleaned up for all entrepreneurs to flourish. It is too limiting to wait for the next Uber or Airbnb to do the hard work of lobbying. It can scour its codes, practices, and policies to make sure that the laws are not creating cookie-cutters for businesses, so that everyone enjoys the freedom to pursue a dream; change an industry; and create value, wealth, and jobs.
Phillip H. Kim & Mingxiang Li, Seeking Assurances When Taking Action: Legal Systems, Social Trust, and Starting Businesses in Emerging Economies(Organization Studies, forthcoming 2013), available athttp://ssrn.com/abstract=2297439.
Abstract (adapted from authors): This study examines how institutional conditions provide assurances founders seek when creating businesses. Classical theories predict legal institutions promote supportive conditions that foster business creation. The authors develop an alternative theory for why this relationship is not as straightforward in emerging economies. In these regions, people may be discouraged from taking entrepreneurial action because of the difficulties in accessing legal protections efficiently. This paper also introduces theory regarding the moderating role of generalized social trust because of its normative influences on business creation. The authors argue generalized trust in strangers exerts positive moderating effects on the direct relationship between legal protections and entrepreneurship. The findings from our multilevel analysis of 30 emerging economies are consistent with their theory. This work advances a new framework for how entrepreneurs cope with uncertain business conditions in emerging economies where informal, normative social structures offer more privately oriented safeguards than do formal, publically oriented institutions. The study also reconnects macro-institutional theories with individual-level accounts of entrepreneurship.
Kenji E. Kushida, Entrepreneurship in Japan’s ICT Sector: Opportunities and Protection from Japan’s Telecommunications Regulatory Regime Shift, 15 Soc. Sci. Japan J. 3 (2011), available at http://ssrn.com/abstract=2118810.
Abstract (by author): Entrepreneurs and entrepreneurship played a critical role in transforming Japan’s telecommunications sector. Between the mid-1990s and mid-2000s, in a sector long dominated by a stable set of large actors with well-established patterns of interaction, entrepreneurs introduced new technologies, new business models, and new norms of interaction. The subsequent transformation of Japan’s telecommunications sector was dramatic, providing consumers with not only fast and sophisticated services but also low prices and an entire new ecosystem of mobile content — a considerable departure from Japan’s long track record of being known as producer — rather than consumer-oriented, with consumers enjoying high-end services and products, but at high prices. Yet, these transformative entrepreneurs were not acting in a vacuum. Regulatory shifts in telecommunications were critical in providing opportunities for entrepreneurs, while simultaneously protecting them from large incumbent firms. These regulatory shifts were driven by the political dynamics of the 1990s as Japan struggled through its post-bubble economic malaise and political changes.
Richard A. Mann, Michael O'Sullivan, Larry Robbins & Barry S. Roberts, Starting from Scratch: A Lawyer's Guide to Representing a Start-Up Company, 56 Ark. L. Rev. 773 (2004).
Abstract: This article is designed to help entrepreneurs and their attorneys understand the basic legal issues that confront a start-up business. Inherently, entrepreneurs are optimistic risk-takers. They bring ideas to the table. They may have significant business experience or none at all. In either event, they look to their attorneys to clear the legal hurdles on the race to the finish line - or to the "exit" in tech-sector lingo.
Tanya M. Marcum & Eden S. Blair, Entrepreneurial Decisions and Legal Issues in Early Venture Stages: Advice That Shouldn’t be Ignored, 54 Bus. Horizons 143 (2011).
Abstract: Entrepreneurs make numerous business decisions each day, many of which have significant legal implications. Due to a lack of time and knowledge, however, these entrepreneurs too often make quick decisions regarding important matters—both current and future—based on a few primary factors, one of which is cost. Entrepreneurs appear to make decisions based on concrete, but frequently inappropriate, factors such as comparison of bottom-line dollar value or relatively small fees; in this scenario, short-term decisions are made that do not take into account intricate legal and strategic implications which may arise down the road. As such, we would suggest a different approach whereby entrepreneurs take the time to learn about and understand the implications of these decisions on long-term sustainability, liability protection, and growth potential. Herein, we discuss how using cost to compare and make decisions has an impact on three issues with legal implications that occur early in the start-up process, and which pose major implications for the entrepreneur if he or she does not deal with them properly. Toward this end, we propose some solutions to help prevent this from happening.
Therese Maynard, Ethics for Business Lawyers Representing Start-up Companies, 11 Wake Forest J. Bus. & Intell. Prop. L. 401 (2011).
Abstract (from article): This Essay explores the ethical issues as well as the general business considerations that arise in connection with the practice of taking stock in lieu of payment of legal fees in cash, which has long been the traditional billing practice for legal services. For reasons that are described in detail in this Essay, many academics and experienced venture capital lawyers believe that taking stock in a client presents significant potential to strengthen the lawyer's relationship with the new business client. At the other end of the spectrum, there are others within the legal community (both academics and practicing lawyers) who just as strongly believe that these equity investment arrangements significantly undermine time-honored ideals that have long guided the legal profession in determining how corporate lawyers should go about fulfilling the ethical and fiduciary obligations that they owe to their business clients. This Essay describes the advantages and disadvantages of these equity fee arrangements in order to address the fundamental public policy concerns presented by the growing practice of taking stock in payment of legal fees--namely, whether this practice serves the client's best interests, and separately, whether these arrangements also serve the best interests of the legal profession.
Patrina Ozurumba, Note, Girl Power: How Female Entrepreneurs Can Overcome Barriers to Successful Businesses, 34 Women's Rts. L. Rep. 24 (2012).
Abstract (adapted from author): Women have made considerable socioeconomic strides over the past century, partly due to sheer girl power, but mostly due to the changes in laws that have elicited such advancements. Since women are not as marginalized in society today as compared with the periods leading up to the feminist movement, gender roles are arguably more unstable now than ever before. Nowadays, for instance, the concept of gender is entirely blurred across sex lines such that gender may no longer be an attribute but a choice. Despite the fast pace by which women have progressed and the gender debate has evolved, one sticking point remains: female-run businesses have not caught up financially with those run by men. Generally defined, a female-run business is a “business that is at least 51% owned by a woman or women who also control and operate it. ‘Control’ in this context means exercising the power to make policy decisions. ‘Operate’ in this context means being actively involved in the day-to-day management.” For these reasons, this Note seeks to explore four legal and social divides that prevent women-owned businesses from achieving gender parity in business profitability: the difficulty for women entrepreneurs to secure financing; the disparity in pay levels among women and men; the commercialization of a woman's femininity, and mompreneurs, entrepreneurial female business owners who are also active mothers. Overall, by exploring the legal landscape and its social effects, a broader, more complete picture to the barriers female-run businesses face should surface. Thus, female entrepreneurs who are equipped with an understanding of these barriers are better poised to overcome them.
Simon C. Parker, Law and the Economics of Entrepreneurship, 28 Comp. Lab. L. & Pol'y J. 695(2007).
Abstract: This paper discusses recent research on law and the economics of entrepreneurship. The central premise of the article is that the law interacts with economic aspects of entrepreneurship in two main ways. First, legal structures shape organizational forms in entrepreneurship. Second, legal rules and institutions carry public policy implications for entrepreneurship in three areas: regulation; bankruptcy legislation; and the broad area of property rights, corruption, and the efficiency of courts. This article reviews literature on each of these issues.
April L. Schwartz, Legal and Business Perspectives on Small Business Start-ups: a Selective, Annotated Bibliography, 6 J. Small & Emerging Bus. L. 479 (2002).
Abstract: This annotated bibliography focuses on small business start-up resources, compiling resources for the specialized area of business law that involves helping clients to launch new businesses. Advising entrepreneurial clients requires careful legal counsel as well as general business knowledge, such as selecting the optimal business entity, producing a business plan, and determining financing options for a new business. This Bibliography describes numerous monographs, serials, and websites to aid lawyers in gaining expertise in the business and legal aspects of launching a new enterprise.
D. Gordon Smith & Darian M. Ibrahim, Law and Entrepreneurial Opportunities, 98 Cornell Law Review, Vol. 98 (forthcoming 2013), available athttp://ssrn.com/abstract=2220075.
Abstract (by authors): 'Opportunity' is a central concept in entrepreneurship research, and this Article explores the relationship between law and entrepreneurial opportunities. The authors adopt the widely held view that entrepreneurial opportunities are ideas created by entrepreneurs, rather than resources waiting to be discovered. Of course, as with all products of the imagination, entrepreneurial opportunities draw on existing resources for inspiration, and we contend that some legal systems are better than other legal systems at encouraging entrepreneurs to think about existing resources in new ways. The authors also contend that when entrepreneurial opportunities are exploited, the inventory of resources expands, thus laying the foundation for the creation of more entrepreneurial opportunities. This 'opportunity cycle' leads to plentiful and continuous opportunity creation. Legal rules play an important role in each stage in the opportunity cycle, and two sets of stories told about law are foundational to innovation research. The first is that property rights (i.e., rights to exclude) are essential in the development of innovative resources because property rights assure market participants that they can retain many of the benefits of their success. The second is that various sets of legal rules – including laws limiting barriers to entry, bankruptcy laws, and corporate laws relating to limited liability and asset partitioning – reduce the costs of entrepreneurial action and failure, thus emboldening entrepreneurs to exploit opportunities. Our thesis is that all of these stories are part of a grander tale about the opportunity cycle, and the central theme of that tale is that the promotion of entrepreneurial action is a fundamental value of the U.S. legal system, the expression of which through positive law inspires entrepreneurs to create more opportunities.
D. Gordon Smith & Masako Ueda, Law & Entrepreneurship: Do Courts Matter?, 2 Entrepreneurial Bus. L. J. 353 (2006).
Abstract (from authors): In this essay, we sketch the outlines of a research agenda exploring links between courts and entrepreneurship. Our conception of law and entrepreneurship encompasses the study of positive law (including constitutions, statutes, and regulations), common law doctrines, and private ordering that relate to the discovery and exploitation of profitable opportunities by new firms. We briefly survey the economics literatures that relate to law and entrepreneurship, including the law and finance literature launched by the work of Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert Vishny (LLSV). Relying on the suggestive work of LLSV and other economists who have labored over the connections between entrepreneurship and law, we suspect that courts may play an important role in facilitating or hindering entrepreneurial activity.
We are particularly interested in the possibility that courts may facilitate the evolution of legal rules to address novel issues raised by entrepreneurial firms. This adaptability hypothesis may be subject to empirical testing, thus shedding light on the otherwise perplexing divide between common law and civil law countries identified by LLSV. The motivation for such a test lies in the conjecture that common law countries update their laws more frequently than civil law countries through judicial intervention. Adaptability in this sense is said to encourage entrepreneurship because outmoded laws allow for opportunism, thus discouraging capital formation. The adaptability hypothesis implies that judges in common law systems have more room to maneuver than judges in civil law systems, and we describe the method by which we intend to approach our future study of adaptability.
Jeff Thomas, The Legal Spark, 78 UMKC L. Rev. 455 (2009).
Abstract (from author): For many years, leading Silicon Valley law firms have used their proprietary form systems to help turn good ideas into world-shaking companies. It is time to put one of those form systems online and teach it to entrepreneurs, students, attorneys and others.