Venture Capital Law Firms Key Terms

Get to know the language of venture capital law firms

By B. Lumadue

Venture capital law firms specialize in new product ventures and seed companies. They work with business owners and venture capital investors to structure companies legally and financially, as well as negotiate investments and stock sales. There are many functions that venture capital law firms perform. Get to know some of the legal and financial terminology used by venture capital law firms to choose a firm that fits your needs.

Initial pubic offering

One of the activities that a venture capital law firm assists with is setting up an Initial Public Offering (IPO). An IPO is a private company's first sale of stock to the public.
Try: Find out more about IPOs from the United States Securities and Exchange Commission.

Anti-dilution provisions

Anti-dilution provisions protect investors from dilution that can happen when stock is sold at a price lower than what the investor paid. There are a few formulas that venture capital law firms can use to determine anti-dilution provisions.
Try: Read more about anti-dilution provisions and formulas used by Avvo.

Registration rights

Venture capital attorneys negotiate the provisions of registration rights. Registration rights give investors the power to make a company register shares of common stock with the Securities and Exchange Commission when the shares are converted to preferred stock. There are time and volume restrictions on shares of stock that are not registered.
Try: See the Startup Company Lawyers blog for more information on registration rights.

Articles of Incorporation

Articles of Incorporation are written to establish a company as a corporation in the state where it does business. While Articles of Incorporation can be written by a business owner, it may be helpful to enlist an attorney to ensure compliance with your state's requirements.
Try: Check out FindLaw for detailed information about Articles of Incorporation.

Business legal structures

There are many legal structures for new businesses to choose from, including sole proprietorship, limited partnership, corporation and limited liability company. The type of structure chosen affects taxation, transferability and liability. Businesses owned by one person are limited in their choices of business structure.
Try: See the Internet Center for Management and Business Administration for explanations of the various types of business structures.

Convertible preferred stock

Convertible preferred stock is one of the most common types of shares issued by seed companies. It is a type of preferred stock that owners are able to exchange for common stock. Preferred stock is usually guaranteed a fixed dividend and is the first to be settled during bankruptcy or liquidation.
Try: StreetAuthority has more information about convertible preferred stock.