Tag: venture capital

Practical and Legal Considerations for Extending Cash Runway in a Changing Economy

The funding environment for emerging companies has fundamentally shifted in 2022 for both venture capital and IPOs, particularly after a banner year in 2021. Whether these headwinds suggest significant economic changes or a return to previous valuation levels, companies need to be realistic about adapting their business processes to ensure they have sufficient cash runway to succeed through the next 2-3 years.

This article provides a comprehensive set of tactics that can be used to extend cash runway, both on the revenue/funding and cost side. It also addresses areas of liability for companies and their directors that can emerge as companies change business behaviors during periods of reduced liquidity.

Ways to Improve and Extend Cash Runway

Understanding Your Cash Runway

Cash runway refers to the number of months a company can continue operations before it runs out of money. The runway can be extended by increasing revenue or raising capital, but in a down economy, people have less disposable income and corporations are more conservative with their funds. Therefore companies should instead focus on cutting operating costs to ensure their cash can sustain over longer periods.

As a starting point, companies can evaluate their business models to determine expected cash runway based on factors such as how valuations are currently being determined, total cash available, burn rate, and revenue projections. This will help guide the actions to pursue by answering questions such as:

  1. Is the company currently profitable?
  2. Will the company be profitable with expected revenue growth even if no more outside funding is brought in?
  3. Is there enough cash runway to demonstrate results sufficient to raise the next round at an appropriate valuation?

Even if companies expect to have sufficient cash runway to make it through a potential economic downturn, tactics such as reducing or minimizing growth in headcount, advertising spend, etc. can be implemented as part of a holistic strategy to stay lean while focusing on the fundamentals of business model/product-market fit.

Examining Alternative Sources of Financing

Even though traditional venture capital and IPO financing options have become more difficult to achieve with desired valuations, companies still have various other options to increase funding and extend runway. Our colleagues provided an excellent analysis of many of these options, which are highlighted in the discussion below.

Expanding Your Investor Base to Fund Cash Flow Needs

The goal is to survive now, excel later; and companies should be open to lower valuations in the short term. This can create flexibility to circle back with investors who may have been open to an earlier round but not at the specific terms at that time. Of course, to have a more productive discussion, it will be helpful to explain to these investors how the business model has been adapted for the current environment in order to demonstrate that the new valuation is tied to clear milestones and future success.

Strategic investors and other corporate investors can also be helpful, acting as untapped resources or collaborators to help drive forward milestone achievements. Companies should understand how their business model fits with the investor’s customer base, and use the relationship to improve their overall position with investors and customers to increase both funding and revenue to extend runway.1

If the next step for a company is to IPO, consider crossover or other hybrid investors, understanding that much of the cash deployment in 2022 is slowing down.

Exploring Venture Debt

If a company has previously received venture funding, venture debt can be a useful tool to bridge forward to future funding or milestones. Venture debt is essentially a loan designed for early stage, high growth startups who have already secured venture financing. It is effective for targeting growth over profitability, and should be used in a deliberate manner to achieve specific goals. The typical 3-5 year timeline for venture debt can fit well with the goal of extending cash runway beyond a currently expected downturn.

Receivables/Revenue-Based Financing and Cash Up Front on Multi-Year Contracts

Where companies have revenue streams from customers — especially consistent, recurring revenue — this can be used in various ways to increase short-term funds, such as through receivables financing or cash up front on long-term contracts. However, companies should take such actions with the understanding that future investors may perceive the business model differently when the recurring revenue is being used for these purposes rather than typical investment in growth.

Receivable/revenue-based financing allows for borrowing against the asset value represented by revenue streams and takes multiple forms, including invoice discounting and factoring. When evaluating these options, companies should make sure that the terms of the deal make sense with runway extension goals and consider how consistent current revenue streams are expected to be over the deal term. In addition, companies should be aware of how customers may perceive the idea of their invoices being used for financing and be prepared for any negative consequences from such perceptions.

Revenue-based financing is a relatively new financing model, so companies should be more proactive in structuring deals. These financings can be particularly useful for Software-as-a-Service (SaaS) and other recurring revenue companies because they can “securitize the revenue being generated by a company and then lend capital against that theoretical security.”2

Cash up front on multi-year contracts improves the company’s cash position, and can help expand the base where customers have sufficient capital to deliver up front with more favorable pricing. As a practical matter, these arrangements may result in more resources devoted to servicing customers and reduce the stability represented by recurring revenue, and so should be implemented in a manner that remains aligned with overall goal of improving product-market fit over the course of the extended runway.

Shared Earning Agreements

A shared earning agreement is an agreement between investors and founders that entitles investors to future earnings of the company, and often allow investors to capture a share of founders’ earnings. These may be well suited for relatively early stage companies that plan to focus on profitability rather than growth, due to the nature of prioritizing growth in the latter.

Government Loans, Grants, and Tax Credits

U.S. Small Business Administration (SBA) loans and grants can be helpful, particularly in the short term. SBA loans generally have favorable financing terms, and together with grants can help companies direct resources to specific business goals including capital expenditures that may be needed to reach the next milestone. Similarly, tax credits, including R&D tax credits, should be considered whenever applicable as an easy way to offset the costs.

Customer Payments

Customers can be a lifeline for companies during an economic downturn, with the prioritization of current customers one way companies can maintain control over their cash flow. Regular checks of Accounts Receivable will ensure that customers are making their payments promptly according to their contracts. While this can be time-consuming and repetitive, automating Accounts Receivable can streamline tasks such as approving invoices and receiving payments from customers to create a quicker process. Maintenance of Accounts Receivable provides a consistent flow of cash, which in turn extends runway.

To increase immediate cash flow companies should consider requiring longer contracts to be paid in full upon delivery, allowing the company to collect cash up front and add certainty to revenue over time. This may be hard to come by as customers are also affected by the economic downturn, but incentivizing payments by offering discounts can offset reluctance. Customers are often concerned with locking in a company’s services or product and saving on cost, with discounts serving as an easy solution. While they can create a steady cash flow, it may not be sustainable for longer cash runways. Despite their attractive value, companies should use care when offering discounts for early payments. Discounts result in lower payments than initially agreed upon, so companies should consider how long of a runway they require and whether the discounted price can sustain a runway of such length.

Vendor Payments

One area where companies can strategize and cut costs is vendor payments. By delaying payments to vendors, companies can temporarily preserve cash balance and extend cash runway. Companies must review their vendor agreements to evaluate the potential practical and legal ramifications of this strategy. If the vendor agreements contain incentives for early payments or penalties for late payments, then such strategy should not be employed. Rather, companies can try to negotiate with vendors for an updated, extended repayment schedule that permits the company to hold on to their cash for longer. Alternatively, companies can negotiate with vendors for delayed payments without penalty. Often vendors would prefer to compromise rather than lose out on customers, especially in a down economy.

Lastly, companies can seek out vendors who are willing to accept products and services as the form of payment as opposed to cash. Because the calculation for cash runway only takes into account actual cash that companies have on hand, products and services they provide do not factor into the calculation. As such, companies can exchange products and services for the products and services that their vendors provide, thereby reserving their cash and extending their cash runway.

Bank Covenants

In exercising the various strategies above, it is important to be mindful of your existing bank covenants if your company has a lending facility in place. There are often covenants restricting the amount of debt a borrower can carry, requiring the maintenance of a certain level of cash flow, and cross default provisions automatically defaulting a borrower if it defaults under separate agreements with third parties. Understanding your bank covenants and default provisions will help you to stay out of default with your lender and avoid an early call on your loan and resulting drain on you cash position.

Employee Considerations

As discussed extensively in our first article Employment Dos and Don’ts When Implementing Workforce Reductions, the possibility of an economic downturn not only will have an impact on your customer base, but your workforce as well. Employees desire stability, and the below options can help keep your employees engaged.

Providing Equity as a Substitute for Additional Compensation.

Employees might come to expect cash bonuses and pay raises throughout their tenure with an employer; in a more difficult economic period this may further strain a business’s cash flow. One alternative to such cash-based payments is the granting of equity, such as options or restricted stock. This type of compensation affords employees the prospect of long-term appreciation in value and promotes talent retention, while preserving capital in the immediate term. Further, to the employee holding equity is to have “skin in the game” – the employee now has an ownership stake in the company and their work takes on increasing importance to the success of the company.

To be sure, the company’s management and principal owners should consider how much control they are ceding to these new minority equity holders. The company must also ensure such equity issuances comply with securities laws – including by structuring the offering to fit within an exemption from registration of the offering. Additionally, if a downturn in the company’s business results in a drop in the value of the equity being offered, the company should consider conducting a new 409A valuation. Doing so may set a lower exercise price for existing options, thus reducing the eventual cost to employees to exercise their options and furnishing additional, material compensation to employees without further burdening cash flow.

Transitioning Select Employees to Part-Time.

Paying the salaries of employees can be a major burden on a business’s cash flow, and yet one should be wary of resorting to laying off employees to conserve cash flow in a downturn. On the other hand, if a business were to miss a payroll its officers and directors could face personal liability for unpaid wages. One means of reducing a business’s wage commitments while retaining (and paying) existing employees is to transition certain employees to part-time status. In addition to producing immediate cash flow benefits, this strategy enables a business to retain key talent and avoid the cost of replacing the employees in the future. However, this transition to part-time employees comes with important considerations.

Part-time employees are often eligible for overtime pay and must receive the higher of the federal or state minimum hourly wage. And if transitioned employees are subject to restrictive covenants, such as a non-competition agreement, they might argue their change in status should release them from such restrictions. Particularly since the COVID-19 pandemic, courts have shown reluctance to enforce non-competes in the context of similar changes in work status when the provision is unreasonable or enforcement is against the public interest.

Director Liability in Insolvency

Insolvency and Duties to Creditors

There may be circumstances where insolvency is the only plausible result. A corporation has fiduciary duties to stockholders when solvent, but when a corporation becomes insolvent it additionally owes such duties to creditors. When insolvent, a corporation’s fiduciary duties do not shift from stockholders to creditors, but expand to encompass all of the corporation’s residual claimants, which include creditors. Courts define “insolvency” as the point at which a corporation is unable to pay its debts as they become due in the ordinary course of business, but the “zone of insolvency” occurs some time before then. There is no clear line delineating when a solvent company enters the zone of insolvency, but fiduciaries should assume they are in this zone if (1) the corporation’s liabilities exceed its assets, (2) the corporation is unable to pay its debts as they become due, or (3) the corporation faces an unreasonable risk of insolvency.

Multiple courts have held that upon reaching the “zone of insolvency,” a corporation has fiduciary duties to creditors. However, in 2007 the Delaware Supreme Court held that there is no change in fiduciary duties for a corporation upon transitioning from “solvent” to the “zone of insolvency.” Under this precedent, creditors do not have standing to pursue derivative breach of fiduciary duty claims against the corporation until it is actually insolvent. Once the corporation is insolvent, however, creditors can bring claims such as for fraudulent transfers of assets and for failure to pursue valid claims, including those against a corporation’s own directors and officers. To be sure, the Delaware Court of Chancery clarified that a corporation’s directors cannot be held liable for “continuing to operate [an] insolvent entity in the good faith belief that they may achieve profitability, even if their decisions ultimately lead to greater losses for creditors,” along with other caveats to the general fiduciary duty rule. Still, in light of the ambiguity in case law on the subject, a corporation ought to proceed carefully and understand its potential duties when approaching and reaching insolvency.

1 Diamond, Brandee and Lehot, Louis, Is it Time to Consider Alternative Financing Strategies?, Foley & Lardner LLP (July 18, 2022)

2 Rush, Thomas, Revenue-based financing: The next step for private equity and early-stage investment, TechCrunch (January 6, 2021)

Article By Natasha Allen, David W. Kantaros, Nikhil T. Pradhan, and Graham P. MacEwan of Foley & Lardner LLP

For more financial institutions and banking legal news, click here to visit the National Law Review.

© 2022 Foley & Lardner LLP

Entrepreneur’s Spotlight: South Loop Strength and Conditioning (Chicago, Illinois)

South LoopWelcome to the latest installment of Entrepreneur’s Spotlight on the Health and Fitness Law Blog.  In this series, we look at successful startups and ventures in the health and fitness industry and interview the hard-working entrepreneurs behind these companies to discuss how they did it and what they learned along the way.

Today, the spotlight is on South Loop Strength and Conditioning (“SLSC”).  SLSC is one of the most popular CrossFit gyms in the greater Chicago area, and is located at 645 S. Clark Street in Chicago, Illinois. For more information on what sets SLCS apart from other gyms in Chicago (and nationwide), please check out its website at http://southloopsc.com/.

SLCS is co-owned and operated by four individuals.  We met with one of the original founders, Todd Nief, to listen to his story.  As you will read below, Todd originally did not have a background in fitness, but he has gone on to obtain a wide variety of certifications, including the following:

  • Certified CrossFit Trainer (CrossFit Level 3)
  • CrossFit Specialty: Movement & Mobility, Running, Powerlifting, Kettlebell
  • DNS “A” Course (Dynamic Neuromuscular Stabilization)
  • DNS Exercise Level 2 (Dynamic Neuromuscular Stabilization)
  • FMS Level 2 (Functional Movement Systems)
  • OPEX CCP Level 2 (Formerly OPT)
  • Poliquin BioSignature Level 2
  • POSE Running Coach
  • Precision Nutrition Level 1
  • SFMA Level 2 (Selective Functional Movement Assessment)
  • USA Weightlifting Level 2

Due to the abundance of information Todd was willing to share, we have decided to break this interview into a two part series.  This is Part I of II.  Part II of II will be posted next week.  If you want to learn more or have questions for Todd, he can be reached at todd@southloopsc.com.

Enjoy!

South Loop

H&F Law Blog: You made the transition to CrossFit owner a few years ago.  Could you please tell us a little bit more about how you made the transition from Environmental Consultant to Gym Owner?

Todd Nief:  This was an entirely accidental transition. I had been doing CrossFit on my own for a few years – mostly training out of a Bally’s. So, I was the weird guy doing weird stuff that I should not have been doing and attempting to lift weights that I had no business lifting. I mostly followed workouts from www.crossfit.com but I also had gone in to CrossFit Chicago to receive a bit of instruction.

I had started going in to Atlas CrossFit on occasion so that I would be able to do workouts with a lot of weight dropping (they did not like that at Bally’s) as well as things like ring muscle-ups. I was not expecting to coach there, but, after being around a bit, I started working with some of the beginner classes there right around the time that I was laid off from my consulting gig.

After spending about a year at Atlas, I wanted to run a facility based upon what I considered to be best practices in coaching and training. So, I started looking into what it would take to open a gym and began heading down that path. Within the CrossFit community, there is a lot of glorification of the gym owner (which makes sense from a business model perspective as well…), so it never seemed that impossible to get into the gym business – especially after seeing some of the back-end of what a successful gym looked like

H&F Law Blog: What was the hardest part of going into business for yourself?  Who did you look to for advice when you first started out?

Todd Nief: Well I certainly had absolutely no understanding of business, sales or marketing. I was a coach and a musician with a chemical engineering degree – as well as a negative attitude towards business based upon a youth spent in punk, metal and hardcore.  So, the most consistently challenging thing for me has been overcoming my own negative and maladjusted thoughts surrounding what it means to own a business and what it means to promote yourself, take money from people, and hold others accountable to your principles (employees, clients, business partners, investors, etc).

We also opened probably about 9 months too late to really reap the benefit of “early adopters” to the CrossFit program. The gyms that opened about a year before us basically had to do nothing to attract clients, since they were some of the first gyms in the city and all they had to do was open up and put “CrossFit” on the door. There was a whole city of people learning about CrossFit and searching out gyms. By the time we opened, there was a certain level of saturation and a lot of the early adopters had already found a home.  So, we were in a position where – to have success out the gate – we would have needed to open at scale and have an understanding of marketing, positioning, sales funnels, and customer experience. Instead, we opened in a little hallway on the second floor of another gym with an attitude towards sales and marketing that resembled a depressed vegan sixteen-year-old talking shit about McDonald’s (I was that teenager).

And, man, we also really got kicked around on the real estate market quite a bit (leases falling through, leases not being countersigned, lack of respect from landlords, etc.)

H&F Law Blog: What was one thing you expected would be easy in owning or managing the business that was actually much more difficult than anticipated?

Todd Nief: I do not know if “easy” is the right word, but the CrossFit community has a lot of cultural push towards a meritocracy of marketing that I think is, at best, misguided and, at worst, disingenuous and pandering.  The assumption is that, by providing a great service to your clients and getting them results, they will do all the marketing for you and you can focus on coaching. This may work in an early adopter environment, but, as soon as the market reaches a certain level of saturation, this is an impossible way to exist and grow a business.

So, I got into the business to coach, and now my main role is understanding how to grow the business – by understanding how to communicate with potential clients and how to reach them.  I do not think I ever thought that marketing was easy, but I also underestimated how much marketing I would be doing.

H&F Law Blog: Conversely, is there anything that you expected would be difficult that turned out to be very easy to manage or figure out?

Todd Nief: This is a tough question for me, since I think that I generally assume that most things will be “difficult” but that I also trust myself to be able to figure them out.

I think that a lot of businesses have a lot of challenges around hiring, finding the right people, and raising cash when they need it. We have certainly had some frustrating, bizarre, and sketchy endeavors in all of these arenas, but we have also had some insanely fortuitous occurrences here as well – one employee leaving and another walking in the door within a few days, one investor flaking out and another reaching out within a few weeks, one lease falling through and another falling into our lap, etc..

Picture--Crossfit Gym

H&F Law Blog: It is my understanding that there are a few different owners of SLSC, and these owners have slightly changed over time without any hiccups in the business.  Speaking from our experience as outside general counsel to gyms with multiple owners, conflicts come up all the time between owners of gyms and we are often asked to interpret poorly drafted or virtually non-existent Operating Agreements or Shareholder Agreements (drafted by other attorneys, of course!).  How has South Loop Strength and Conditioning managed to have multiple owners (including some transition of owners), while running one of the elite CrossFit facilities in Chicago?

Todd Nief: Fortunately, one of my partners is a mergers and acquisitions lawyer, so he was able to get us set up with a pretty sturdy operating agreement when we started the business.  The business started as three of us, and there are now four; over four years we have removed one partner from the operating agreement and added two.

While the operating agreement did make these processes pretty clear in terms of what removal and addition of partners looks like, I think one of the biggest things here has been maintaining a level of respect between partners.  Even when one of our original partners was dissociating (which does not tend to happen if things are going swimmingly), there was never any bad blood and things never became unprofessional in that process. The operating agreement pretty clearly stated that we would buy out his shares for an agreed upon fair market value, so we crunched some numbers, went back and forth on a few things, and came to an agreement pretty quickly.  In terms of adding partners, it was a situation where two people came along at the right time that had an interest in the business and the right skillset to jump in and move us forward, so – similarly – we hashed out agreements that we thought were fair and amended our then-existing agreements.

[Note from Aaron Werner (Health and Fitness Attorney/Interviewer): Be sure you have a very clear and enforceable Operating Agreement (LLCs) or Shareholders’ Agreement (Corporations) when starting or buying a business with other people.  If you are raising outside capital, you need to be very careful about the securities laws involved concerning fundraising and documenting the business deal with your investors.  Be sure to work with an attorney well-versed in Operating Agreements/Shareholders’ Agreements/Other Fundraising Documents.]

H&F Law Blog: What advice do you have for other people that are going to go into business with other co-owners of a gym or studio?  What characteristics in your own business partners makes your partnership work so well?

Todd Nief: This is a somewhat challenging question since I think that this is somewhat similar to hiring – and there are many books and courses and videos and seminars and masterminds on this topic.

There are all kinds of things you can do to vet people, but the only consistent thing that works seems to be working with them to see what happens. Sometimes you make good calls, and sometimes you make bad calls.  And, similarly to hiring, sometimes you meet the right person at the right time, and then you can end up starting some gym together and having to figure out a bunch of stuff that no one ever told you before.

People say all kinds of corny stuff about vision and mission and whatnot, but that is all kind of inspirational quote fodder as far as I am concerned. I think there are basic understandings of how human beings should relate to each other that are essential for an effective partnership – most important is honestly probably generally treating other people with respect, whether that is clients, employees, or your other partners. Once contempt, deceit or manipulation enter a relationship, it can be impossible to salvage.

So, my advice would be to work with people before you enter into a partnership with them so that you know what you are getting into.

To be continued next week…

Article By Aaron D. Werner of Horwood Marcus & Berk Chartered
© Horwood Marcus & Berk Chartered 2016. All Rights Reserved.

Should Investors Buck the Status Quo with LLCs?

The National Law Review recently published an article by Jason B. Sims of Dinsmore & Shohl LLP regarding Investors and LLCs:

Sometimes change is good.

Too often investors and entrepreneurs just stick with the status quo, in terms of structuring a venture capital or private equity investment. One notable example is requiring that target portfolio companies formed as limited liability companies reincorporate into a “C” corporation because…well…that is just how it is always done.

Actually, the decision is a bit more thoughtful than that. One concern that investors have with LLCs is the typical pass-through tax election these entities make to provide economic benefits to the founders during the lean, loss years.That is a valid concern because funds investing in a pass-through vehicle will experience phantom losses and gains that flow to them as a result of the investment, which creates accounting nightmares. Many limited partnership or operating agreements for funds prohibit investments in pass-through vehicles for that reason.

Another reason that investors often prefer corporations, particularly in Delaware, is the generally corporation-friendly laws and the deep body of judicial opinions interpreting those laws create some level of predictability on how bad situations will play out. The laws governing LLCs and the related judicial opinions interpreting those laws are not nearly as robust in Delaware or any other state when compared to dealing with corporations.

Avoiding unnecessary tax issues and enjoying the protection of a wealth of well interpreted corporate laws are both relevant analytical points to consider, but they are not necessarily determinative of the choice of entity question.

Funds can eliminate the issue of phantom losses and gains in two ways. The most obvious is to have the LLC make an election to be taxed as a corporation. That sort of flexibility is one of many attractive features of an LLC. The other method to avoid phantom losses and gains is to set up a corporation, often referred to as a “blocker corp,” to serve as an intermediary between the fund and the LLC. This is something that private equity firms do more than traditional venture funds.

Delaware LLCs are not going to win the battle of legal precedent any time soon. But that doesn’t necessarily matter, because there is one step that the LLC can take that arguably trumps all the general predictability—at least, as far as the investors are concerned. That step, of course, is limiting, or even eliminating, fiduciary duties.

Venture capital or private equity investors often want to insert one (or more) of their own onto the boards of directors for their portfolio companies. That makes perfect sense because the investors have a vested interest in keeping abreast of the progress of their investment. The investors also typically have a wealth of experience that adds tremendous value to the development of the company, when they serve on the board. The rub is that serving on the board opens a Pandora’s Box for liability in the form of fiduciary duties.

In an earlier blog post, Mike DiSanto discussed the impact of fiduciary duties have on investor designees serving the board of directors of a portfolio when that portfolio company completes an inside round of bridge financing. But that isn’t the end of the analysis. Inside-led rounds of equity investment present the same issues, and investors wanting to truly double down on an investment shouldn’t be prevented from doing so from the fear that the valuation and other terms used to consummate the equity round will later be deemed to fall outside the inherent fairness test imposed by Delaware corporate law – remember, that standard is applied using 20/20 hindsight, making it ultra risky.

Of course, there is more. In the unfortunate event of a fire sale of a portfolio company, a board dominated by investor designees faces liability when the preferred holders consume all of the acquisition proceeds due to previously negotiated liquidation preference (full case here). Those same directors face potential liability when the board approves a reverse stock split that has ultimately forces a cash-out of minority stockholders (full case here).

There are lots of other examples, but you get the point. Fiduciary duties generally force investor designees serving on the board of a portfolio company to think about what is in the best interest of the stockholder base as a whole (or sometimes just the common holders), not what is best for the investment fund.

Delaware LLCs have a distinct advantage vis-à-vis corporations when it comes to mitigating potential damages for breaches of fiduciary duties. The Delaware Limited Liability Company Act allows for LLCs to expressly limit, or even eliminate, the fiduciary duties of managers or members by expressly stating that in the operating agreement.

Delaware takes this position because LLCs, unlike corporations, are a creature of contract. Not an organic form of entity that is regulated by well established corporate laws. Delaware has long encouraged the policy of freedom of contract, and that policy extends to the operating agreement of a LLC, even if that includes eliminating fiduciary duties.

It is also important to note that, as a creature of contract, Delaware LLCs have the freedom to establish all the various enhanced rights, preferences and privileges that typically go along with an investor acquiring preferred stock in a corporation. In fact, LLCs are often more flexible when it comes to the ability to tailor those rights into exactly what the parties want, rather than having to conform to existing corporate laws on liquidation or voting rights, for example.

All the pros combine to make Delaware LLCs a pretty attractive choice of entity from the perspective of a venture capital or private equity investor. I think it may be time for private equity funds and venture capital firms to reconsider investing directly into LLCs.

© 2012 Dinsmore & Shohl LLP.