SaaS Contracts Lawyer and Software Attorney  based in New Jersey drafting software contracts, SaaS software licensing agreements and SaaS MSA, EULA, customer, startup, vendor, services and subscription agreements Andrew S. Bosin helps software clients and SaaS startup companies all across the US.

Andrew can be reached for a free consultation at 201-446-9643.

Email: andrewbosin@gmail.com.

What distinguishes Andrew apart from most of the big law firms is the manner in which he bills and charges clients for performing legal work.

Instead of requiring clients to pay a large upfront retainer fee and billing hourly legal fees like the big firms do, Andrew charges clients an upfront, low cost, transparent, one time fixed fee.

Andrew offers legal services, assistance and advice and specializes in representing startups, entrepreneurs, founders, seed, early stage growth, bootstrapped, pre-revenue, pre-incorporation companies and small to medium size businesses.

Andrew is also skilled and experienced in negotiating startup legal documents and business contracts and agreements including bylaws, founders restricted stock agreements, IP Licensing and Invention Assignment Agreements, board consents, LLC Operating Agreements, term sheets and promissory notes.

Andrew also helps clients with NDA’s, employment agreements and contracts, executive compensation agreements, software licensing and technology agreements, mobile app and software development licensing agreements and SaaS subscription agreements.

Andrew’s fixed rate startup incorporation package includes everything but government and third party filing fees. It’s hard to find a startup lawyer to draft great legal documents for a set fixed price.

Andrew offers start-ups located and doing business in any state in the United States in their first year a start-up legal package for the formation of a new Delaware Corporation structured for an investment by angels, seed round financing or VC’s.

This package is offered for a fixed fee of $2,950 (plus out-of- pocket expenses, such as filing fees in Delaware).  We understand that every startup has different legal needs so your business might not need everything set forth below.

This Legal Startup Package for Entrepreneurs and Startups consists of the following documents and services:

Incorporation, Organization and Qualification

• Reservation of corporate name
• Preparation and filing of a Delaware Certificate of Incorporation
• Preparation of Bylaws and Certificate of Secretary
• Preparation of Action By Incorporator
• Preparation of Organizational Board Consent regarding organization and corporate governance matters.
• Preparation and filing of Form SS-4 Application for Employer Identification Number (and state tax application for state where the business is located)
• Preparation and filing of qualification to do business as a foreign corporation in the state in which the company is located (if applicable)
• Preparation of Stockholder Consent regarding the following organization and corporate governance matter:
• Approval of form of Indemnification Agreement for officers and directors

Capitalization Matters

• Preparation of Founders’ Restricted Stock Purchase Agreements for up to four Founders (with standard vesting terms)
• Preparation of Stock Certificates and Receipts for up to four Founders
• Preparation of 83(b) Elections for Founders

Intellectual Property Matters

• Preparation of form of Unilateral (One Way) Nondisclosure Agreement (NDA)
• Preparation of form of Mutual (2-Way) Nondisclosure Agreement (NDA)
• Preparation of Assignment of intellectual property from the Founders to the corporation through Invention and Non Disclosure Agreements

Employment and Consulting Matters

• Preparation of form of At-Will Employment Offer Letter
• Preparation of form of Employee Confidentiality and Inventions Agreement
• Preparation of form of Independent Contractor Services Agreement

Includes 3 Hours of Legal Time for Consultations

In addition to these documents and filings, we also provide up to four (4) hours of legal advice and consultation with Andrew S. Bosin, Esq.

What is Not Included

This legal start up package does not include any stockholders’ agreements among the founders or any private placement memorandum or other documents to raise external financing.

Andrew provides the best personal service to his clients. Andrew’s clients can text him day and night and he typically responds within minutes. Andrew is also accessible nights and weekends.

Why You Should Hire a Former SaaS Entrepreneur Such as Andrew for Your Company’s Legal Needs

Andrew has also been an entrepreneur who has done the startup grind as the General Counsel of a Delaware C Corporation SaaS business that he launched and scaled with partners. As an owner of a SaaS company Andrew’s duties did not stop with being the lawyer for the business.

Rather, Andrew participated in most of the company’s business functions including marketing and sales, on-boarding new customers, raising capital and overseeing the software development process. SaaS Agreements. The use of Software as a Service (SaaS) applications, products and services has grown dramatically in the past decade.

Needless to say, there are probably only a handful of SaaS attorneys in the US who at the same time while building and scaling their Tech Startup Law Firm also devoted thousands of hours over a five year period in building and scaling their own startup company. The terms “lean startup” “in the weeds” or “from 50,000 feet” aren’t just terms to Andrew that he read online. He lived and breathed these words every day he was an entrepreneur.

Experience matters! plain and simple. Startups across the US hire Andrew because he has started and built two SaaS companies as the General Counsel/Owner. Andrew has rolled up his sleeves and risked his own time and money in building two Delaware corporations with his partners.

Unlike most attorneys, Andrew understands from his own entrepreneurial experiences what it is like to raise capital, pitch investors, create sales decks, take go-to market sales training, get clients and close enterprise deals.

There is no substitute for hands on entrepreneurial experience and Andrew has devoted thousands of hours into his own startup companies.

Because of His SaaS Entrepreneurial Experiences Andrew Offers His SaaS Clients An Objective View Of the Startup Grind

One of the other things that Andrew tries to help his startup clients understand is what it is like living the startup grind in that sometimes the company takes two steps forward, one step back, rinse and repeat and that building a startup is often times more frustrating than satisfying.

One of the other things that new entrepreneurs who perhaps were getting a steady paycheck before taking the startup plunge really have no conception of is the mental, emotional and financial toll being a startup founder takes on you.

When you’re working for a paycheck if you are doing a good job you really don’t think about not having a paycheck. Unless your laid off or fired for a reason having nothing to do with your performance you don’t think about not having the ability to pay your bills.

It’s absolutely the opposite in a startup. All you think about is money and will the company have enough to survive and if not when will you go out of business. You also think about when the company is going to have revenues if you have quit your job and have no salary. Sometimes it will seem like everyone you know is prospering or doing better than you. That’s why being in a startup is not for everyone.

If you’re going to join a startup you need to be prepared for the mental, emotional and financial toll it will take on you. That’s why Andrew encourages entrepreneurs to read everything they possibly can about what it’s like to be in a startup.

Things To Know And Think About Before Joining a Startup

As a Tech Startup who represents more than 100 startups, Andrew gets asked some of the same questions again and again. In the interest of saving some time here are a few key points to inform you about some of the key topics in the business of starting/running a start-up.

I’m ready to get started, what legal issues should I think about when deciding on the best structure for my business?

As with any decision you make, you need to have clear goals and realistic expectations in order to make the right decisions with respect to your business corporate structure. Some things to think about should be:

1. Clear goals
   1. What is your exit strategy and time horizon for being in a startup? Do you want to exit after a VC invests?  Do you want to pass the company to your children, or do you want to sell the business in three to five years to a strategic partner?
   2. Do you want some type of consulting business, a brick and mortar, or are you creating a high-technology company?
   3. Do you want to keep the business closely held, or do you want to take it public and have a large ownership base?
   4. Realistic expectations
      1. How much capital do you believe you can realistically raise? Is your business something that venture capital or angel investors would want to invest in?
      2. What do your revenue and expense projections look like?  Will the business be making money from day one, or will you need $1 million to $5 million and 1 to 2 years before you can realize a profit?
      3. Do you have another job that will provide you with income until your startup makes money?
      4. What are the things of value that the owners will bring to the business, other than their time and energy (e.g., ability to develop software, creating intellectual property, investment monies, other assets)?
      5. Best structure – even within the concept of “structure,” there are many things to consider:
         1. Should your company be an LLC, or a Corporation (S-corp, C-corp)?
         2. Should you contemplate “vesting” of founder’s stock in anticipation of future investment monies from angels or VC’s?
         3. What happens when a founder leaves the company? Do they stop vesting in stock? Can you claw any stock back from them?
         4. How can you protect your personal assets from the liabilities of the company?

Some startups make the mistake of issuing all of the stock in the first round to the founders. This presents two major issues or obstacles in trying to attract investor monies.

If the company needs to make key hires, or bring on more shareholders to help the company grow in exchange for sweat equity or take in investor monies it will have to issue additional shares of stock which means everyone will get diluted. This is not a good look for any startup company pitching an investor to invest in the company.

Investors want to put their money into startups being run by mature, business minded entrepreneurs. This doesn’t mean that a 22 year old doesn’t fit the mold. It’s not so much the age of the founders but rather their attitude, mentality and work ethic.

Startup Investors Prefer Delaware C Corps.

A Delaware C Corp is typically the preferred business entity for startups seeking to raise money from serious investors. A Delaware C Corp from a corporate business management perspective is so much easier to operate than an LLC which requires continual amendment of an operating agreement every time your entity makes a major business decision.

On the flip side, with a Delaware C Corp let’s say hypothetically you need to issue more shares to bring on additional talent all it really requires you to do is to draft a resolution authorizing the C Corp to take such action and take a vote of the shareholders. Typically, early stage startup companies consist of several people with one or two owning the majority of stock so voting and approving of such measures is very easy to accomplish in a Delaware C Corporation.

On the flip side, if you incorporate as an LLC let’s say in the state where everyone in the company is located there is a possibility that the laws of that state are not investor friendly or the courts are not pro business or the state imposes huge taxes on businesses like California.

If you need to raise capital to start your SaaS business or anticipate needing funds to hire employees, developers, etc., you should give serious thought to incorporating as a Delaware C Corp.

In any event, it is critical that you consult with and seek the advice of your accountant to make certain that a C Corp is suitable for the type of business that you will be operating especially if you are concerned about how much in taxes you will be paying. With that said, unless you have tons of orders for your SaaS application before you have even incorporated the amount in taxes you “might” pay at some point should be the least of your concerns and making sales should be your top priority.

If you incorporate in Delaware you need neither a shareholder agreement nor an operating agreement to govern you company and your company is not mandated to follow the rules of The New Jersey Revised Uniform Limited Liability Company Act (RULLCA).

So how does your company govern itself by just filing to incorporate in Delaware? Your company should have by-laws drafted, which are a set of rules the shareholders would need to follow. And, the state of Delaware would issue Articles of Incorporation to the C Corp.

Once filed, your corporation can elect both a board of directors and officers. Your company can then authorize itself to sell shares in the company. You would do this by drafting a resolution and having the owners of the corporation vote on it. Then, the board, assuming it’s the owners and perhaps one other person would hopefully ratify and adopt the resolution. You can do as many resolutions as you desire so that your business operates in an orderly manner. For example, you can do a resolution to change the address of the company or how many shares the company is going to sell to shareholders.

If your business is contemplating signing an agreement with a SaaS vendor here are just a few of the issues you should think about before signing the contract. This is for information purposes only and not legal advice.

What Are The Typical Fees/Costs Associated With Subscribing To Use SaaS Software

With traditional enterprise software, your IT department can ballpark what it is going to cost to purchase the software, install it on your servers and how much each month it will cost to maintain the software. With SaaS software, because there are so many moving pieces, i.e., number of users, amount of data stored and guaranteed performance minimums, it is best to get in writing from the SaaS provider what your monthly costs are going to be to access the services.

While traditional software typically charges a one-time fee, the user of SaaS software will most likely pay a monthly fee to access the software. And, unlike traditional software, the user of SaaS Software does not own a copy of the software or have a license to use it.

You can break down monthly costs pretty easily. You need to nail down how many users will be able to access the service each month and what that cost will be. And, is it a set number of defined users that can access the services such as 20 employees with their own log in or can 20 random employees, no matter who, have access to the services at any given time?

You also need to find out how much of your company’s data will be served and stored on the SaaS provider’s servers. You want to also see if you will be charged an overage fee and how much.

The Need For Language in a SaaS Agreement About SaaS Service Uptime Availability 

Most SaaS vendors should agree that their customers whether enterprise or not should have a reasonable expectation that the SaaS services or application be available and able to use as if the SaaS services were placed in the customer’s networking system maintained on the customer’s own premises. If a SaaS application is not working or is unavailable, the damages caused to the customer’s business could be catastrophic especially if the SaaS Application is critical.

That’s why it is important that the SaaS Provider contractually agree to make the SaaS Services/Application available and accessible to use at least 99.5% of the time all day every day of the year. The part of the SaaS agreement that this commitment is made is called the Service Level Agreement or SLA.

It is also common for SaaS vendors to give monetary credits to the customer for failing to achieve a certain up time or availability. For example for each 1% up time or non-availability the customer could receive a 1% credit back on the contract amount.

Should Agreements Have Language With The SaaS Vendor Assuming Liability for a Data Breach?

Because almost every function we perform on our cell phones from Linkedin to Instagram to Google Gmail is a SaaS Application why do SaaS customers have concerns over a SaaS vendor hosting/maintaining/serving their company’s data?

Despite the state of technology and that fact that there is widespread use of robust security, intrusion detection systems and encryption to name a few there is not a week that goes by that a large data security breach is not reported.

Because SaaS Vendors and Providers by their very nature are in the business of protecting other company’s confidential data and information and must do a good job of it or else a better more equipped competitor will crop up some say that SaaS providers sit in a better position to protect customer’s data that the customer.

A SaaS customer should expect pushback in contract negotiations if it demands that the vendor pay “consequential damages.” What are consequential damages? These are damages that could be anticipated as a result of a breach of contract.

Most would agree that if a customer’s data is compromised and this breach caused them to suffer lost profits that this is a foreseeable damage flowing from the breach. Unfortunately, for SaaS Providers this type of damages could well exceed the monetary amount paid by the Customer for the Services in the Agreement and could cause the SaaS Provider to go out of business.

Despite the catastrophic consequences a data breach might cause a SaaS vendor in the purse strings, SaaS customers will likely attempt to hold SaaS vendors liable for any data loss, damages, intrusion, or unintended breach or disclosure.

Most SaaS providers will not agree to any clauses in the SaaS Agreement where they are responsible to accept consequential damages liability. This is because all it takes is one breach of data and a client suffering substantial damages for the SaaS vendor to be put out of business.

On the flip side, most SaaS customers enter into contracts with their own customers obligating their companies to perform certain services. In how many of these agreements do the SaaS Customers’ obligate their companies to accept consequential damages liability? The answer is probably close to zero.

The best course of action for a SaaS customer to take is to try to convince the SaaS provider to accept liability for direct damages from a data breach for an agreed upon limit amount based on the total value of the contract. Hypothetically, if the contract is $50,000 for one year perhaps the SaaS Vendor would agree to cap damages caused to the customer in the amount of 1x the contract.

 What is an Application Performance Warranty?

An application performance warranty states that the SaaS provider will provide the Application to the customer conforming to specifications or documentation provided to the customer by the provider. If the application does not meet the published standards provided by the SaaS provider or there is a defect or problem with the application that cannot be cured by the provider then the provider should prorate the remaining months left on the contract. And, charge the customer only for the time that the application was up and running and working properly.

Access To Your Company’s Data

There is some downside to using SaaS Software and this is with regard to control of and access to your company’s data. If the services are no longer available for whatever reason because the customer fails to pay the bill or the SaaS provider goes out of business the customer will no longer have access to the services and will likely lose all of its data.

With regard to a SaaS provider filing bankruptcy, there is a way around the lack of protection and ambiguity in both the Bankruptcy Code and relevant case law. The agreement between the customer and SaaS provider can still be drafted in such a way that the customer still maintains the ability to access the cloud services provided otherwise by the SaaS provider.

This is accomplished by drafting software licenses and/or SaaS agreements as licenses to intellectual property to invoke section 365(n) of the Bankruptcy Code. One needs to be careful to draft the agreements as a present license grant not contingent on some event happening or a future grant.

A present license grant would allow the customer to use and access the licensed software and compel the SaaS supplier to provide the software source code, object code, and/or related documentation in the event that the SaaS provider attempts to reject the SaaS agreement under 365(a).

Service Level Agreements

An important part of the SaaS Agreement is holding a SaaS provider to a minimum performance standard in connection with a SaaS agreement. An example is that the service will have an uptime percentage of 99.9%, meaning the service is guaranteed to be up, available and running live 99.9% of the time. This performance standard is known as a Service Level Agreement (SLA). You also need to have the Agreement spell out how the performance standard will be calculated.

Typically, customers are given one day of credit for each hour that the SaaS service is down and not accessible. Although the SaaS provider would likely never provide the customer with this information, I would ask to see documentation showing that the SaaS provider has the same minimum performance standards from the entity that hosts and maintains the services on its behalf.

Here is the scenario. What if the SaaS provider guarantees in your agreement that the services will have an uptime of 99.9%. On the flip side, what if the SaaS provider in its agreement with the company that serves and hosts its services is only paying for up time of 99.2%. This means that the SaaS provider is taking a risk that the performance standard or uptime for its services will never fall below 99.9%.

A SaaS Vendor Has To Comply With The GDPR If It Wants To Do Business In The EU

If you’re a SaaS company and trying to figure out legally how to prepare to do business in Europe I would recommend at a minimum doing the following:

1. Explore and look into your SaaS service or application being hosted by a cloud managed service provider located in the EU;
2. Enter into SaaS agreements with European clients that incorporate and deal with EU Data Protection Regulation Directive 95/46/EC;
3. In addition to obtaining legal advice, you should seek out the services of a company that deals specifically with protecting the personal information of EU residents to help comply with the GDPR.
4. Draft an EU Data Processing Agreement and display it visibly on your website.
5. Consult with your commercial business insurance company to make sure you have adequate coverage for doing business in the EU.

Legal Concerns Issues Challenges With Purchasing an Online E-Commerce Internet Website Business

There are many legal challenges in purchasing a website especially if the seller represents that the site has both a certain amount of traffic and revenues from ad dollars and purchases. A prudent website purchaser will take his or her time in doing the right amount of legal and financial due diligence to make sure this is the right purchase for them.

You want to make sure that the party who owns the site actually owns the site. You want to see all of the underlying entity formation documents filed in the state where the entity incorporated to make sure that entity really owns the site. If its an LLC you want to examine the incorporation documents and ask the seller if there is an Operating Agreement for the LLC which would help you determine if there is more than one owner of the entity.

The next thing to do is to verify that the entity is the rightful owner of all of the domain names associated with the site. You want to make certain that the site owner legally owns all of the domain names and has the ability to transfer the names to you or your company.

You also want to ask the seller in writing to represent whether or not there any debts and liabilities or whether the site owes any money to any creditors. You don’t want to buy a site that makes money only to find out it’s in the red. And, you should also ask if the company has been sued or is currently in litigation.

You want to make sure that all of the software code and passwords have been transferred to you. You don’t want to be in a situation where you have purchased a website but the seller still has some sort of control over the site.

A big legal issue could also arise with trademarks and copyrights. If you are going to making a big purchase and be spending a lot of money on the site you want to make sure that the owner of the site has filed for the requisite trademarks and copyrights.

It’s not a bad idea to do your own search with the US Patent Office or hire a lawyer to do a search on your behalf. You don’t want to spend money purchasing a website only to be later sued by a third party claiming that the site infringes upon their copyright or trademark.

Then comes the issues of traffic and ad revenues. The owner of the site should be able to demonstrate via Google the amount of daily traffic to its site. With ad revenues just make sure the documents look legitimate and authentic.

You don’t want to spend good money purchasing a site only to find out that it looks good but is worthless. A little due diligence goes a long way. Pay your accountant a few bucks to look at whatever financial documents the seller provides to you.

It might not be a bad idea especially if the site makes money to have the seller stay on for a certain period of time as a consultant helping you learn every facet of the business.

What is Infrastructure as a Service (IaaS)?

What is the definition, explanation or meaning of Infrastructure as a Service (IaaS)? IaaS is also known as Hardware as a Service (HaaS). Infrastructure as a Service (IaaS) is a service model that brings computer infrastructure on an outsourced basis to support or assist business enterprise operations. What is becoming common place is that IaaS Providers offer hardware, storage, servers and data center space and/or network components and some might also offer software. One of the benefits of IaaS is that the customer/end user does not have to expend the cost of making a hardware purchase, rather, users can purchase IaaS based on consumption, analogous to electricity or other utility billing.

When compared to SaaS and PaaS, IaaS users are responsible for having to manage applications, data, runtime, middleware, and OSes. On the flip side, Providers still have the task to manage virtualization, servers, hard drives, storage, and networking. One of the main benefits of IaaS is an  infrastructure upon which they can install any necessary platform.

SaaS Agreement Legal Checklist

If you are going to be entering into a SaaS agreement with a SaaS vendor here are some things you should consider.

You need to make sure the agreement has well defined, clear, start and end dates. You also should see if there is language that lets one party terminate the agreement with a certain amount of time left in the term such as 30, 60 or 90 days.

Pricing is also very important and should spelled out clearly how much you are going to be charged to use the vendor’s SaaS application.

Users. How many of your company’s employees/users are going to be able to use the vendor’s SaaS application?

Warranties. Is the SaaS vendor going to provide a warranty regarding the functionality of its application?

Liability. Is the SaaS provider going to assume a sufficient amount of liability to cover any losses or damages your company might incur using their product?

Security. What type of security measures and protocols has the vendor implemented to protect your data and personal information? Ask the vendor if their company has undergone either a SOC-1 or SOC-2 audit.

What should startups know, learn and understand when they are in the process of trying to find and hire a startup lawyer? Some say that finding the right startup attorney for your company or business could mean the difference between success and failure.

It is important that you find a startup lawyer that your company likes and feels comfortable speaking with about your company’s problems and legal issues.

It is also important that you understand what lawyers or attorneys are going to be performing work on your startup’s behalf. Are you going to be paying a partner only to find out that a junior level associate is actually going to be doing some or all of the work?

How about accessibility? How long will it take the lawyer to respond to calls and emails? How is the lawyer going to charge you company: by the hour or by flat rate fixed fees.

Please call Andrew for a free consultation at 201-446-9643.

Or email: andrewbosin@gmail.com.

Andrew offers affordable, low cost, flat fee startup legal packages.