Liquidity Crises and Fiduciary Duties of Directors of Early-Stage Companies

 

Liquidity Crises and Fiduciary Duties of Directors of Early-Stage Companies READ MORE

The FDIC receiverships of Silicon Valley Bank and Signature Bank have caused certain early-stage companies to face potentially crippling near-term liquidity issues. These liquidity issues may result in a company becoming insolvent. Therefore, boards of directors of such companies need to consider their fiduciary duties as well as steps that can be taken to mitigate risks.   Fiduciary duties are typically owed to the company for the benefit of its owners. While each state has its own interpretation of fiduciary duties, the general rule is that a corporation owes fiduciary duties to the corporation and its owners. That rule changes, however, when a company is insolvent. During insolvency, the board owes its duties to the corporation and its creditors. Note that Delaware law no longer holds that fiduciary duties begin to shift from equity holders to creditors when a company is approaching the so-called “zone of insolvency,” and duties continue to be owed to the enterprise as a whole.   There is no single definition of insolvency. Courts historically use a number of “tests” to determine when a company is insolvent. These determinations of insolvency include reviewing whether: (i) the value of a company’s liabilities exceeds the value of its assets (the “balance sheet test”), or (ii) a company’s cash flow is no longer sufficient to pay obligations as they become due in the ordinary course of business (the “equitable insolvency test”). Moreover, insolvency can occur gradually or all at once—including because of a liquidity shortfall due to the loss of a financing or banking relationship. In the current environment, if a company knows (or should know) that it will not be able to pay its obligations, either due to the loss of a banking relationship or otherwise, it may have reached the point of insolvency.   In practice, it is challenging to determine when insolvency occurs, especially for early-stage companies without recurring sources of revenue. Forecasting cash inflows and outflows is key, and a company should be conservative in its cash planning. It may be necessary for companies to seek emergency funding from their current investors or outside sources. A board should seek the advice of its trusted advisors to help determine how much “runway” a company has and whether additional capital is available to avoid insolvency.   Fiduciary duties include the duty of care and duty of loyalty. The actions of directors—and the fiduciary duties that underlie them—are governed by the law of the state in which a company is organized or formed. These duties typically include the duty of care and the duty of loyalty, and they require a board to act in good faith and in the best interests of the corporation and its stakeholders (be they shareholders or creditors).   The duty of care requires a board to stay informed and make decisions with the “requisite care.” To meet the duty of care, a board should examine all material information about the business that is reasonably available and, in making decisions, consider all relevant information and reasonable alternatives. This may even permit a board to approve “long-shot” or “Hail Mary” transactions so long as the decisions are well-informed and the risks of success are properly weighed against the likelihood of failure.   In practice, and especially when insolvency is a consideration, a board should consult with its legal and financial advisors to ensure that it is taking all necessary actions to protect the business. In discharging the duty of care, directors may reasonably rely on the advice of advisors whom the directors reasonably believe are acting in areas of their professional expertise and who have been selected with reasonable care.   During a liquidity shortfall, it is particularly important that directors and officers preserve cash to pay employee wages and benefits as well as employment-related taxes; otherwise, directors and officers may face personal liability if they continue to allow employees to work beyond the point in time at which they know the corporation does not have sufficient funds to pay employee wages, benefits, and related tax liabilities. Boards should also consider whether a state-law WARN Act applies to employee reductions in force or layoffs.   A board may also consider appointing a “liquidity management” committee to focus on these issues specifically.   The duty of loyalty requires a board to balance the interests of various groups. Directors must act in good faith and in a manner they reasonably believe to be in the best interests of the enterprise. Taking action will require understanding the conflicts that exist or may exist between various stakeholders.   It is of particular importance for employees of venture capital funds who sit on boards of portfolio companies to recuse themselves from decisions that create the impression of a conflict between the interests of the corporation and the interests of the venture capital fund. For example, if a venture capital fund is seeking to provide the company with “rescue financing,” board members associated with the fund or sponsor should not be part of the decision-making process and the company should consider all reasonably accessible potential sources of capital before agreeing to funding from existing sources.   If a board member/venture capital employee is involved in a “dual fiduciary” decision, and that decision is later challenged, courts will look to the “entire fairness” of the transaction. That is, courts will take a closer look at whether the transaction was the product of both fair dealing and fair pricing. It is of the utmost importance that a board and venture capital fund obtain proper counsel before entering into a transaction that could later be challenged as “self-dealing.”   The actions of a board and management team are protected—to a degree. In most circumstances, assuming the above-mentioned rules are followed, a board’s decision-making will be protected. However, if a board’s decision-making is subsequently challenged, a court will typically avoid “second-guessing” decisions by deferring to the “business judgment” exercised by directors; this includes any judgment made by relying on the advice of legal or financial advisors.   However, certain actions will remove this protection from a board’s decisions. Obvious pitfalls include engaging in self-dealing or insider transactions, committing fraud, and failing to fulfill certain corporate responsibilities. In addition, directors may be liable for the unlawful payment of dividends or unlawful stock repurchases when the corporation is undercapitalized. A board must discuss these pitfalls with its trusted advisors before taking any such actions.   Practical measures for limiting director liability in the face of a liquidity crisis. While there is no way to prevent a disgruntled shareholder or creditor from filing suit, boards can protect themselves by considering the following actions in consultation with discussions with their advisors:  Maintain an appropriate amount and type of D&O insurance, even if liquidity is tight. In addition, a board may want to consult a specialized “restructuring” insurer who can review existing policies and suggest changes to the policies to maximize protection. Ensure that corporate records reflect a sufficiently deliberative process and the board’s awareness of its fiduciary duties. Thoroughly review actions that may prefer one constituency over another constituency. Document the scope of fundraising efforts and alternatives to financings (such as a merger, asset sale, or reduction of operations to conserve cash). Exercise care in approving transactions that leave a corporation inadequately capitalized, even if the corporation is solvent at the time. Disclose any potential conflicts of interest and scrutinize all insider transactions. Confirm that all tax obligations (such as franchise taxes, sales and use taxes, and withholding obligations) are satisfied or that funds have been set aside to satisfy the obligations. Do not require employees to come to work if it is clear, or should be clear, that the company does not have sufficient funds to pay employees. If the decision is made to wind-down the company or prepare a bankruptcy filing, create a realistic budget that allows for an orderly process rather than a fire sale. Read our client alert. SETH J. KLEINMAN Partner skleinman@mofo.com JENNIFER L. MARINES Partner jmarines@mofo.com LORENZO MARINUZZI Partner lmarinuzzi@mofo.com

How to Make Money as a Ghostwriter: Insider Tips to Get Started

 

How to Make Money as a Ghostwriter:
Insider Tips to Get Started
By Robert Rice

Ready to learn how to become a ghostwriter — and how to make money writing in the process?

Whether you're an experienced freelance writer or you're just breaking into the industry, ghostwriting can be a lucrative and rewarding way to build your writing business.

There's just one thing:

Ghostwriting isn't for everyone, and there are important factors to consider before writing for someone else (without receiving credit).

In this article, we'll answer your top ghostwriting questions like:

• What does a ghostwriter do?
• How can I become a ghostwriter?
• How much do ghostwriters make?

Then, we'll take you behind-the-scenes in an interview with professional ghostwriter Tim O'Leary, so you get insider advice on what it's really like to make a living as a ghostwriter.

Read on to learn how to become a ghostwriter and discover if it's the right path for you.

What Does a Ghostwriter Do?

What is ghostwriting — and how is it different from other kinds of freelance writing projects?

A ghostwriter is anyone who writes for someone else without receiving credit for their work. Ghostwriters might pen content for projects like blog articles, emails, speeches, memoirs, or novels.

Wondering why anyone would want to pour their talent and energy into a writing project they know they won't receive credit for?

The answer is simple. There is a thriving market for ghostwriting services, and it's one of the most readily available ways to make money writing.

If writing is your passion, why not make it your day job, too?

"If I had known ghostwriting was a career option, I would've jumped in right after college instead of spending time in offices where I felt creatively stifled."
– Tim O'Leary, professional ghostwriter

People in all niches and industries want to write but lack the time, motivation, or know-how to do so. Whether it's for a personal passion project or a defined business goal — professional ghostwriters help people tell their stories.

Anyone with an idea for content might hire a ghostwriter to help them turn their vision into a reality. Maybe it's a celebrity or an athlete ready to publish a memoir. Or perhaps it's a business owner who wants to share their knowledge and build their authority through blog posts.

Even some of the biggest names in publishing, like James Patterson outsource parts of their writing process.

As a ghostwriter, you get to do what you love (writing), and your client achieves their content goals. Plus, you can generally charge more for your writing services because you're not receiving credit for your work.

There are other pros to becoming a ghostwriter, too. Generally speaking, your clients will provide you with the information or research you need for the project since they're the ones with a story, idea, or expertise to share.

Most ghostwriters aren't responsible for promoting or marketing the finished product, either.

If you want to spend more time putting pen to paper while helping people bring their stories to life, then ghostwriting could be the perfect option for you.

In contrast, here you can learn what is freelance copywriting and how it is different from ghostwriting.

How Much Do Ghostwriters Make?

Many writers ask how to become a ghostwriter so they can charge more for their work. So, just how much do ghostwriters make?

Well, it depends. Experienced freelance writers can demand more for their skillset; books and memoirs pay more than blog posts or short-form copy.

On average, a ghostwriter can make between $10,000–$50,000+ for a nonfiction book or memoir. For blog posts or articles, ghostwriters can easily earn between $150–$500+. Rates vary based on word count, the writer's ability, the client's goals, and budget.

Let's say you charge $20,000 for a 60,000-word book. If it takes you four months to complete a project, you could earn $60,000 a year from ghostwriting. Add to the mix other writing projects like blog posts and website copy, and you can easily make six-figures as a ghostwriter.

How Hard Is It to Become a Ghostwriter?

If you're intrigued by the idea of becoming a ghostwriter, I've got good news:

Breaking into the business of ghostwriting might be easier than you think!

There are countless people with stories to tell — individuals with a mission and the budget to outsource their writing projects. The secret is to connect with your ideal client, then turn their great idea into a written masterpiece.

Becoming a ghostwriter doesn't happen overnight. But with the right tips, you can become a highly paid ghostwriter, too.

Follow these steps to start attracting ghostwriting clients and projects:

1. Build Your Freelance Writing Portfolio

One of the most common questions about how to become a ghostwriter is:

How can I build my portfolio if I can't take credit for my writing?

Since you can't market your ghostwriting projects as your own, it's helpful to have a few freelance writing samples under your belt.

So, write a short story or a couple of articles. They don't have to be exceptionally long, but they should represent your best work so you can showcase your writing talent and build your credibility.

2. Get Comfortable Writing in Different Voices and Styles

The best writers often have a clear, recognizable style. But when you're learning how to be a ghostwriter, adaptability is an essential skill to develop.

As a ghostwriter, your pen is a vehicle for your client's voice, not your own. Train your brain to use the words, rhythm, and energy that match your client — to be a writing chameleon, so to speak.

3. Nurture Your Relationships and Network

What's the next step in how to become a ghostwriter? Seek out ghostwriting opportunities!

Be proactive and build your personal network. Don't be afraid to ask people in your life if they need a ghostwriter — you never know who has a story to tell.

Here are a few easy ways to market yourself as a ghostwriter:

• Update your social media bios
• Guest post about ghostwriting
• Leverage your existing clients
• Apply to work with firms
• Search on writing job forums

As your ghostwriting client base grows, so too will your referrals and opportunities.

How to Be a Ghostwriter: An Interview with Professional Ghostwriter Tim O'Leary

Tim O'Leary is one of many writers working "behind-the-scenes" to help people transform their story ideas into reality.

His only regret? Not diving into ghostwriting sooner.

In a recent interview, I asked Tim how he got his start in ghostwriting, how the work has shaped his life, and his advice for "up-and-comers" who want to break into the business.

Learn what Tim had to say about how to become a ghostwriter.

What were you doing before you started ghostwriting?

I was working sales at a high-end gym in the West Village of New York City to support my playwriting career. It was 60 hours a week minimum with hardly any time off, since gyms never close, and the burnout rate was incredibly high. I saw many, many people come in and out during my time there.

But, I stayed because the money was good and I was actually halfway decent at selling. Who knew?

How did you get your start as a ghostwriter?

A good friend of mine who was working for a ghostwriting firm reached out to me because they were in desperate need of writers. Talk about a sentence I never thought I would hear …

Writing is my first passion, and I was ready to leave my sales job, so I took the opportunity to send them a few samples of my work.

Thankfully, they liked my materials enough to give me a chance as a baby writer.

Can you elaborate a bit on your writing experience and what samples you sent?

I was pursuing a career as a playwright, so I had done a lot of writing for myself — plays, short stories, and even a novel that was never published. Professionally, I wrote movie and theater reviews for two websites, as well as advice and dating columns.

I submitted a few columns I wrote, as well as a chapter from my book. Honestly, any writing you have lying around can work as a sample. It just has to show your style.

What does being a "baby writer" entail?

Essentially it's like an entry-level position. They matched me with a client who had a smaller budget and I wrote a full-length novel for him. The experience was incredible, as I learned how to execute someone else's vision. It was my first time doing that.

Thankfully, he made the job simple by being easy to work with and very clear on what he wanted.

How did things change after that first novel?

The client was so pleased with the work that the next book they gave me was a significantly higher payout. And before I was one-third of the way through that book, I got another offer for something even higher.

At first, I was worried about juggling multiple projects at once, but I found it was quite doable with a bit of planning.

For readers wondering how to become a ghostwriter, what does a typical ghostwriting project look like?

Projects vary quite a bit, but the first thing we always do is have a phone conversation to discuss what they're looking for. Sometimes they have an outline, sometimes it's just two sentences of an idea. It's my job to take whatever they have and help shape that into a story.

After that, I create an outline of every chapter, so we have a clear roadmap of how the book goes and writing goals. Once the client approves, I get to work writing the pages.

I'll send anywhere from 5 to 15 pages at a time. If the client has notes, I'll make those revisions, and once they approve what I've written, it's locked. This makes it so we don't endlessly go back and forth.

How long does a book take you to write?

Typically a novel-length book takes anywhere from six months to a year and a half. That's why the pay is high — it's a long-term commitment.

Since you mentioned it, how does ghostwriting pay?

It's easy to make money as a ghostwriter. If you're self-employed, you can start around $10,000 per project and build all the way up to $50,000 or more. I'd say new writers can expect $10,000-$20,000 on a first book (assuming the client is respectful) and then after that, $30,000 and up is totally normal. If you decide to work through a firm, you will make less but you'll be given clients. Either way, you get to work from home, which is the best payment and one of the top benefits of being a writer.

What's your day-to-day life like?

A typical day in my writer's life is waking up around 9 a.m. (I'm a night owl), having breakfast, and then getting to writing. I write well early and late, so I use those times to get pages done. In between, I deal with emails and phone calls.

I am also pursuing television writing here in Los Angeles, so I use my free time to write scripts, produce series, and apply for studio fellowships. Thankfully, ghostwriting allows me to keep my own schedule, so I work whenever I want, wherever I happen to be!

Recently, I was hired as a co-writer (which is basically ghostwriting with credit!) for a book series.

Do you only work on books as a ghostwriter?

Novels, memoirs, and screenplays are my specialties. However, my firm offers services for any type of writing you can think of.

Clients hire us for editing and even consulting on projects they want to write themselves. Basically, if you have a gem of an idea, we can take you from outline to finished novel, to signing with an agent, to potentially a brokered deal with a publishing house. It's amazing!

As a side note, consulting is fun and quite lucrative if you enjoy developing stories but don't want to write a whole book for someone.

What are your favorite genres to write?

I particularly enjoy action, sci-fi, thrillers. I'm also attracted to stories with unconventional lead characters.

Aside from the money and time freedom, what draws you to ghostwriting?

Honestly, it's a thrill for me to help other people see the stories they've been thinking about for so long become a reality. So many people dream of writing books but never make the time to get around to doing it. I give them the gift of checking that item off their bucket list.

It's also great to finally say, "I write for a living." It's the coolest feeling in the world and I constantly feel inspired by the projects I get to work on.

How can someone learn how to become a ghostwriter if they're just starting out?

The best thing to do first is to get a few samples together. Write a short story, or an article or two, showcasing your style and your writing expertise. They don't have to be particularly long.

Once you have a sample, you can start seeking work. You can either apply to work with firms or find work on writing sites. Or, you can get creative and ask people in your life directly if they want to write a book. You'd be amazed how well that works.

I landed a $30,000 project independent of my firm because a veteran friend of mine wanted to write a memoir. Another friend of mine who heads the psychology department for a university was ready to pay $10,000 for a novel.

Ready to Start Ghostwriting?

At the end of the day, it comes down to building relationships and referrals. So many people are ready to have their stories told, and you could be paid handsomely to tell them!

So why not consider ghostwriting as a way to kick off your writer's life? You'll be well paid and get to do what you like most: write.

For the first-time ever, AWAI has launched a self-paced training program titled, How to Become a Sought-After, High-Income Ghostwriter. You'll get the skills and know-how you need to become a respected, well-paid author, directly from successful, best-selling ghostwriter Laura Gale.

Don't miss this ridiculously low introductory price — it goes away at midnight. Check out all the details here!

What's Hot at AWAI …

 LAST CHANCE: Grab our BRAND-NEW Ghostwriting program at the amazing low launch price before midnight!

 The importance of feedback.

 How to become a successful ghostwriter like this CPA has done. #NationalGhostwritingWeek

 New Jersey man turns writing sideline into a full-time income.

 How writers make lucrative money telling the stories of busy executives, thought leaders, and even celebrities.

How His "Anytime, Anywhere" Writing Career Allows Robert to Pursue His Other Passion Projects …

Robert Rice wanted a reliable income that wouldn't interfere with his passion for acting. Find out here how copywriting offered him exactly what he was searching for … and changed his life in innumerable ways.

Robert just updated us that he and Tim have created a production company in Los Angeles where they develop genre Film and TV projects. It's still under wraps, but this year, they're developing a short-form TV series for a streaming service that Tim is writing and directing.

Congratulations, Robert! Can't wait to hear more when you can share the details. 

If you're ready to check out all that ghostwriting has to offer, don't miss your chance to get the details and low launch price here.

Have your own story to share? Email us at mysuccess@awai.com, or post it over in the Facebook group, so we can celebrate your win too!