. All My Problems Started with a Good Idea

Jane ultimately declined Soas offer of an equity exchange and decided to pay for the IP work out of her start-up cash. With Mitchs help as Janes small business lawyer, Roommate Harmony LLC is ofcially in business, and things are going well. The speakers are designed, and prototypes are arriving for review. Jane has begun to work closely with her friend Dank, an engineer and recent MIT graduate, on the technical issues. She had been paying Dank $40/hour out of pocket, but they begin to discuss whether Dank should be a partner in the business. They ultimately agree that Dank will own 25% of the company in exchange for a $20,000 capital contribution and full-time work for Roommate Harmony LLC.

Dank and Jane want Mitch to provide the legal work to make this happen. Mitch indicates that he can do the work but says it will cost $2500. Mitch states, however, that he can represent everyone in the deal, so that there is no need to hire additional lawyers, which will lower the overall costs considerably.

During their meeting, Dank steps out of the room briey to take a phone call about the speaker systems Bluetooth features. While he is out of the room, Jane tells Mitch about her recent conversation with a rich angel investor, Marcus, who might be willing to invest $200,000 into the company in exchange for a 40% ownership stake. This would leave 60% of the company to be shared by Dank and Jane in the same 75%/25% proportion, which would mean that after Marcuss investment, Marcus would own 40%, Jane 45%, and Mitch 15%. She asks Mitch not to say anything to Dank, however, as the proposed angel investment might not come to pass, and she prefers not to unnecessarily complicate things.

Questions: Should Dank and Jane accept Mitchs suggestion? Who does Mitch represent in this transaction? Is there anything problematic with Janes request to Mitch in connection with the potential angel investor?