Articles Posted in Limited Liability Companies

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Every new business venture starts as an idea – where many entrepreneurs go off-course is in the implementation and execution of that idea. One of the most important aspects of starting a new business is establishing the business in a way that is compliance with the relevant rules and regulations in your state.

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There are many different steps you may need to take to legally form your business to ensure that you comply with relevant laws in California, though the exact steps applicable to you will depend on the nature of your business goals. Consulting with an experienced business attorney can help you make all necessary decisions and ensure that you follow through with every required legal step to start operations on the right foot. Some of the steps that are essential to starting every new business are discussed below.

Choose a business entity

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According to IT research and advisory firm Gartner, worldwide software revenue totaled $407.3 billion in 2013. More and more players are trying to break into the software market, and the ease of delivery through the Internet has significantly lowered the barrier for entry for many smaller companies. Two of the main ways of delivering software to consumers are (1) licensing the software to the consumer for download on a device and (2) providing it as a subscription service through the cloud. Below is some basic information regarding these two models and the ways in which they differ.

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For more information, contact the Structure Law Group to discuss your situation with one of our San Jose business law attorneys.

Software Licensing

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When drafted properly, employee handbooks encourage open communication in the workplace, set employee expectations, and shield businesses from the financial burden of legal liability. Here are 3 reasons why your business should have an employee handbook.

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3 Reasons Why Your Company Should Have an Employee Handbook

  1. Establish Your Company’s Character
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When starting a new business, one of the most important decisions that entrepreneurs must make is choosing the type of business entity under which they will operate. Many new businesses form as limited liability companies, or LLCs, as they combine the limited liability offered by corporations with the flexibility and favorable tax treatment of partnerships. The document that governs how an LLC operates is known as its “operating agreement.” While an LLC’s operating agreement does not need to be filed with the Secretary of State, it is still required that every LLC have one and that the document clearly lays out the rights and responsibilities of the company’s members.

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It is highly advisable for anyone in the process of forming an LLC to consult with an attorney to ensure their operating agreement accurately represents the intent of the parties it affects and it contains the necessary provisions. Below is some information about a few of the basic issues any LLC’s operating agreement should address.

The LLC’s Ownership Structure – One of the most important issues that should be addressed in an operating agreement is the ownership of the company. Ownership can be determined either by allocating percentages or by issuing “units,” which are similar to stocks issued by a corporation. In the absence of provisions to the contrary, California’s default LLC rules will apply, which may or may not reflect the intent of the people forming the LLC.

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The term “intellectual property,” or “IP,” refers to intangible property that is the creation of a person’s mind. IP is given certain aspects of property rights by law. One way of looking at IP, is that it is the property right one possesses in information. McCarthy’s Encyclopedia of Intellectual Property defines “intellectual property as “an all-encompassing term used to designate as a group all of the following fields of law: patent, trademark, unfair competition, copyright, trade secret, moral rights, and the right of publicity.” For example, moral rights, also called the right of attribution, require that I attribute the quoted language to its source. Otherwise, I would not only be guilty of plagiarism, but also copyright infringement.

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While intangible, intellectual property can be extremely valuable and in some cases may be a company’s sole asset. Some examples of the types of intellectual property that often has significant value include software code, techniques of manufacture, client lists, artistic works, works of authorship and formulas. For example, the Google search-engine algorithm and the recipe for Coca-Cola are each valuable forms of IP, the former being protected by a patent and the latter as a trade secret.

Intellectual property can be legally protected in several ways, including the use of legal instruments such as patents, copyrights, or trademarks. This area of law can be extremely complicated, so it is important for anyone seeking to protect their IP to discuss their options with an experienced attorney.

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Last year, California legislators passed the Healthy Workplace Healthy Family Act of 2014, which provided the opportunity to accrue paid time off for sick leave to almost every California employee. The law allows qualifying employees who have worked at least 30 days to begin accrual and to use that sick time after 90 days of employment. The law covers temporary, part-time, and full-time employees with very few exceptions. Such exceptions only apply to certain employees with collective bargaining agreements, some air carrier employees, and in-home providers of supportive services.

Because the new law so widely affects California employers, all business owners should thoroughly familiarize themselves with it to avoid legal disputes or sanctions for noncompliance.

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Basic requirements for employer compliance

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To make your business distinguishable, it’s important to focus on choosing and trademarking a business name early on; this is essential to securing ownership of your new company. Here are 3 steps to choosing the name of your business and protecting it under trademark law.

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3 Steps for Trademarking a Business Name

  1. Pick a Name Category
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At the end of June 2015, the Supreme Court of the United States (SCOTUS) published several opinions, including the highly-publicized decision that ruled all bans on same-sex marriage unconstitutional. While most of America was focused on the equal rights decision, there were two additional decisions regarding the use and protections of patents and copyrights that may be highly important to business owners and entrepreneurs.

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Kimble v. Marvel Enterprises

Owners of patents may license their invention to others to use, to sell, to manufacture with, or to advertise for sale. In return for the license, the patent owner collects royalties. Some patent holders have long-lasting royalty agreements with companies that depend upon the technology to operate.

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The robust expansion of the Internet and increased accessibility of Internet-enabled devices has provided entrepreneurs and existing businesses an easy and relatively inexpensive way to reach millions of people. One only needs to look the meteoric rise of companies like Amazon and Netflix to see the growth potential of an Internet-based business.  In fact, many types of businesses which once were required to have a bricks-and-mortar presence can now operate solely online, significantly cutting their overhead costs. One only needs to look at the rise of companies like Amazon and Netflix to see the growth potential of an Internet-based business.Fotolia_78106111_Subscription_Yearly_M-300x210

Because of this potential, more and more people are choosing to start their own online business selling goods or services to people around the country and even the world. While the Internet has removed many of the barriers of entry that have traditionally kept many people from starting a business, it has also created significant and new legal issues that business owners must consider before building a website and selling their product. It is for this reason that anyone considering starting an online business should discuss their situation with an experienced lawyer. Some of the more important issues related to starting an online business are discussed below.

Type of business entity

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For many new and existing businesses, their intellectual property (IP) may be by far their most valuable asset. Intellectual property can include literary works, software code, processes, formulas, manufacturing specifications, marketing plans, or designs.  In some cases, a company’s ideas may literally be their only asset – consider, for example, an individual with the idea for the next smartphone app that will be downloaded by hundreds of millions of people. She, and any company that she forms to develop that app, have the asset of that idea before even a single line of code is written. Of course, it is only natural to want to protect that asset from misappropriation by other parties. In many cases, the best way to achieve this goal is to use a non-disclosure agreement (NDA) with any other parties with whom the idea may be discussed.

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What is a Non-Disclosure Agreement?

Fundamentally, NDA agreements are contracts between two or more parties that outline information that they wish to share with each other but not with other parties. There are two main types of NDA agreements, which are:

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