Partnerships

Thinking of Partnering to Launch a Business? Draft a Partnership Agreement.

March 18, 2016 | Jaclyn Ford

While many well-known businesses are either corporations or limited liability companies, partnerships remain a common and savvy business entity selection. In fact, some of the biggest names in tech—Apple, Microsoft, and Google—started out as partnerships.

What is a Partnership?

Partnerships exist whenever there is a cooperative endeavor of two or more people, entities, or some combination thereof, to provide a product or service. The main characteristic of any partnership is that the partners share in the profits and losses of the business.

How Retaining an Attorney Can Help Avoid Costly Business Litigation

March 4, 2016 | Mark Figueiredo

Many business owners do not hire an experienced attorney for several reasons. Some believe they cannot afford it and others may believe there is no need for a lawyer unless a legal conflict arises. However, it is much more resource-effective (time, energy, and money) to have the guidance of a skilled business lawyer from the very start. Doing so can avoid costly litigation in the first place and will allow you to focus on your business operations and not on a legal case. The following are only some examples of how hiring a business attorney can help to avoid litigation.

Business contracts – Businesses involve many different kinds of contracts, whether they are with fellow owners, suppliers, clients, or any other party. You may not recognize that a particular contract has unfair or adverse provisions that may leave your business vulnerable to losses or liability. Every single contract you consider signing should be carefully drafted, reviewed, and negotiated by a knowledgeable lawyer to protect your interests and avoid legal liability.

Compliance with business laws – California has a great number of laws that are relevant to businesses, and compliance is essential to avoid costly fines or legal conflicts. Such laws can regulate business formation, licenses, permits, zoning, taxes, employees, and many other issues. As a business owner, it may be challenging for you to identify all relevant laws and to ensure that you comply with them. An experienced attorney will know what steps you need to take to comply with necessary laws.

Avoiding Litigation with a Comprehensive Employee Handbook

February 26, 2016 | Jaclyn Ford

Hiring employees can be exciting for a business owner though it comes with many legal responsibilities and requirements. You must report your new hires to the state, set up a payroll system, comply with tax and immigration laws, and more. With so many requirements, the last thing you may want to do is anything that is not expressly required by law.

One optional step that can be extremely important, however, is developing and regularly updating an employee handbook. Following are some reasons that a carefully drafted employee handbook can help you to avoid legal conflicts with employees.

Avoid employee miscommunication

Tech Startups and Intellectual Property Decisions

February 19, 2016 | Mark Figueiredo

Startups centered around a technological development or product are highly popular in this day and age—and for good reason. Companies such as Apple or Facebook originated in garages or dorm rooms and are now each valued at hundreds of billions of dollars. Even if you are not a technical person and know nothing about programming or coding, you can still start a successful tech startup, as evidenced by companies such as Pandora. It is not surprising that individuals are continually trying to bring the next big idea to life and start their own tech company.

However, like any other type of business, there are many legal concerns for tech startups. One highly important concern is how to properly protect your intellectual property (IP). A novel and viable idea is generally the heart of a tech startup and you do not want to risk your success by failing to adequately protect your idea. The following are only some IP concerns that may be relevant to your tech startup.

Choosing the right type of IP protection

Using Equity as Compensation in a Tech Startup

February 5, 2016 | Mark Figueiredo

Many startups in the tech sector are idea-rich and cash-poor, meaning that their most valuable (and often only) asset is their intellectual property that may have the potential to be worth a substantial amount of money. While some startups are able to move their ideas from concept to deployment with relatively little labor involved, many of these ideas require the assistance of developers, programmers, engineers, and marketers, all of whom are skilled professionals who can easily command salaries well into the hundreds of thousands of dollars per year.

For this reason, many startups are faced with the issue of how to pay their employees during the development and launch phase, before they are generating any revenue. Of course, one option is to borrow the money or to seek investors – a solution that has significant pros and cons which should be considered. Another very popular option is to offer employees equity shares in a company in lieu of cash compensation. In some cases, this may take the form of equity for a lower salary than they would normally expect, while in others an equity share may be the only compensation they receive.

There are many issues that tech entrepreneurs and founders should consider when offering equity as compensation. These include the following:

Incorporating your Tech Startup: The Importance of Bylaws

January 29, 2016 | Mark Figueiredo

According to an article published by Forbes in late 2014, 42 technology startups potentially looking at a 2015 IPO had raised venture financing of at least $1 billion. With the potential for the creation of significant wealth in a relatively short period of time, it is no wonder that many people are seeking to enter the tech marketplace with new ideas that have the potential to impact the way that millions of people conduct their daily lives.

Incorporation is one of the major steps involved in the growth of a tech startup and involves creating a distinct business entity that can own intellectual property, issue stock, raise capital, and is subject to rules of corporate governance. Incorporation can be a complicated process and involves filing paperwork with the Secretary of State’s office in the jurisdiction in which you wish to incorporate.

What are Bylaws?

Due Diligence in Acquisitions: Five Issues to Thoroughly Investigate

January 22, 2016 | Mark Figueiredo

A comprehensive evaluation of a target company is a critical component of any successful corporate acquisition. Often referred to as a “due diligence evaluation” or “due diligence review,” this process involves fully evaluating the company that is being acquired (the target) in terms of its assets, liabilities, litigation risks, intellectual property matters, as well as other issues that could have an impact on the feasibility and advisability of a particular acquisition.

Fotolia_99549567_Subscription_Yearly_M-300x217
The most effective way to ensure that a thorough due diligence investigation is conducted is to retain legal counsel that is familiar with representing buyers in mergers & acquisitions. Some of the most important issues to address in a due diligence review of a potential corporate acquisition are discussed below.

The target company’s financial matters – Issues such as financial statements, liabilities, margins, future projections, and potential capital expenditures should all be fully evaluated. This is often the first aspect of due diligence.

Can Founders Pay For Their Stock in Cash or Contribute Intellectual Property?

January 1, 2016 | Mark Figueiredo

Starting a business entity is a complicated issue that can be compounded by things such as founder’s stock and each founder’s respective contribution. Equity considerations can be extremely important in starting a business, especially when one founder contributes intellectual property (IP) rather than cash or labor.

What is Founder’s Stock?

Awarding a company founder stock is a relatively common practice in business formation, particularly in situations in which a startup is new and not yet generating income. Doing so gives the contributing founder a measurable property interest in the newly formed entity. Typically, these stocks have a very low face value so that the founder receives a large amount of stock respective to his or her contribution.

The Importance of Contract Management Systems in Business

December 18, 2015 | Krystle Warren

Enforceable contracts that accurately describe an agreement between the parties are essential to any business, regardless of industry. Contracts arise in many relationships, including with partners, businesses, suppliers, employees, and client or customers, and a company of even moderate size could easily have thousands of contracts with various parties. For this reason, implementing a system to manage contracts and ensure compliance can significantly improve efficiency, improve compliance, and reduce the risk of incurring legal liability that can arise from contract disputes. In addition, an effective contract management system can help automate certain tasks, significantly reducing the risk of human error resulting in a costly dispute. Below are 4 ways in which implementing a contract management system can help businesses in every aspect of the contract lifecycle management process.

Keep all contracts in a central repository – This benefit may seem simple, but consider the inefficiency involved in an employee searching through files upon files for a contract that may have been executed years ago. An effective contract management system can keep a copy of the contract itself while also summarizing key facts regarding the agreement in a way in which they are easily accessible to those searching.
Create a database of standard agreement and pre-approved substitutions – There is no need to reinvent the wheel every time your company enters into a new agreement. Creating a standardized contract for use in recurring situations as well as standard substitutions that are pre-approved for use can significantly improve efficiency in contract drafting and execution.

Opening a Business in California as a Foreign National

December 11, 2015 | Mark Figueiredo

Many individuals who are citizens of foreign countries want to take advantage of the economic market in the United States. More specifically, California is a particularly popular state in which to start a business as a foreign national due to the close connections with the tech industry and the large and diverse population, among other reasons. If you are a foreigner considering conducting business in California, there is good news for you—neither residency nor citizenship is required to do so. Instead, you need only go through very similar steps as a U.S. citizen starting their own business with the state.

The following are some important steps that you must take to start your California business:

Choose your business entity – This is an important decision with many implications and your options, including corporation, limited liability company, limited liability partnership, or limited partnership, should be carefully weighed. An experienced business attorney can assist you in choosing the correct entity for your type of business and your goals.