Articles Tagged with california

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Of the many challenges faced when starting a business, creation of a company’s bylaws can be one of the more complex, technical, and overwhelming challenges of them all. While daunting, such agreements can protect startup companies from liability in business transactions. A Silicon Valley corporate lawyer can help your business create the bylaws which will best meet your legal needs.

  • Identify the needs of your businessFotolia_104278045_Subscription_Monthly_M-300x169

Before crafting any corporate policy, it is important to determine your goals. Does the policy need to protect the company from legal liability? Reduce operating expenses? Provide clarity for executing important business discussions? Identifying clear goals will allow for bylaws to effectively address such needs. Owners should also be sure to consider both the short and long-term needs of the business. Business, financial, and legal concerns can change over time. Effective bylaws will allow the business to adapt to the dynamic reality of the marketplace.

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Public policy in California dictates that businesses should be free to compete against each other in the marketplace. Competition among businesses greatly benefits consumers. At the same time, competition engenders higher quality goods and higher service quality at price points advantageous to the consumer. Toward that end, California’s antitrust law, known as the “Cartwright Act,” prohibits a wide variety of conduct designed to restrain competition in the marketplace.

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The San Jose business lawyers at Structure Law Group, LLP dedicate their practice to helping business owners grow their company while insulating them from harm.  Unfair competition has a negative effect on consumers and businesses. Business entities should avoid structuring agreements which arguably cause unfair competition. Failure to do so could subject those businesses to lengthy and costly litigation and expose them to potential damages.

According to California business, trusts are unlawful and against public policy. California law defines a trust as a “combination of capital, skills, or acts by two or more persons” to:

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The exchange of cash for payment for a goods or services is rare these days. We have certainly become a digital society. Business make advances daily to make transactions more efficient and convenient. However, businesses engaging in e-commerce must not compromise security for expediency. Additionally, businesses store infinite amounts of personal data about their customers. These businesses, such as health care providers and health insurance companies, not only must safeguard their electronic transactions but must also secure sensitive information and proactively combat data breaches. Failure to do so can lead to a huge economic loss for the customers and the company. The savvy business attorneys at Structure Law Group, LLP advise businesses on the best practices to prevent data breaches and counsel them on the necessary steps to take if such an unfortunate event occurs.

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In California, people have a constitutional right to the safety and integrity of their personal information. California’s information security act defines personal information as any information that could identify or describe a person. Personal information is also an individual’s name, address, social security number, license number, medical information, and the like. A business in possession of such information must take reasonable steps to prevent disclosure of private information. California law obligates businesses to implement security measures reasonably designed to protect the integrity of the private information. Every business entity, from a sole proprietorship to a multi-national corporation is subject to the information security act.

California law broadly defines “data breach.” Data breach includes any “unauthorized acquisition of computerized data that compromises the security, confidentiality, or integrity of personal information maintained by the person or business.” The information may be used in good faith for the benefit of the person whose information is disclosed, provided that such disclosure is authorized.

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Businesses must endeavor to guard their trade secrets jealously. Failure to do so can wreak havoc upon development and growth. It will also give competitors a leg-up in the marketplace. Knowing and understanding California’s trade secret law is therefore critically important. Implementing multiple safeguards to prevent trade secret disclosure is necessary. If a business fails to implement reasonable safeguards to prevent trade secret misappropriation, then the business may be without recourse in court. Working closely with experienced business attorneys to develop the appropriate security measures to prevent trade secret theft could prevent disaster from striking. The San Jose San Jose business attorneys at Structure Law Group, LLP (in San Jose and Oakland) have extensive experience counseling businesses on how to best protect their trade secrets and defending businesses against trade secret misappropriation in court.

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California’s Uniform Trade Secrets Act (“UTSA”), which follows the Uniform Trade Secrets Act adopted in 48 states, defines a “trade secret” as “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” (Ca. Civil Code §3426.1.)

In order to assert a claim for misappropriation of trade secret information, the owner of the trade secret information must identify its trade secret with sufficient specificity so that the information is separate from areas of general knowledge. For example, customer lists, marketing plans or pricing concessions are examples of broad categories of trade secret information. Or, the trade secret can be highly specific, such as a newly designed manufacturing process or the recipe for some sugary carbonated beverage, such as the recipe for Coca-Cola.

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Everyone knows what they say about real estate: location, location, location. This same axiom is definitely true for many businesses too. While some businesses may operate out of homes and employ their workforce remotely, many operations require a physical location to which workers and customers go on a daily basis. For example, stores, restaurants, and other locally-serving businesses always want to have a prime location with lots of foot traffic and easy access in town. Others, such as manufacturers, need large warehouses with affordable rent and room for all their equipment. While many business owners choose to own their building, many others do not have means to do so, or may not want to commit to one location long-term. For these reasons and more, many business owners lease their commercial spaces.

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For any type of lease agreement or contract, you want to be sure that all of the provisions are fair and reasonable. A proper lease will set out your rights as a tenant, and you want to be sure it does so adequately. A commercial lease will also designate your responsibilities as a business tenant, and you should be aware of any terms that require unreasonable or difficult responsibilities from you. Because each of these lease types can be complex documents with confusing legal language, you should always have any potential leases reviewed by a highly experienced business attorney prior to signing.

Of course, you will want to make sure the length of the lease and rent requirements suit your needs. The following are some additional terms your attorney will consider and review:

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A partnership is created whenever two or more people agree to do business together for a profit. Additionally, partnerships should ensure that they follow sound business practices once they begin their new venture.

Steps in Forming a Partnership

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The first step to forming a partnership is choosing its name.  In California, a partnership may use the last names of the individual partners or any fictitious names. If a fictitious name is used, it must be distinguishable from the name of any business name that is currently on record.  Before choosing the name, a search should be run in the following databases such as California Secretary of State or The United States Patent & Trademark Office.   If a fictitious name is used, the state of California requires that a fictitious business name statement is filed in the office of the county clerk where the partnership intends to do business.  The fictitious business name must also be published in the county newspaper for four weeks.

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California law requires employers to take reasonable steps to prevent and address alleged discriminatory and harassing conduct, to provide a government-issued brochure on sexual harassment to all employees, and to conduct sexual harassment prevention trainings if the employer has 50 or more employees.  As of April 1, 2016, the California Department of Fair Employment and Housing (DFEH) has enacted regulations that will require employers to develop written anti-discrimination and harassment policies with certain content requirements.

Under the new regulations, the anti-discrimination/harassment policy must be in writing, and must at a minimum:

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  1. List all of the protected categories under California’s Fair Employment and Housing Act, which currently include race, creed, color, national origin, age, ancestry, physical and/or mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation, and military and/or veteran status,
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Contracts are an integral part of conducting business and the necessity for certain contracts can arise from the very start of your company. The following are only some examples of important contracts for startups in California.

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Founders’ Agreement — If you are going into business with one or more people, having a comprehensive and clear founders’ agreement is imperative. This agreement can be likened to a premarital agreement: it foresees and addresses potential issues that may arise and sets guidelines for dealing with those issues. A solid and enforceable founders’ agreement can prevent a lot of legal conflict and costs down the road.

Nondisclosure Agreements — If you have the idea or formula for a unique product or process, you want to keep information confidential so others do not try to misappropriate your idea. However, it will be necessary to share information with co-founders, employees, investors, contract developers, and others involved in the project. In such cases, you may have others sign a nondisclosure agreement to ensure they will not disclose confidential information to other parties.

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A limited liability company (“LLC”) is one of the most favored forms of business entities because they combine the advantages of a corporation, such as limited liability and protection of their members from investor-level liability, with the advantages of a partnership, such as “pass-through tax treatment.” Additionally, LLCs are characterized by the informality of its organization and internal governance, set forth through an internal contract called the operating agreement.  An LLC member can be an individual, a corporation, a partnership, another limited liability company or any other legal entity.

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An LLC can be structured as a manager-managed or member-managed LLC.  In a manager-managed LLC, the members appoint a manager or managers to run and manage the LLC while the members take on a more passive role.  In a member-managed LLC, all the members share in managing the day-today operations of the LLC.  The managers or managing members who have been charged with the responsibility of running the LLC are obliged to act in the best interest of the LLC. The duties connected to this obligation are  known as fiduciary duties.   The key fiduciary duties are the duty of loyalty and the duty of care.  These duties are specifically defined by California law, as discussed in more detail below.

Requirements of a Fiduciary Duty

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At some point during the life of a limited liability company (LLC), the owners may decide that it is time to close the business.  The process of closing a business  is just as important as the process it took to create the LLC, because, among other things, the owner(s) need to provide notice to creditors and ensure that the LLC is beyond the reach of creditors.  The formal process of closing your LLC is called “dissolution.” While there are many ways to dissolve an LLC, including involuntary dissolution, this article focuses on voluntary dissolution by the LLC’s member(s) and for those LLCs which were active in conducting business during its lifespan.

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In order to voluntarily dissolve an LLC, the member(s) should first look to the company’s formational documents, which are the articles of organization and operating agreement.   In the majority of cases, one of these two documents will contain procedures and/or rules for how to dissolve the company.  In most cases, the procedure begins with a vote of the LLC members on a resolution to dissolve.  It is important that any specific requirements regarding the voting of member(s) are followed, such as providing for when a meeting to vote should take place, whether any advance notice to the LLC’s members is required in preparation for the meeting, and what required percentage of members is needed to pass the vote.

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