Articles Posted in Business Transactions

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One of the first steps a Texas startup should take is to hire a knowledgeable Texas business attorney. Unfortunately, many companies view this as optional and delay until they face a lawsuit or another legal crisis. However, the ideal time to hire a business attorney is before encountering any legal issues.  Structure Law Group can work with you proactively, taking the time to understand your specific needs and providing guidance to help your company avoid future legal issues.

Defining the Legal Needs of Your Business

During the startup phase, businesses must address key tasks such as choosing a business entity, filing the required paperwork with the state, and establishing internal procedures like corporate bylaws or operating agreements for an LLC. Beyond these basics, specific legal needs may arise depending on the industry and market. These can include obtaining necessary licenses, maintaining regulatory compliance, and safeguarding the business’s intellectual property.

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AdobeStock_1539065348-300x200Every Texas business must take essential steps to protect and enforce its intellectual property rights, with trademarks and service marks being among the most critical. These marks represent your company’s brand and reputation to the world. The Austin intellectual property lawyers at Structure Law Group are here to ensure your marks are properly registered and effectively protected.

How Trademarks and Service Marks Work

A trademark or service mark is any combination of words, phrases, symbols, or designs used to identify a good or service. (A trademark refers to a good, while a service mark refers to a service.) These marks serve several critical functions, including identifying the source of the good or service and providing consumer protection against counterfeiting. However, it is important to understand that a mark does not mean that you “own” a word, phrase, or symbol. Rather, you have the right to use the mark in connection with your company’s specific goods or services.

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AdobeStock_429740779-300x200Are you looking to start a new business in San Jose or Silicon Valley?  If so, congratulations! Among your many decisions will be choosing a business legal entity.  A sole proprietorship is the easiest structure to get up and running quickly. But there are certain legal steps you will need to take to establish a sole proprietorship. And there are potential disadvantages you should consider. The Silicon Valley start-ups and financing lawyers at SLG can provide you with more specific advice related to your situation that will help you choose the right entity for your new business.

What You Need to Know About Being a Sole Proprietor in Silicon Valley

A sole proprietor is an individual who owns an unincorporated business. From a tax and legal standpoint, there is no distinction between the sole proprietor and their business. This has several implications, such as:

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AdobeStock_1534752117-1-300x171John Roberts, Jr., the United States chief justice, used a report on the federal judiciary to comment on the growing role of artificial intelligence (AI) in the legal profession. Roberts noted, “Proponents of AI tout its potential to increase access to justice, particularly for litigants with limited resources.”. The Chief Justice agreed that “[m]any AI applications indisputably assist the judicial system” in helping courts to resolve disputes.

Roberts also predicted that “human judges will be around for a while.” Similarly, while online chatbots may seem like a convenient alternative to hiring an attorney, the team at Structure Law Group encourages you to carefully evaluate your overall legal needs before relying solely technology.

What AI Is–and Is Not

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AdobeStock_248573288-300x200A successful California business lives or dies by its brand. Your corporate name, logo, and slogan are often the first things a customer associates with your business. So it is crucial to protect your branding through the use of trademarks. The experienced California trademark attorneys at SLG offer a full range of legal services designed to help your business in this area.

What Does a Trademark Do (or Do Not Do)?

Although the term “trademark” is used broadly in everyday conversation, there are actually two types of marks used in branding–trademarks and service marks. A trademark is used to describe physical goods and products, while service marks describe services. For the sake of simplicity, we will just refer to both as “trademarks” in this article.

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AdobeStock_839026665-300x200A founders’ agreement is a contract between co-owners of a business that outlines each of their roles and responsibilities, ownership interests, and rights in the business. It may be a standalone document or may be incorporated into a shareholders’ agreement, a partnership agreement, or an LLC agreement.  In this piece, we focus on pre-incorporation founders’ agreement—the first document we recommend be put together just as soon as two or more persons get into business together as co-owners. This will help protect the interests of each co-owner and avoid any potential disputes among them later.

So, what should founders include in a pre-incorporation founders’ agreement? Although the answer will vary depending on the line of business, a typical pre-incorporation founders’ agreement includes these items:

  1. Name of the parties and (potential) name of the business: The agreement should identify each party that will be bound by it. If the founders already have a name lined up for their business that should also be included in this agreement.
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AdobeStock_1329871997-300x200Alternative Dispute Resolution (ADR) offers a great way to settle disputes without stepping into a courtroom. Two of the most popular methods of ADR are mediation and arbitration. Both provide efficient, private alternatives to traditional litigation, but they are quite different when it comes to the process and the results. Understanding these differences is key when deciding which option works best for your situation.

Benefits of ADR

Both mediation and arbitration share some key advantages over going to court:

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AdobeStock_1049776145-300x200Texas entrepreneurs often embody a ‘do-it-yourself’ (DIY) ethos. In a typical startup, a compact team of committed individuals assumes various roles across the organization. While this approach can be instrumental in driving a company towards success, applying a DIY mindset indiscriminately can be detrimental and lead to significant costs for the business. Entrepreneurs must recognize when professional expertise is needed, particularly in areas with legal implications.

In recent years, we have seen several online services promote DIY legal services as an inexpensive way to help get a business up and running. But when it comes to understanding and complying with the multitude of federal, state, and local regulations that may affect a new business, legal advice is one area where you do not want to cut corners. Instead, you should strongly consider working with an experienced Texas start-up and financing attorney.

Beware of Legal Templates

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AdobeStock_1285714358-300x171In this second of our series of blog posts on common misconceptions around hiring and working for startups, we address a common misconception around classification of independent contractors. Most startup owners do not want to deal with the costs of hiring employees. So, many engage new hires as independent contractors. The common misconception is that getting these new hires to execute a well drafted independent contractor agreement is conclusive of their status as independent contractors. While such an agreement is one indicator of the parties’ intent to establish an independent contractor relationship, it is by no means conclusive and offers little by way of protection against employment related claims (especially in California) if factually the relationship is more akin to that of employer and employee.

Various factors go into the analysis of classifying a new hire as an employee or independent contractor. The analysis is not identical across the board and often the test to be applied turns on who is investigating the alleged misclassification. For instance, the test the IRS applies is not identical to one applied by the Department of Labor.

Under federal Fair Labor Standards Act (“FLSA”), the definition of employee is vague— employee is defined as “an individual employed by employer”. In analyzing an individual’s status under the FLSA, courts have looked at the totality of the circumstances including contractual language. The test, commonly known as the “economic realities test”, generally looks at these factors:

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AdobeStock_190612024-300x200Once you have started your own business, one of the first decisions you must make is choosing the form in which you want to conduct your business – whether as a sole proprietorship (or partnership, in case of more than one founder) or by organizing your business in an entity form. Your choice will lay the foundations for your business and guide tax efficiencies, liability exposure, administrative ease, attractiveness to investors, and therefore, your ability to scale. Also, choosing a form that best fits your needs helps avert disputes and prevent misunderstanding among the stakeholders by defining their ownership, roles, and duties in the business.

Whether your business should be organized as a corporation, partnership, limited liability company (“LLC”) or a sole proprietorship, depends on various factors including your goals for the business, whether you intend to raise outside capital, whether your business will be a lifestyle business, your desired tax treatment for the business, whether you intend to offer equity to employees and service providers, and so forth. However, in this blog we limit our discussion to adding our two cents to the ever-going debate of whether a new business should organize as a C-corporation (“C-Corp”) or an LLC. Our conclusion, to no ones’ surprise we hope, is there is no one-size-fits-all answer.

Arguably, one of the biggest drawbacks of a C-Corp is the potential for double taxation. A C-Corp is a separate taxpayer independent of its stockholders. The income earned by the C-Corp is first taxed at the entity level and then again in the hands of its stockholders when the net income is distributed to them as dividends[1]. For the same reason, distributing cash to the owners on an ongoing basis is difficult to accomplish with a C-Corp (though by no means impossible). Also, to avail the protection from personal liability that C-Corp affords its owners (and to avoid the piercing of the so called “corporate veil”), it is important that a corporation complies with all corporate formalities stringently. LLCs (which also shields its owners from personal liability) offer much more flexibility in matters of corporate governance. Also, statutorily mandated fiduciary duties of the board of directors of a corporation cannot be eliminated by the corporation’s owners via a private agreement, whereas the members of an LLC have much flexibility to reduce (or altogether eliminate in some states) a manger’s (or managing member’s) fiduciary duties to the LLC and its non-managing members through the LLC’s operating agreement.

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