business legal services for entrepreneurs legal services of eastern missouri community economic...
TRANSCRIPT
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Business LegalServices forEntrepreneurs
Legal Services of Eastern MissouriCommunity Economic Development Program
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Program Overview
Free business legal assistance to Existing businesses AND Start-ups
Range of legal issues Entity formation Commercial leases Employment Contracts Intellectual property
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Program Overview Benefits to Businesses
Avoid time-consuming, potentially devastating problems
Help business grow
Services offered One-on-one legal representation Business legal workshops Legal counseling
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Choice of Legal Entity
Operate as sole proprietor/partnership? OR
Form separate legal entity, e.g., corporation or LLC?
Factors to consider
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Choice of Entity – Considerations
Liability Taxation Formal requirements and fees Management and control of business Ability to transfer ownership Continuation of business
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Main types of legal entities
Sole Proprietorship Partnership Corporation S Corporation Limited Liability Company
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Sole Proprietorship
Business owned by one person Duration limited to life of owner Tax treatment
Report business income and expenses on individual income tax return
Unlimited liability
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Sole Proprietorship – Pros and Cons
Benefits Pass through taxation Easy to form and maintain Maximum flexibility for owner
Drawbacks Unlimited liability Difficult to get investments
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General Partnership
Business conducted by 2 or more people
Not a distinct legal entity Each partner files income and
expenses on personal income tax return
Unlimited liability Limited duration
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General Partnership – Pro’s and Con’s
Benefits Pass through taxation Easy to create and maintain
Drawbacks Easy to form Unlimited liability
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General Partnership – Practical tips
Business insurance to protect against personal liability
Written partnership agreement is essential
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Corporation Independent entity, separate from
owner/s Owned by stockholders Managed by a board of directors and
officers Duration is perpetual No personal liability Pay corporate taxes on business
income
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Corporation – Pro’s and Con’s
Benefits Protection from personal liability Easy to transfer ownership interests Easier to raise or borrow money
Drawbacks 2 levels of tax Formalities to create and maintain Avoid “piercing the corporate veil”
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Contract -- Signature
Sign with corporation name, not your name
ABC Nonprofit Corp.
By: _________________Name: [Tom Jones]Title: [Chief Executive Officer]
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S Corporation
Similar to C Corporation except: Pass through taxation More limitations with tax allocations Additional filing to establish Limitations on who can be stockholders
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Limited Liability Corporation
No personal liability Pass through taxation Owned by members Managed by members or a manager
chosen by members
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Limited Liability Company – Pro’s and Con’s
Benefits Pass through taxation Liability protection Flexible management structure Few ongoing corporate formalities Ownership allocation flexible
Drawbacks Difficulty transferring full ownership interests Tax filings can be complicated
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Limited Liability Company – Practical Tips
Avoid piercing the corporate veil
Must have written operating agreement Required by law with 2+ members Strongly advisable with one member
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Contracts
May be oral or written Advisable to put agreements in
writing Clearly describe terms of agreement Avoid “piercing the corporate veil”
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Contracts (con’t)
Why Make a Contract? Written Agreement: Less room for
misunderstanding Helps identify and resolve differences Legally enforceable: Protect yourself
from unfair business practices Provides mechanism for settling
disputes
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Employment
Anti discrimination laws Employee vs. independent contractor Employer obligations Policies and procedures terminations
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Employee v. Indep. Contractor
Pivotal Question: Who has the right to control when, where and how work is completed? Employer has right to control how the
work is performed Independent contractors choose method
of completing work
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Employee v. Indep. Contractor (con’t)
Major Factors to Determine: Who supplies equipment? Who determines when person works? Method of payment Duration of employment Right to discharge
See Missouri and IRS 20 factor test at: http://labor.mo.gov/DES/Employers/
reportable.asp#notreport
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Employment Policies and Procedures
Employee handbook
Discipline
Regular performance evaluations
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Employment - Terminations
“At will” relationship: can fire anyone for any reason as long as it is not an illegal reason
BUT…
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Employment - Terminations
Before termination, consider: Prior notice for unacceptable behavior Reasonableness of policy and fair
application Adequate investigation Proof of policy violation Progressive discipline
3rd person present in termination meeting
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Real Estate
Commercial leases Total economic costs Other essential terms that could impact
the business Do not rely on landlord’s attorney
Zoning
Other permits and licenses
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Intellectual Property
Trademarks Trade secrets Copyright
Websites
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Trademark
Word, symbol, and/or design used to distinguish a product service or business from others
Must be non-generic
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Trademark (cont)Avoiding Infringement on Other’s Marks
Do not duplicate existing trademarks Search US Patent Office web site (
www.uspto.gov) and the internet to determine if there are existing trademarks in that name
Letters from other businesses claiming trademark infringement must be taken seriously
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Trade Secrets
Information that has independent economic value because it is not generally known to other people
Examples: recipes, client lists, business information
Non-disclosure agreement
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Copyright
Original artistic expressions (e.g., curriculum, books, computer programs, databases)
Gives business/individual exclusive right to control the use, distribution, adaptation, display and performance of the work
Copyright created automatically
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Copyright (con’t)Practical Tips
Avoid infringing on others’ copyrights: Generate your own pictures, images and
marketing materials Do not copy software
If contractor prepares materials, have him/her assign ownership of materials to business
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Copyright (cont)
For more information on copyright see:
http://www.publiccounsel.org/tools/publications/files/fairuse.pdf
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Patents
Right to exclude others from making, using or selling an invention
Two principal types Design patent: what the product looks
like Use patent: how the product works
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Patents cont.
Limited duration
Involves filing and maintenance fees
If you think you have a patentable design or invention only share it with legal counsel
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Websites
Have a written contract with web designer/host
Use own pictures and other material
Can put links to other websites on your site
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Work for Hire
Who owns intellectual property created for the business? Business if created by employee Individual if created by independent
contractor Can change these default rules by
written agreement
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Contact information
Laurie Hauber, Staff AttorneyLegal Services of Eastern Missouri, Inc.Community Economic Development Program4232 Forest Park Ave.St. Louis, MO [email protected]