Business Legal Services for Entrepreneurs Legal Services of Eastern Missouri Community Economic Development Program.

Business LegalServices forEntrepreneurs

Legal Services of Eastern MissouriCommunity Economic Development Program

Program Overview

Free business legal assistance to Existing businesses AND Start-ups

Range of legal issues Entity formation Commercial leases Employment Contracts Intellectual property

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

Choice of Legal Entity

Operate as sole proprietor/partnership? OR

Form separate legal entity, e.g., corporation or LLC?

Factors to consider

Choice of Entity – Considerations

Liability Taxation Formal requirements and fees Management and control of business Ability to transfer ownership Continuation of business

Main types of legal entities

Sole Proprietorship Partnership Corporation S Corporation Limited Liability Company

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

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

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

General Partnership – Pro’s and Con’s

Benefits Pass through taxation Easy to create and maintain

Drawbacks Easy to form Unlimited liability

General Partnership – Practical tips

Business insurance to protect against personal liability

Written partnership agreement is essential

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

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”

Contract -- Signature

Sign with corporation name, not your name

ABC Nonprofit Corp.

By: _________________Name: [Tom Jones]Title: [Chief Executive Officer]

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

Limited Liability Corporation

No personal liability Pass through taxation Owned by members Managed by members or a manager

chosen by members

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

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

Contracts

May be oral or written Advisable to put agreements in

writing Clearly describe terms of agreement Avoid “piercing the corporate veil”

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

Employment

Anti discrimination laws Employee vs. independent contractor Employer obligations Policies and procedures terminations

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

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

Employment Policies and Procedures

Employee handbook

Discipline

Regular performance evaluations

Employment - Terminations

“At will” relationship: can fire anyone for any reason as long as it is not an illegal reason

BUT…

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

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

Intellectual Property

Trademarks Trade secrets Copyright

Websites

Trademark

Word, symbol, and/or design used to distinguish a product service or business from others

Must be non-generic

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

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

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

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

Copyright (cont)

For more information on copyright see:

http://www.publiccounsel.org/tools/publications/files/fairuse.pdf

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

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

Websites

Have a written contract with web designer/host

Use own pictures and other material

Can put links to other websites on your site

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

Contact information

Laurie Hauber, Staff AttorneyLegal Services of Eastern Missouri, Inc.Community Economic Development Program4232 Forest Park Ave.St. Louis, MO [email protected]