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Legal Issues Important for Doing Business in the U.S. | Martijn Steger
 

Legal Issues Important for Doing Business in the U.S. | Martijn Steger

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A comprehensive overview of what investors need to know about doing business in the United States, including entry options, IP protection, employment law, liability and import-export issues.

A comprehensive overview of what investors need to know about doing business in the United States, including entry options, IP protection, employment law, liability and import-export issues.

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    Legal Issues Important for Doing Business in the U.S. | Martijn Steger Legal Issues Important for Doing Business in the U.S. | Martijn Steger Presentation Transcript

    • Legal Issues Important For Doing Business In Ohio Presented by S. Martijn Steger
    • I. ENTRY OPTIONS FOR INVESTORS
      • Various Company Structures
      • (1) Corporation
      • A corporation is an entity separate and apart from the individuals who compose it; it is a legal fiction for the purpose of doing business.
      • The General Corporation Law of Ohio requires that a corporation's name must end in: Company, Co, Corporation, Corp, Incorporated, or Inc.
    • I. ENTRY OPTIONS FOR INVESTORS
      • Ohio is one of the best environments for corporations in terms of the authority given to the directors compared to the liability they can face in other states.
      • Shareholders can easily transfer their ownership in the corporation by selling their shares to whomever, whenever, and usually for any price.
    • I. ENTRY OPTIONS FOR INVESTORS
      • Every corporation must have Statutory Agent in Ohio (for service of process).
      • C-Corp
        • Has characteristics of a basic corporation.
      • S-Corp
        • Enjoys limited personal liability, perpetual existence, works as a pass-through taxation entity. The S-Corp does not have a separate tax status from its shareholders. Owners are not taxed both on their income and their corporate earnings.
    • I. ENTRY OPTIONS FOR INVESTORS
      • (2) Limited Liability Company (LLC)
      • Limited liability of members (i.e. members are not personally liable for the debts of the company).
      • LLCs have broad control over their management decisions. For example, can decide on either free or restricted transferability of ownership of the company.
      • Single member LLCs permitted.
    • I. ENTRY OPTIONS FOR INVESTORS
      • (3) Limited Partnership (LPs)
      • Company name must contain ‘limited partnership’ and cannot be similar to other limited partnership or corporation names in Ohio.
      • Must be one general partner, who has full personal liability for debts and managerial.
      • General partner is subject to all of the liabilities of a partner in a regular partnership, including personal liability for partnership obligations.
    • I. ENTRY OPTIONS FOR INVESTORS
      • (3) Limited Partnership (LPs), cont.
      • A limited partner is not liable for partnership obligations beyond its contributions.
      • An LP must have a records office within the state of incorporation. Must keep their certificate, agreements, and their tax returns for the previous 3 years on record at the office. Must have a Statutory Agent appointed.
      • (4) Limited Liability Partnerships (LLP)
      • Generally partners are not held liable for the torts or wrongful acts of their co-partners.
      • Partners are personally liable for their own wrongful acts and for those committed by someone whom they directly supervise.
      I. ENTRY OPTIONS FOR INVESTORS
    • I. ENTRY OPTIONS FOR INVESTORS
      • B. Forming an Entity
      • Creating an LLC or corporation can be done in one or two days (Member Agreement could take longer).
      • Is the name available? Can find out on the Internet in about an hour.
      • ONE OPTION IS INSURANCE
      • Various insurance choices include:
      • Workers ’ Compensation Insurance
      • All employers, with one or more employees, are required to have Workers ’ Compensation insurance in the state of Ohio. It covers the medical expenses and lost income of employees who are injured while in the scope of their employment.
      • HOW DO YOU PROTECT YOUR BUSINESS?
      • Professional Indemnity Insurance
      • If you are in the business of selling (knowledge or skills), for example, architects and accountants, then consider obtaining professional indemnity insurance.
      • This protects individuals against compensation sought after by a client if mistakes, defects or negligence are found to have been committed in providing professional services.
      • HOW DO YOU PROTECT YOUR BUSINESS?
      • Directors ’ and Officers’ Insurance
      • Directors and officers of businesses have various duties, responsibilities and powers in connection with their position.
      • As a result, they can be held responsible for a range of issues including: health and safety, data protection, maintaining unsatisfactory accounts and negligence.
      • If the director or officer inadvertently acts outside their scope of work and this gives rise to a valid claim, then compensation and legal fees would be covered by Directors' and Officers' liability insurance.
      • HOW DO YOU PROTECT YOUR BUSINESS?
      • Product Liability Insurance
      • It is critical for nearly all manufacturers and sellers of products in the USA.
      • Fortunately, it is easily available for most products and comparatively inexpensive
      • HOW DO YOU PROTECT YOUR BUSINESS?
      • Written Contracts
      • Protecting your business often means shifting risk to someone else – a supplier or a customer.
      • Contracts are risk allocation tools
      • Written agreements are much easier to enforce
      • HOW DO YOU PROTECT YOUR BUSINESS?
      • Training
      • Train, train, train
      • Educate your employees, suppliers and customers
      • Professional Advice
      • Get it early
      • Establish an Advisory Board
      • HOW DO YOU PROTECT YOUR BUSINESS?
      • KNOW YOUR LIABILITY EXPOSURE AS A PRODUCT MANUFACTURER
      • PRODUCT LIABILITY – UNDER OHIO LAW
      • Both manufacturer and supplier of products
      • Manufacturer can be liable for defective product if defect arose in the actual manufacturing or construction. Product is defective if at the time the product left the control of manufacturer it deviated in a material way from (1) design specifications, (2) formula, (3) performance standards of manufacturer, (4) other identical units manufactured to same specs, (5) other similar formulas, (6) other performance standards.
      • or defect arose because of inadequate warning or nonconformity with manufacturer ’s representation.
      • Supplier will only be liable for a defective product if it was negligent itself, or if it made a certain representation about product to which product failed to conform. Supplier may also be liable if manufacturer is held liable.
      • Statute of Repose : No product liability claim can be brought after 10 years after product ’s introduction to market.
      • If consumer knowingly or impliedly assumed risk of the product, then they cannot bring a product liability claim against manufacturer.
      • KNOW YOUR LIABILITY EXPOSURE AS A PRODUCT MANUFACTURER
      • PROTECTING INTELLECTUAL PROPERTY ASSETS
      • How is IP Protected ?
      • Intellectual Property is Protected Through:
      • Trademarks (Federal and State Law)
      • Copyrights (Federal Law)
      • Trade Secrets (State Law)
      • Patents (Federal law)
      • I. What is a Trademark ?
      • Trademark = Symbol of Goodwill
      • Object of Trademark Law – Protects consumers from market confusion
      • PROTECTING INTELLECTUAL PROPERTY ASSETS
      • II. Proper Use of Trademarks
      • Let people know that it is a trademark … Set it apart from other text (bold, italics, capital letters, etc.)
      • Always use ® or TM.
      • Consistency is key … Use your marks the same way they are registered.
      • ESTABLISH COMPANY GUIDELINES FOR PROPER USE.
      • Control use of marks by Licensees/Franchisees/etc.
      • PROTECTING INTELLECTUAL PROPERTY ASSETS
      • III. How are Copyrights Created ?
      • Copyright Law Protects the Particular Expression of an idea …
          • … Not the Idea itself
      • Copyright is Created the Moment the Work is “Fixed” in a Tangible Medium of Expression.
          • (i.e. when the painting is on the canvas, or the words are put on paper).
      • PROTECTING INTELLECTUAL PROPERTY ASSETS
      • Duration of Copyright
      • For New Works (post-1978):
        • Life of the Author + 70 years
      • For Older Works (pre-1978):
        • More Complicated to Determine
      • Post-1978 Works for Hire:
        • 120 Years from Date of Creation or 95 Years from Date of Publication (whichever is shorter).
      • PROTECTING INTELLECTUAL PROPERTY ASSETS
      • Avoiding Infringement
      • Don ’t copy the works of others!
      • Damages can be enormous
      • Current Focus on Software Piracy
      • Do not exceed your license!!
      • Works For Hire
      • Use Explicit Agreements to avoid ownership disputes with employees and third parties.
      • PROTECTING INTELLECTUAL PROPERTY ASSETS
      • IV. What is a Trade Secret ?
      • Defined by Ohio State Law.
      • Basically anything that owner knows, and that others do not:
        • Coca Cola ’s Secret Recipe
        • Customer Lists
        • Manufacturing “Know-How”
      • PROTECTING INTELLECTUAL PROPERTY ASSETS
      • Secrecy is the Key !
      • Trade Secret must be kept secret …
        • If it is disclosed or becomes known generally, trade secret protection is lost.
      • Protect through :
        • Limiting Access
        • Marking as “Confidential”
        • Disclose on “Need-to-Know” Basis
        • When disclosed to employees or third parties, use effective Confidentiality/Non-Disclosure Agreements.
      • PROTECTING INTELLECTUAL PROPERTY ASSETS
      • PATENTS
      • Types of Patents
      • Utility Patent
        • Inventions.
        • Includes “Business Method Patents.”
      • Design Patent
        • Ornamental Design – only protects appearance of article, not its structure or function.
      • PROTECTING INTELLECTUAL PROPERTY ASSETS
      • Benefits of a Patent
      • Gives Owner a Monopoly
      • Limitations:
          • Duration – 20 years.
          • Territory – only in the U.S.
            • Must obtain foreign patents to protect in foreign countries.
      • PROTECTING INTELLECTUAL PROPERTY ASSETS
      • EMPLOYMENT & LABOR ISSUES
      • MINIMUM WAGE REQUIREMENTS
      • Ohio ’s Minimum wage:
      • Non-tipped employees: $7.00
      • Tipped employees: $3.50
      • Overtime: 1.5 x the hourly rate for any hours worked over 40 in a week.
      • Adjusted each January
      • Federal Minimum Wage ($6.55 as of July 24, 2008) – applies to companies with Gross Revenues of less than $255,000
      • Mandatory Labor Requirements & Compliance
      • (1) Americans with Disabilities Act
      • Ohio employers must comply with the federal ADA guidelines and reasonably accommodate any employees with disabilities.
      • (2) Mass Layoff Procedures
      • Ohio employers must follow the federal W.A.R.N. Act when conducting mass layoffs. Employers must report to the state 3 days in advance before terminating 50 or more employees within a 7-day period.
      • EMPLOYMENT & LABOR ISSUES
      • Workers' Compensation Coverage
      • Employers with at least one employee must carry workers' compensation coverage for their employees.
      • State Unemployment Insurance
      • Each employer must report wages to and pay taxes for the state unemployment fund on a quarterly basis.
      • EMPLOYMENT & LABOR ISSUES
      • Traditional Employment Relationship
      • Most employees are considered employed "at will," meaning that either the employer or the employee may terminate the relationship at any time, for any reason or no reason.
      • Employers have the option, if they so choose, to create contracts with their employees that specify a definite period of employment.
      • EMPLOYMENT & LABOR ISSUES
      • Restrictive Covenants
      • Ohio law strongly favors restrictive covenants such as, non-compete , non-solicitation , non-disclosure , so long as the restraint:
        • is no greater than is required for the protection of the employer
        • does not impose undue hardship on the employee; and
        • is not injurious to the public.
      • EMPLOYMENT & LABOR ISSUES
      • Even if a court determines that a restrictive covenant is unreasonable by the above standard (e.g., geographic area is too large, time period is too long or forbidden scope of employment is too great), court may invoke the " blue pencil rule “:
        • enforce modified version of the covenant, rather than declare covenant unenforceable.
      • EMPLOYMENT & LABOR ISSUES
      • Equal Employment Opportunity Compliances
      • Unlawful for an employer to discriminate (whether by failing to hire, firing, limiting, segregating, or classifying) against employees on the basis of race, color, religion, sex or national origin.
      • Ohio statute prohibits discrimination on the basis of a protected characteristic.
      • EMPLOYMENT & LABOR ISSUES
      • OPTION OF FRANCHISING & DISTRIBUTION: KEY CONSIDERATIONS
      • FRANCHISE REGULATIONS
      • Ohio does not have a specific franchise law, so the FTC's Rule governs disclosure obligations
      • However, Ohio has a Business Opportunity Law that requires persons, who offer others the opportunity to start a business, to provide a written disclosure statement and prohibits misrepresenting information.
      • Franchise Structures
      • (1) Master Franchising (MF)
      • MF is used by franchisor to expand its business model in new markets, either regionally or internationally.
      • The benefits of being a master franchisee are :
        • (i) earning a portion, if not all, of the franchise fees generated from franchise sales; and
        • (ii) earning a percentage of the royalties within the territory.
      • OPTION OF FRANCHISING & DISTRIBUTION: KEY CONSIDERATIONS
      • (2) Direct Franchising
      • This method is frequently used in domestic markets, where franchisor contracts individually with single-unit franchisees in the target market.
      • It is a good way to ensure that franchisor retains maximum control over the system.
      • (3) Area Development Franchising
      • This method is similar to direct franchising, except that franchisee is permitted to develop multiple units across a designated territory.
      • Franchisors are advised to begin by granting a small territory, with options for the area developer to acquire more territory as they meet performance goals.
      • OPTION OF FRANCHISING & DISTRIBUTION: KEY CONSIDERATIONS
      • (4) Joint Venture
      • In a joint venture, franchisor shares ownership of an operating entity with a local partner.
      • It can be used to take advantage of the partner's local knowledge, as well as to gain business or tax advantages in markets where locals are accorded preferential treatment.
      • (5) Area Representative
      • The franchisor enters into an area representative arrangement, under which franchisor grants rights to a local entity, allowing it to market, and perhaps even train and service franchisees on behalf of the franchisor. Like direct franchising, franchisor often ends up dealing with unit franchisees directly.
      • OPTION OF FRANCHISING & DISTRIBUTION: KEY CONSIDERATIONS
      • Fees & Payments
      • Initial franchise fees and other expenses
      • The initial franchise fee may be non-refundable, and cost several thousand to several hundred thousand dollars.
      • Costs may also be incurred to rent, build, and equip an outlet and to purchase initial inventory.
      • Other costs may include operating licenses and insurance.
      • OPTION OF FRANCHISING & DISTRIBUTION: KEY CONSIDERATIONS
      • Royalty payments
      • Regular fees paid by franchisee for the right to use franchisor's name.
      • Usually based on percentage of monthly gross income.
      • Advertising fees
      • Franchisee may have to pay into an advertising fund.
      • Fees may go for national advertising or to attract new franchise owners, but not to target a particular store.
      • OPTION OF FRANCHISING & DISTRIBUTION: KEY CONSIDERATIONS
      • IMPORT-EXPORT ISSUES
      • Bureau of Customs and Border Protection (CBP)
      • US Customs service is part of Homeland Security
      • World Trade Organization (WTO)
        • WTO Dispute Settlement Board decisions do not apply in US until specifically accepted by US
      • International Trade Considerations
      • “ Escape Clause” – Section 201(b) actions
      • Unfair Trade Laws
        • Anti-dumping
        • Countervailing Duties
      • IMPORT-EXPORT ISSUES
      • Other International Trade Considerations
      • Exclusion of Unfairly Traded Imports (Section 337)
      • Unfair Trade Practices in Foreign Markets (Section 301)
      • “ Special 301” Actions: Annual List by US Trade Representative
      • IMPORT-EXPORT ISSUES
      • Other US Agencies With Control Over Imports
      • Food & Drug Administration
      • Consumer Product Safety Commission
      • Department of Agriculture
      • State Laws (e.g., Liquor)
      • IMPORT-EXPORT ISSUES
      • Duties (discussed later)
      • Import Quotas
      • Marking Requirements
      • Prohibitions and Quarantines
      • IMPORT-EXPORT ISSUES
      • IMPORT
      • Assessment of duty
      • All goods imported into the U.S. are subject to duty or duty-free entry in accordance with their classification under the Harmonized Tariff Schedule of the United States.
      • If the importer disagrees with the dutiable status of the goods, it may file a protest and application for further review. If the Customs Service denies a protest, dutiable status may then be determined through litigation against the Government.
      • IMPORT-EXPORT ISSUES
      • Foreign Trade Zones
      • Avoidance of Duties and Import Restrictions
      • Deferral of Duties and Import Restrictions
      • Manufacturing and Assembly
      • Bonded Warehouses
      • IMPORT-EXPORT ISSUES
      • EXPORT
      • Export regulations
      • The Export Administration Regulations (EAR) regulate the export of items for national security, non-proliferation, foreign policy, and short supply reasons.
      • The Department of Commerce's Bureau of Export Administration (BXA) has taken some steps to remove unnecessary obstacles to exporting, including completion of U.S. regulatory reform efforts and export control liberalizations.
      • IMPORT-EXPORT ISSUES
      • ENVIRONMENTAL ISSUES
      • Federal Laws
      • Federal government sets the minimum environmental standards to which every state must abide.
      • State Law – Ohio
      • Agency charged with responsibility for environmental matters is the Ohio Environmental Protection Agency (Ohio EPA).
      • Ohio EPA establishes and enforces standards to protect the environment and is divided up into the following divisions:
      • 1. Division of Air Pollution Control
          • Ensures compliance with the Federal Clean Air Act and works to reduce the emission of air toxins.
      • 2. Division of Drinking and Ground Waters
          • Ensures compliance with the Federal Safe Drinking Water Act and evaluates potential threats to source waters of Ohio's public water systems.
      • 3. Division of Surface Water
          • Ensures compliance with the Federal Clean Water Act and works to increase the number of water bodies that can safely be used for swimming and fishing.
      • ENVIRONMENTAL ISSUES
      • 4. Division of Hazardous Waste Management
          • Makes sure that companies properly dispose of their hazardous wastes.
      • 5. Division of Solid and Infectious Waste Management
          • Ensures proper handling of solid waste and encourages people to reduce, reuse or recycle solid waste generated in Ohio.
      • 6. Division of Emergency and Remedial Response
          • Oversees the clean-up of contaminated sites and works to prevent the spread of contamination.
      • ENVIRONMENTAL ISSUES
      • DISPUTE RESOLUTION
      • DISCOVERY
      • Why is it so important? Because …
      • Parties to litigation must disclose all “relevant" information within the party’s custody or control.
      • Should you be afraid? No, but you should be prepared.
        • Document Retention Policies
      • Courts are beginning to limit discovery
      • Opposing party is entitled to non-privileged information as long as the information will reasonably lead to discovery of evidence to be used at trial.
      • Ways to obtain discovery include:
        • Depositions
        • Interrogatories
        • Production of documents and things/Inspections
        • Requests for admissions
      • DISPUTE RESOLUTION
      • MEDIATION
      • What is Mediation?
      • Voluntary
      • Confidential
      • Non-Binding
      • Neutral
      • DISPUTE RESOLUTION
      • Mediation ’s Potential Benefits
      • Holistic Approach
      • Preserve Relationships
      • Confidentiality
      • “ Saving Face”
      • Cost Savings
      • Complements Other ADR
      • DISPUTE RESOLUTION
      • Paths to Mediation
      • Contract Provision
      • Other Agreement
      • Court-Ordered
      • Industry Programs
      • DISPUTE RESOLUTION
      • International Mediation Complexities
      • Cultural Differences
      • Language Barriers
      • Differences in Business Practices
      • Physical Distances
      • Political Factors
      • DISPUTE RESOLUTION
      • International Mediation Checklist
      • Law Applicable to the Mediation
      • Written/Signed Agreement
      • Location – Neutral Country?
      • Duration Needed?
      • Time Differences
      • Settlement Authority
      • Use of Interpreters
      • DISPUTE RESOLUTION
      • Arbitration
      • 1958 New York Convention
      • Arbitrators decide the dispute rather than judges.
      • Result can be kept private.
      • DISPUTE RESOLUTION
      • CHOICE OF LAW/CHOICE OF FORUM
      • A. Choice-of-Law Clauses
      • Should Ohio law govern?
      • Can Ohio law govern?
      • Apply more than one body of law?
      • Will a judgment or award rendered under Ohio law be enforced?
      • Drafting imperatives:
        • Exception for choice-of-law rules;
        • Exception for CISG
      • B. Choice-of-Forum Clauses
      • Should Ohio be the forum?
      • Can Ohio be the forum?
      • Neutral forum?
      • Will a judgment or award rendered in Ohio be enforced?
      • Drafting imperative:
        • Be clear that all parties submit to the jurisdiction and venue of the chosen forum.
      • CHOICE OF LAW/CHOICE OF FORUM
    • Legal Advice
      • This presentation is designed to provide an overview of a number of legal principles and considerations.
      • As each legal issue is fact-dependent, this presentation should not be used or viewed as legal advice, and your legal counsel should be consulted on the application of your particular factual situation to the current law.
      • Copyright: 2008 Kegler, Brown, Hill & Ritter Co., L.P.A.
    • Thank You
      • S. Martijn Steger
      • Chair, International Law and Business
      • Kegler, Brown, Hill & Ritter Co., L.P.A.
      • Suite 1800, 65 East State Street
      • Columbus, Ohio 43215
      • Direct Dial: +1 614 462 5495
      • Fax: +1 614 464 2634
      • Email: [email_address]
      • www.keglerbrown.com