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Legal Concerns of the Entrepreneur

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Legal Concerns of the Entrepreneur

  1. 1. Legal Concerns for the Entrepreneur<br />By Salene Mazur Kraemer, Esquire, MBA, CTP-D<br />Pittsburgh, PA 15241<br />412.427.7075 phone, 412.221.3658 fax<br /><br /><br />1<br />MAZURKRAEMER LAW<br />
  2. 2. Overview<br />A. Getting Started<br />B. Corporate Formation & Formalities<br />C. Hiring Employees or Contractors<br />D. Regulatory Compliance<br />E. Raising Money<br />F. Intellectual Property<br />G. Corporate Counseling<br />H. Contract Drafting & Review<br />I. Product Liability, Warranties, Advertising<br />J. Business Torts<br />K. E-Commerce<br />L. Exit Strategies<br />2<br />MAZURKRAEMER LAW<br />
  3. 3. A. Getting Started<br />1. Leave Current Employment<br />2. Startup, Acquisition <br />(stock or assets), Franchise<br />3. Business Plan<br />4. Location Selection<br />5. Hiring Professionals<br />6. Choose Business Entity<br />7. Forming the Board<br />3<br />MAZURKRAEMER LAW<br />
  4. 4. Leave Current Employment<br />Covenant Not to Compete <br />Trade Secrets<br />Invention Assignment Agreement<br />Misappropriation of Company Resources<br />Non-Solicitation Agreement<br />MAZURKRAEMER LAW<br />4<br />
  5. 5. Location Selection<br />MAZURKRAEMER LAW<br />5<br /><ul><li>Office share
  6. 6. Commercial lease
  7. 7. Buy property
  8. 8. Virtual office
  9. 9. Location visibility</li></li></ul><li>Choose Business Entity<br />Sole Proprietorship ***<br />C Corporation <br />S Corporation ***<br />Partnership<br />Limited Partnership (who is the GP and who is the LP) ***<br />Limited Liability Limited Partnership<br />Limited Liability Company ***<br />MAZURKRAEMER LAW<br />6<br />
  10. 10. Considerations<br />Number of Owners<br />Type of Owners<br />Personal Liability Protection<br />Tax status<br />Governing Agreement<br />Flexibility re: management/governance<br />Flexibility re: profit/loss allocations, as well as cash distribution<br />Securities concerns- additional investors?<br />Liquidation of entity<br />MAZURKRAEMER LAW<br />7<br />
  11. 11. Hiring Professionals<br />Accountant<br />Graphic Design Artist<br />Website developer/hosting<br />IT consultant<br />PR firm/social media <br />consultant<br />Insurance<br />Banker<br />Lawyer (Corporate, IP, FDA, etc. )<br />Printer<br />Benefits Company<br />MAZURKRAEMER LAW<br />8<br />
  12. 12. B. Corporate Formation Documents<br />Articles or Certification of Incorporation or Formation or Partnership<br />Written Consent of Sole Incorporator<br />Unanimous Consent of Board of Directors<br />Corporate Minute Book<br />Stock Certificates<br />Docketing Statement<br />Application for EIN<br />Name Reservation in State Incorporated and Where Intend to Do Business<br />Fictitious Name Filing<br />Certificate of Authority to Do Business in Other States<br />Publication of Authority to Do Business in State<br />Voting Agreements, <br />Necessary Tax Forms<br />Shareholders Agreement, Partnership Agreement, Operating Agreement<br />Buy-Sell Agreement<br />9<br />MAZURKRAEMER LAW<br />
  13. 13. C. HR Issues-Hiring Employees & Contractors<br />Employment Agreements<br />Consulting Agreements<br />Covenant Not to Compete<br />Policy/Handbook<br />Discrimination Prevention<br />Pre-employment application/screening <br />Wrongful discharge v. employee at will<br />Equity compensation<br />10<br />MAZURKRAEMER LAW<br />
  14. 14. Employee v. Independent Contractor<br />TEST IC- 1) control the outcome of a piece of work and the means and manner of achieving the outcome; 2) Offer services to public at large, not just one business<br />IMP-employer does not have to pay social security or Medicare, unemployment insurance or workers’ comp for employee, no benefits, no retirement<br />Lower paid, lower skilled often considered employees<br />MAZURKRAEMER LAW<br />11<br />
  15. 15. Important Legislation <br />Civil Rights Act<br />OSHA<br />National Labor Relations Act<br />ADA<br />Age Discrimination<br />Family Medical Leave Act<br />Fair Labor Standards Act<br />EEOC<br />MAZURKRAEMER LAW<br />12<br />
  16. 16. Reduce Litigation Risk<br />Pre-employment recruiting materials<br />Careful interview and screening process<br />Consistent job evaluations during course of employment<br />Have written employment or independent contractor agreements<br />MAZURKRAEMER LAW<br />13<br />
  17. 17. D. Regulatory Compliance<br />Local, state (foreign or domestic), federal level <br />Zoning approval, permits and licenses<br />Insurance<br />Government<br />14<br />MAZURKRAEMER LAW<br />
  18. 18. E. Raising Money<br />Business plan<br />Private placement memo<br />Stock Purchase Agreement/Subscription Agreement<br />Securities Compliance (both Federal and States)<br />Loan agreements (term v. revolver v. secured)<br />UCC filings, Security Agreements<br />Guaranty agreements<br />15<br />MAZURKRAEMER LAW<br />SOURCES: <br />*Private investors (self, friends, family, angel investors)<br />*Venture capital financing<br />*Credit (term loan or revolver)<br />*Strategic alliances, joint ventures<br />*Loan funds<br />*Issue common stock, preferred stock, bonds<br />
  19. 19. F. Intellectual Property<br />Basic Forms<br />Patents<br />Trademarks<br />Copyright<br />Trade Secret<br />16<br />MAZURKRAEMER LAW<br />
  20. 20. IP Issues Continued<br />Trade Secret Proprietary Information Program<br />Confidentiality or non-disclosure agreements <br />Non-competition and non-solicitation agreements<br />Invention Assignment Agreement<br /> Trademark, Service Marks-brands, logos, packaging or designs that are used to distinguish its goods and services<br />Registered Internet domain name<br /> Copyright for text, graphic, software, audio or film materials, such as manuals or promotional or training materials<br /> Licensing Agreements<br />International? <br />MAZURKRAEMER LAW<br />17<br />
  21. 21. G. Corporate Counseling<br />Board Formation<br />Legally required<br />Selection, number, frequency of meeting, diversified, outside v. interested, compensation<br />Synergy, credibility<br />Fiduciary Duty of Care to corporation and shareholders (BIOTC)<br />Duty of Loyalty (no self-dealing, no usurp corp opportunity)<br />Duty of Care (“reasonable man” test)<br />Business Judgment Rule (disinterested, informed, shifts burden)<br />D&O Insurance<br />Indemnity Agreement (officers) <br />18<br />MAZURKRAEMER LAW<br />
  22. 22. H. Contract Drafting & Review<br />Commercial Property Leases<br />Equipment Leases<br />Agreements of Sale for Property<br />Loan Agreements<br />Sale of Goods (Supply Agreement, Distribution Agreement, Purchase Order)<br />Engagement letters<br />Customer Contracts<br />Consignments<br />Management Agreement<br />Requirements and Outputs Contracts<br />19<br />MAZURKRAEMER LAW<br />
  23. 23. Contract Law Basics<br />Basic elements (offer, acceptance, consideration)<br />UCC v. Common Law<br />Contract theories (breach of contract, unjust enrichment, promissory estoppel, restitution)<br />Oral, written, implied<br />Statute of Frauds (goods over $500, real property, contract longer than 1 years, pre-nup, assumption of debt)<br />Remedies<br />MAZURKRAEMER LAW<br />20<br />
  24. 24. Remedies<br />$ or Equitable (specific performance, injunction, recission)<br />Expectation<br />Reliance<br />Restitution<br />Consequential (foreseeable)<br />Liquidation<br />Punitive<br />MAZURKRAEMER LAW<br />21<br />
  25. 25. Material Contract Terms<br />Who are the parties?<br />Duties and Obligations<br />Payment Terms<br />Duration<br />Termination<br />Warranties and Representations<br />Indemnification<br />Boilerplate provisions<br />MAZURKRAEMER LAW<br />22<br />
  26. 26. Boilerplate Provisions <br />Notice provisions<br />Governing Law<br />Waiver of Jury Trial<br />Amendment<br />Assignment<br />Attorneys’ Fees<br />Litigation v. Arbitration or Mediation<br />MAZURKRAEMER LAW<br />23<br />
  27. 27. Creditors’ Rights in Bankruptcy<br />MAZURKRAEMER LAW<br />24<br />
  28. 28. I. Product Liability, Warranties, Advertising<br />Warranties (express (not puffing), implied warranty of merchantability, implied warranty of fitness for a particular purposes)<br />Limitation of Liability, AS IS clauses<br />Products liability for defective products sold in dangerous or defective condition (strict liability, chain of distribution, design defect, warnings)<br />False or Misleading Advertising<br />Successor Liability<br />Defenses (comparative fault, assumption of risk)<br />25<br />MAZURKRAEMER LAW<br />
  29. 29. J. Business Torts<br />Negligence (duty of care, breach, cause, damages)<br />Intentional Torts (false imprisonment, IIEM, defamation, appropriation, trespass, nuisance, fraud/misrep, conversion, interference with K’l relations, unfair competition)<br />Vicarious Liability/respondeat superior<br />Strict Liability (ultrahazardous and products)<br />Toxic Torts (exposure to harmful substances)<br />Defenses, Damages, J/S Liability, Contribution<br />26<br />MAZURKRAEMER LAW SM<br />
  30. 30. K. E-Commerce<br />Basic terms of use (favorable linking, information usage, disclaimers, liability limitation, dispute resolution and forum selection provisions)<br />Clickwrap agreements<br />Passive or "brochureware" website vs. selling goods or services online<br />Cookies Permission<br />Data security <br />Illustrations or photos<br />Restricted territories <br />27<br />MAZURKRAEMER LAW<br />
  31. 31. 412.427.7075 phone, 412.221.3658<br />28<br />MAZURKRAEMER LAW<br />