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

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Legal Concerns of the Entrepreneur

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