Update (November 17, 2010): I have decided to start identifying by name online providers who, in my opinion, have delivered inadequate service to my clients. (The clients used those providers before retaining me.) The inadequate provider referenced, below, in this post is Rocket Lawyer, which has been added to the Hall of Shame page.
Update (April 27, 2011): I had a cordial conversation this afternoon with Rocket Lawyer’s VP of Sales & Business Development. He acknowledged that, last year, Rocket Lawyer was using a filing service (filing operations are outsourced) that did not meet the company’s expectations. He reported that the current filing service is performing at a much higher level and that Rocket Lawyer is paying closer attention to ongoing support of its customers.
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Almost a year ago, I suggested (in Can I form an LLC without a lawyer?) that entrepreneurs seeking to save money when forming a limited liability company would be better off buying a book from Nolo than using an online LLC formation service. I now believe that more than ever.
Read more…
Today I answered a LinkedIn question about forming an LLC where some members have no ownership of the LLC but receive a share of cash resulting from the business’s profits. The question and answer are reproduced, in somewhat edited form, below.
Q: Can you have a Manager Managed LLC where Members have zero ownership interest but receive a share of economic interest? So, the Operating agreement would look like this: 2 Manager Members w/ 50/50% ownership share and 25/25% economic share; 2 Additional Members w/ 0% ownership share and 25/25% economic share.
A: The short answer is “yes”, though, as explained below, I will need to change your terminology slightly.
I recently created, for a client, an LLC that has not only the variables that you identified, but more.
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Recently I have received several questions about assigning LLC (limited liability company) memberships. Here is a brief summary of California law on this topic.
The applicable statutes are Corporations Code Sections 17300-17304. If assignment of membership interests is not covered in the LLC’s Articles of Organization or Operating Agreement, the the following statutory provisions apply:
- An economic interest may be assigned in whole or in part (Section 17301(a)(1)).
- A membership interest may be assigned in whole or in part, but the assignee may become a member only upon the vote of a majority interest of the other members (Section 17303(a)).
Read all posts that discuss LLCs.
Photo credit: Aaron Murphy via stock.xchng
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Let’s assume that your website has a particularly effective visual and interactive elements that you would not want another website to copy. How can you protect this “look and feel”?
Look and feel falls in the category of trade dress, i.e., visual appearance that signifies the source of a product or service. You may be able to obtain a federal trademark registration for the non-functional elements of the website’s look and feel and bring suit against infringers based on that registration. (Please see Trademark Protection in One Easy Lesson.)
Look and feel is not eligible for copyright protection because look and feel is not a work of authorship. (Please see Copyright Protection in One Easy Lesson.)
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Recently I have received questions from entrepreneurs who are starting a second line of business. They want to know whether the new business should be under the same legal entity – perhaps with a separate fictitious business name (DBA) – or under a separate corporation/LLC.
This is not really a legal issue: Either approach can work just fine. The differences between the two approaches are business-oriented.
The advantage of using the existing entity is minimal additional paperwork or cost.
The advantage of creating a new entity is that it isolates the businesses from one another. If one of the businesses fails or has serious legal or financial problems, the other business will not be affected.
Only the entrepreneur can decide whether the ability to isolate the businesses is worth the cost of a second entity. I suspect that, for many entrepreneurs, the answer would be “yes”.
Related post: Should I form an LLC or a corporation?
Photo credit: Emil Bacik via stock.xchng
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Someone has obtained a domain name that is the same as, or confusingly similar to, a trademark or service mark that you own. How can you take the domain name from this “cybersquatter”?
When he registered the domain name, the cybersquatter (the Registrant) agreed to ICANN’s Uniform Domain Name Dispute Resolution Policy (UDRP).
Under the UDRP, you (the Complainant) will be required to prove the following:
(i) the domain name is identical or confusingly similar to a trademark or service mark in which you have rights; and
(ii) the Registrant has no rights or legitimate interests in respect of the domain name; and
(iii) the domain name has been registered and is being used in bad faith.
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You’ve started a new business. Don’t forget to apply for (and next year, renew) your business license!
Most cities (in some instances, counties) require that businesses located within their borders obtain what are commonly called “business licenses”. In reality, these are applications to pay business taxes.
Here are links to the applications for several of California’s largest cities:
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
The evening of Wednesday, July 21, the Silicon Valley Association of Startup Entrepreneurs (SVASE) will present “Cleantech and Software: Where the Action Is“.
Event description: Historically, cleantech investment has been dominated by capital-intensive projects like alternative energy and biofuels, but with the credit crunch and economic downturn, capital is harder to come by. Cleantech software, on the other hand, has dramatically increased investment appeal due to low capital requirements and a cost saving value proposition for projects such as energy efficiency, carbon management, water conservation and e-waste recycling. Our distinguished panel will talk about what investors are looking for in cleantech software businesses and how you can successfully raise funds in today’s environment.
Panel members include VCs, cleantech experts and successful entrepreneurs.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Many software companies rely on a combination of copyright and trade secret protection for their products. There is a potential problem, however: The requirement to submit source code with a copyright registration is somewhat at odds with the confidentiality requirements of a trade secret.
Fortunately, the U.S Copyright Office offers some flexibility in its deposit requirements for software containing trade secrets. The applicant may deposit any of the following:
- First 25 and last 25 pages of source code with portions containing trade secrets blocked out; or
- First 10 and last 10 pages of source code alone, with no blocked out portions; or
- First 25 and last 25 pages of object code plus any 10 or more consecutive pages of source code, with no blocked-out portions; or
- For programs 50 pages or less in length, entire source code with trade secret portions blocked out.
Finally, an applicant who is unwilling or unable to deposit source code may deposit object code, though the software will be registered under the rule of doubt – meaning that the Copyright Office has not determined the existence of copyrightable authorship, so the value of the registration may be compromised.
These issues are addressed in greater detail in Copyright Office Circular 61.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
I recently met two individuals who formed a business partnership. They were pretty informal about the process: They had no written partnership agreement. More surprisingly, they had not obtained an employer identification number (EIN) from the Internal Revenue Service.
Failure to obtain an EIN was a legal mistake. The IRS’s Do You Need an EIN? page states that when a partnership is formed, it must obtain an EIN.
Even worse, the failure was a serious business and personal mistake. When customers asked for the partnership’s EIN, one of the partners provided her social security number. As a result, at year-end the IRS will think all partnership income was earned by that partner! If her return is audited, she will have quite a bit of explaining to do.
Bottom line: If you form a partnership, get an EIN.
Related post: Beware the Unintended Partnership
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Dana Shultz is a business-savvy lawyer located in Northern California's San Francisco Bay Area (in the East Bay, near Oakland) who has in-depth knowledge of law, business, technology, and the needs of startup and early-stage companies.