Beal Business Law

Do I have to register my copyrights all over the World?

2012-01-03T10:34:00.000-08:00

The Berne Copyright Convention and the GATT treaty allow authors in the United States to enforce their federally registered copyrights in most industrialized nations, and allow the nationals of those nations to enforce their registered copyrights in the United States. All Berne Convention nations must offer copyright protection that lasts for at least the life of the author plus 50 years. This protection is automatic without the need to take any legal steps to preserve the copyright internationally.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://www.BealBusinessLaw.com.

Is it wise to organize my California business in Nevada instead of California?

2011-10-25T13:23:00.000-07:00

I get this question all the time. As a general rule, you will need to organize your corporation or other limited liability entity in all states where you are “doing business”, as defined by state law. Having said that, “doing business” can be a very grey area under state law. Also, your entity can be liable for state income or sales taxes without being organized in such state, again depending upon state law. Expert tax and legal advice is recommended in these areas.

Therefore, organizing your entity in a state other than where it is “doing business” for tax purposes may not make sense in light of the above, and this will significantly multiply your administrative effort and costs (e.g. more accounting, tax returns, annual statements, and the like).

Organizing your entity in a state other than where it is “doing business” may have sufficient advantages for larger businesses that have large revenues to overcome balance out the additional effort and cost. Advantages of organizing in Delaware, Nevada, and now Wyoming, for example, include (1) greater protection for directors and officers versus shareholders from personal liability for acts committed on behalf of the entity, (2) more, favorable, and time-tested corporate laws, (3) higher degrees of privacy for shareholders, (4) in the case of Nevada, no sharing of information with the IRS, and (5) in the case of Delaware, high prestige, as more than 60% of the Fortune 500 companies are incorporated there.

Other than for the foregoing potential superseding reasons, it is not usually wise for smaller businesses to organize in a state, such as Nevada, unless it is otherwise “doing business” in Nevada.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://www.BealBusinessLaw.com.

Bankrupt Customers, Trustee Preference Claims, Return of Customer’s Payments…Oh My!

2011-10-11T15:30:00.000-07:00

Times are tough, and customers are going into bankruptcy. You should know that the Bankruptcy Code gives a debtor in bankruptcy the right to avoid and recover certain payments (called "preferences") made during the 90 day period before the bankruptcy filing. Thus, your customers, actually their priority creditors through the trustee, may be able to recover all payments they have made to your business within the 90 day preference period, subject to certain defenses, the main one of which is that payments made to you were made in the “ordinary course of business” between you and your customer.

If you have had a longstanding customer relationship, and such relationship did not significantly change as your customer approached bankruptcy, then you are probably in a good position to use the “ordinary course of business” defense against the bankruptcy trustee’s preference claim. If you have not had a longstanding relationship with a customer or you make material changes to your credit practices during the 90 day preference period, maintaining such an “ordinary course of business defense” is problematical. For example, you may uncharacteristically start enforcing or changing credit terms, or withhold shipment pending payment with your soon to be bankruptcy debtor. If you have an important customer facing financial difficulties, you might consult with a seasoned bankruptcy lawyer before increasing pressure for payment.

Should you take your customer’s payment even though you suspect there may be a bankruptcy trustee claim to demand return of this payment coming? You should definitely take the payment. Best case: The trustee does not pursue the preference action, based upon various defenses or otherwise, and you keep the entire payment. Worst case: you or your bankruptcy attorney negotiates a lower settlement amount with the trustee based upon various defenses, such as the “ordinary course of business” one discussed above.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://www.BealBusinessLaw.com.

Commercial Lessors: Stop and Think before serving that 3-day “Pay or Quit” Notice

2011-05-24T16:52:00.000-07:00

When a commercial lessee becomes unacceptably delinquent, lessors or their counsel most often choose to issue “pay or quit” notices and sue for possession, if the lessee does not voluntarily vacate. Because an unlawful detainer is an expedited procedure designed to quickly obtain possession of the premises, the lessor may recover only delinquent rent and the reasonable rental value for the period after termination of the lease and prior to judgment.

There are circumstances where it is better not to terminate the lease, not to accept lessee’s vacating the premises, but sue for rent as it becomes due. Such circumstances include tenants or guarantors that are financially strong or an economic recession when replacement lessees are difficult to obtain. Be aware, however, that a lessee cannot use this remedy without complying with California Civil Code Section 1951.4, which requires that if a lessee desires to disclaim its duty to mitigate its losses, then the lessor must provide, not only in the lease, but in practice, the lessee with the reasonable ability to sublease and assign. The lessor must be reasonable in any financial or other requirements related to subleasing or assignment and cannot take actions inconsistent with holding the lease open, such as serving “pay or quit” notices, declaring or accepting abandonment, changing locks, etc.

Upon execution of the above remedy, the lessor should send a letter to the lessee clearly setting forth the lessor's intention to legally collect rent from the lessee as it becomes due month after month. This should provide powerful incentive to the lessee to either find an equal or better lessee for the premises or make a settlement offer to the lessor to obtain a written release of lessee’s liability for the entire remaining lease term. An additional financial bonus results for the lessor, if the lessor settles with the current lessee for an extended period of rent, and then promptly finds another lessee to lease the premises.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://www.BealBusinessLaw.com.

Employers: Be aware of your legal obligations regarding pay statements

2011-04-07T10:12:00.000-07:00

The California Labor Code requires employers to provide a statement in writing each pay period that includes nine types of information. These types are:
(1) gross wages earned,
(2) total hours worked by the employee, except for any employee whose compensation is solely based on a salary and who is exempt from payment of overtime,
(3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis,
(4) all deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item,
(5) net wages earned,
(6)the inclusive dates of the period for which the employee is paid,
(7) the name of the employee and the last four digits of his or her social security number or an employee identification number other than a social security number may be shown on the itemized statement,
(8) the name and address of the legal entity that is the employer, and
(9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.

Failure to do so will expose employers to potential damages and penalties based upon each infraction from either the employees involved or the Labor Commissioner or both.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://www.BealBusinessLaw.com.

No more ZIP card number requests before card purchases

2011-04-07T09:54:00.000-07:00

The California Supreme Court ruled on 2/10/2011 that the "Song-Beverly Act" prohibits businesses from requesting and recording ZIP codes from consumers prior to credit card transactions. Merchants should immediately desist from asking for ZIP codes prior to processing a card transaction.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://BealBusinessLaw.com.

I have my product and some attractive potential business developer partners. Now what do I do?

2010-11-23T15:12:00.000-08:00

First, you need to sit down with all of your potential business partners and discuss how you are going to proceed with the business venture. This is assuming that you have already done your due diligence and are comfortable with having each as a business partner. Follow your gut in this. No type or amount of paper is going to save you from untrustworthy business partners.

Then, all of the participants need to agree on the business plan (not just cocktail napkin treatment). A written agreement should be reached on the business entity to be used to execute the business plan. Partnerships and joint ventures are common, but involve joint and several liabilities to all business owners. A corporation or LLC limits such liability against the owners, if set up and operated properly. The business partners’ tax advisors should be involved in the final decision, as the tax tail sometimes wags the business dog.

Once these matters are agreed, an owner’s agreement should be drafted and signed setting forth the business plan; the business entity; the capitalization dates, types, amounts and events; and the ownership split and profit split, if different (possible with LLCs). The parties need to decide in advance, who will be the initial or continuing directors or managers (LLC); which decisions are to be made by the owners versus the directors or manager versus the officers; and who will be which officers, including the tax matters partner for LLCs.

This agreement also needs to cover withdrawal rights, if a partner just wants to leave, and restricted rights to transfer ownership, to protect the remaining owners from undesirable new owners. Any future obligations to loan money or provide services should be covered by loan documents and restricted ownership interest agreements, so that ownership interests do not vest prior to future performance of each owner’s obligations.

Once this agreement is in place, it is time for all of you to successfully execute the business plan.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://BealBusinessLaw.com.

What licenses does my new business in California need in order to be legal?

2010-10-06T16:13:00.000-07:00

This is one of the most common questions asked by new business owners in California. To give you a headstart in this process, and to assist you in finding the appropriate permitting information for your specific business and specific location, the CalGOLD database at www.calgold.ca.gov/ provides links and contact information that direct you to agencies that administer and issue business permits, licenses and registration requirements from all levels of government. The CalGold listings include descriptions of the requirements, the contact information of the agencies that administer those requirements, and in most cases a direct link to the agencies' Internet web pages. Then, you should only require the assistance of business counsel, if serious licensing issues come about.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://www.BealBusinessLaw.com.

We are a small business, and need a good attorney. How do we find one?

2010-10-06T15:55:00.000-07:00

If you are a small business, you should concentrate on small business attorneys, ideally with experience in your specific business, as each business shall have its own set of legal and regulatory circumstances.

Hopefully, you will know one or more trustworthy small business persons in California in similar circumstances who can refer you to an attorney. If not, you must do some homework. On the Internet, you can Google search for an attorney in your area of interest in your area of concern in California , or you can use lawyer searching websites, such as http://www.findlaw.com/.

Then, check at http://members.calbar.ca.gov/search/member.aspx (California State Bar) to determine the disciplinary status and other information for each attorney candidate. Once you have at least 3 qualified candidates, call each of them and explain your situation and listen to their feedback. Your instincts should determine the right attorney candidate from these calls. In close calls, ask to physically interview each without cost.

During your calls to attorney candidates, ask them if they have personal business experience in the area of your business. Ask them if they are a "general counsel" or a litigator, as litigators are many times unavailable, and usually have a different mindset, as discussed more fully below. If they are unfamiliar with the "general counsel" term, they are probably not a good candidate.

General counsel do not usually litigate and are there to advise and service you, when you need it. General counsel aim to keep you out of court. If you are unfortunate enough to need or defend litigation, your general counsel will refer you to the most appropriate litigation attorney or firm and thereafter monitor and manage the costs of litigation, which could otherwise spiral out of control.

Ideally, your general counsel will have sufficient prior litigation experience in order to do the foregoing effectively. Also, he or she will be able to draft contracts with an eye towards staying out of litigation or litigating in a friendly venue. For example, the existence (or lack thereof) of a contact clause providing for a prevailing party’s right to attorney fees can mean the difference between having (or not having) litigation.

In addition, a general counsel, rather than a litigator, is more likely to give you all the advice you want or need and then get out of the way so as not to frustrate your business goals. Business risk is your decision, not a lawyer’s. Once a transaction’s basic terms and conditions have been negotiated, a good general counsel will rapidly draft an industry standard agreement reasonably slanted to protect you in sensitive areas, as simply stated as safely possible, customized to your particular circumstances and risk tolerance levels, oftentimes for a fixed fee.

As Dan Harper, an acknowledged corporate counsel, so ably states, “It is very easy to just say ‘no’ when a controversial issue arises, this is easy because we can’t get into too much trouble by taking the ultra conservative approach. However, after so many ‘nos’, the company will soon go out of business because it won’t be able to sell anything."

"As in-house [general] counsel, we must always remember that we are here to serve the client, it exists to sell goods or services and to make money. It does not exist to provide gainful employment for attorneys. Hence, we must do what we can to further that mission, balance the risks against the benefits, including the mission of the company – making money and thereby keeping all of us employed.” Do Law Firm Lawyers Really Know What It's Like to Be an In-House Lawyer? Dan Harper, Corporate Counsel, 9/10/2010.

Armed with the foregoing, I hope you find the ideal attorney for your business in California.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://www.BealBusinessLaw.com.

Patents, Copyrights, Trademarks...Oh My!

2010-10-06T14:25:00.000-07:00

There are constant questions about the differences between patents, copyrights, and trademarks. Since I cannot say it better than Michele Schwartz of the law firm of Andrews Kurth LP, I reprint her article from Mondaq (01Oct2010) below:

Protecting Your Intellectual Property

Have you ever had an idea for a great product that would solve a pet peeve, or just make life easier or more pleasant? Many women have made millions from such light bulb moments. Just consider Spanx®, the patented footless pantyhose empire. Perhaps you should take that epiphany and run with it. In addition to writing a business plan, making a prototype and charming investors, one of the most important aspects of commercializing that idea is to protect any intellectual property associated with the product or concept.

So how do you protect your intellectual property once that light bulb goes on? Consider the three main types of intellectual property protection: patents, copyrights and trademarks.

PATENTS
Patents generally protect functional features of inventions, or in the case of design patents, ornamental designs for articles of manufacture. For patents, take dated notes on your idea and maintain confidentiality, not only to protect others from stealing the idea but also to preserve your rights if the invention is patentable. If you decide to share your idea with others, make sure a signed confidentiality agreement, sometimes called a non-disclosure agreement, is in place before revealing the idea. Once an invention is made publicly known, you have one year to apply for patent protection. If you decide to apply for a patent, consider a patent search. An attorney can advise whether a search would be worthwhile or whether it makes more sense to file an application. The patent process is tricky and is best handled by an attorney. It also can be expensive—be prepared to invest several thousand dollars in the process.

COPYRIGHTS
Copyrights protect original works of authorship fixed in the tangible medium of expression, including literary works, visual art (including designs on packaging), music, and pictorial and motion picture works. For example, copyright law protects your artwork, unique designs on fabric, your marketing literature or photographs. Copyrights subsist in a work upon creation and are owned by the author of the work unless the rights are assigned or transferred to another person. Beware if you have an outside ad agency or friend create artwork for your product, including photography. Obtain a written assignment of those rights or the rights will remain with the author, even if you pay for the work. You can obtain a copyright registration from the U.S. Copyright Office which strengthens your rights in a copyrighted work if you have to take legal action against an infringement. Whether your work is registered or not, always include a copyright notice on the work which consists of the symbol ©, the copyright owner's name and the year of publication of the work, meaning the year you first distributed the work to the public by sale or other transfer of ownership.

TRADEMARKS
You will need to name your million-dollar idea. The name, logo, a slogan, even unique product packaging or shape (trade dress), or other manner of identifying your product, can be protected under trademark law. At the outset, search at least the U.S. Trademark Office records to determine if the mark is available. Once you start selling your product, you develop "common law" rights in the mark which are circumscribed to the geographic marketplace in which you sell your branded product. You also can obtain a federal registration for the mark, which provides nationwide rights regardless of whether you have shipped your product to all 50 states. Prior to obtaining registration, utilize a superscript TM symbol to identify the mark or logo as your own. After the mark is registered, you may use the symbol ® to indicate that you own a federal registration for the mark.

Consider all three types of intellectual property protection to protect the ultimate expression of your idea or concept. Though your idea or concept may not be worthy of patent protection, the original artistic design or the funky name or packaging used to market the product may be protected by copyright and trademark law, resulting in a valuable monopoly when consumers demand your product. Intellectual property rights are valuable assets considered by investors and potential buyers. If you have protected your rights, you will be able to maintain exclusivity and increase the value of your business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://www.BealBusinessLaw.com.

When may I compete with my employer?

2010-06-08T15:54:00.000-07:00

While employed with your employer, you should:

not use any of your employer's trade secrets outside of you employer’s business. This is a violation of California law. “Trade secrets” arise from your employer taking reasonable measures to protect information, which is valuable, because it is secret, such as customer lists, business plans, spreadsheets, bid specifications, etc;
not develop your new business on your employer’s time or using your employer's resources, such as computers, printers, telephone, etc.;
not violate any other employment policies and procedures related to competition, loyalty, etc., signed employment agreements, nondisclosure agreements, proprietary rights agreements, or other similar agreements with your employer; and
not advise your employer's customers that you will be soon starting a competing business.

After employment with your employer, you may “freely” compete with your employer, but you should:

still not use any of your employer's trade secrets, as discussed above; and
still not violate any signed past employment agreements, nondisclosure agreements, proprietary rights agreements, or other similar agreements, which by their terms extend beyond your employment.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://www.BealBusinessLaw.com.

Develop a Profitable Small Business

2010-06-08T15:17:00.000-07:00

I set about writing a blog on how to start a new business. In my research I found an existing article (1), written by Robin M. Gronsky, Esq., who is the owner of Gronsky Law Office in Ridgewood, New Jersey, which says it better than I could, so I quote it verbatim, below.

“Disclaimer: The information contained in this article is general advice and should not be construed as legal advice or as a legal opinion.

Most entrepreneurs start their new businesses with the dream of building a successful business. Many of you who started your new business recently opened up the business because you couldn't find a new job. You weren't prepared with a business plan, or market research, or entrepreneurial skills. Yet, none of these deficiencies will necessary mean that your business won't succeed. If you create a team of advisors, you should be able to find professionals and businesspeople who can help you build a thriving business.

Who should be on your team? You should have a business lawyer, an accountant who can advise you on taxes and on how to grow your profits, an insurance broker, and a person who has already created a successful business.

Why do you need these advisors and how do you find them? A business lawyer has the knowledge to advise you about how to avoid lawsuits (which are always more expensive than the costs of acting proactively). If you are moving from your home to an office or renting a storefront, you want a business lawyer to help you negotiate with the landlord to get you the best lease terms. A business lawyer will draft your contracts for you to work with clients (which can state that you get paid upfront in full or in part - that's good for cash flow), with vendors, and with independent contractors (so you don't get into trouble with the IRS or the labor department). You may have a logo to trademark or a creative idea or process that needs a copyright or a patent. Your business lawyer will help you with all of these problems or can refer you to another lawyer who has more expertise with these types of law.

Your accountant will help you set up a chart of accounts, prepare your business tax returns and advise you (together with your lawyer) on issues where taxes are involved (whether sales, income, or payroll taxes). Your accountant should also be able to advise you on how to maximize business deductions so that you pay the least amount of taxes that are required.

An accountant or profitability consultant will advise you on how to grow your revenues, help you to focus on your core business and then add new products or services, advise you on setting your pricing strategy, implement inventory controls, and help you with cash flow problems.

Many businesses carry a wide variety of insurance - or should. These range from liability insurance to business interruption insurance to professional malpractice (or errors and omissions) insurance to auto insurance to commercial property insurance. Do you have an independent insurance broker who will shop your business to several insurance companies? Who will find you the best coverages for the right prices? Who will advise you about risk management so you can keep your premiums as low as possible? That's why you need an insurance broker on your trusted advisor team.

You should also try to find a business mentor, someone who has created a business that is successful. This person should be available, who will listen to you, who has the knowledge and skills that you want to acquire, and should be willing to give you constructive criticism and feedback.

Your team of trusted advisors lets you look at your business through fresh eyes. It gives you a group of professionals who have been what you're going through and have shepherded clients through your challenges. They have expertise that you do not have and should have contacts in other businesses that will help your business (such as technology, marketing, pricing strategies, inventory control). They will ask you questions that you haven't even thought of yet. But, you must be willing to take the advice of your trusted advisors because they will help you build the business of your dreams.

How do you find these trusted advisors? Start with one advisor who you trust and ask them for referrals to the other types of advisors that you want to have. Interview them about their experience and ask yourself whether you would be willing to work with these individuals over an extended period of time. You must be comfortable with your team because they will know you and your business intimately. Only by being open and honest with your advisors can they really help you.

A good team will get you to your goals faster than if you do it on your own.”

1. Why Your Small Business Should Have a Trusted Advisor Team to Help You Realize Your Business Dreams, by Robin M. Gronsky, Esq., EzineArticles.com.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://www.bealbusinesslaw.com.

I sell brand name equipment for resale and enter consulting contracts to promote same. How do I avoid being deemed a franchisor in California?

2010-03-17T14:26:00.000-07:00

Under California Law (Corporations Code §31005), a franchise means, a contract or agreement, either expressed or implied, whether oral or written, between two or more persons by which: (1) a franchisee is granted the right to engage in the business of offering, selling or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor; and (2) the operation of the franchisee's business pursuant to such plan or system is substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising or other commercial symbol designating the franchisor or its affiliate; and (3) the franchisee is required to pay, directly or indirectly, a franchise fee.

The California franchise law requires any offer or sale of a franchise to be registered with the Commissioner of Corporations on a detailed “Uniform Franchise Registration Application”. Certain offers and sales, however, are exempt from this requirement, if the franchisor meets minimum requirements for net worth, experience, and disclosure and has filed a notice of exemption with the Commissioner.

If registration is required, and the application is approved, the registration is valid for one year. The registration may be renewed for additional periods of one year each. The fee for filing an application for registration of a franchise offer is currently $675; the fee for renewal is $450. The fee for filing an initial notice of exemption is $450; the fee for each subsequent notice is $150. The government, or disgruntled buyers of yours, may obtain fines, rescission or reformation of the transaction, payment of refunds and damages, and/or a cease and desist order.

You can mitigate the risk of “franchising” in California by eliminating one of the three requirements first described above. The third requirement is compensation. Since getting paid is the primary reason for the transaction in the first place, this requirement cannot be eliminated.

So, there are only two further requirements that may be eliminated: (1) reducing your control to an insubstantial level over the operations and marketing of the business product or services sold or (2) licensing or selling a common trade name, trademark, or logo. Initially, you should decide whether a buyer of your business is more interested in (1) obtaining assistance in marketing the business, or (2) branding. “Branding” occurs if you license or sell to the buyer the right to use your trade name, trademark, and/or logo as the name of the buyer’s newly-acquired business and/or products and services.

If you eliminate the licensing of these branding rights, then the effect may be to eliminate this requirement of franchising, which becomes even more effective where you do not permit the buyer to use your trade name, trademark, and/or logo as the name of buyer’s business or in a substantive or primary way.

Where selling products or services can be done without branding, then allowing the buyer to operate under its own name may be the avenue to take, because you can then exert more controls on operations and marketing that assist the buyer in successfully selling your products or services. However, your control cannot reach the status of “substantial” controls.

You cannot tell the buyer substantially or explicitly how to operate (known as “design specifications”), but you can describe what generally needs to happen (known as a “performance specifications”). To the extent the buyer can do its licensed business in the manner that it chooses, it will not be deemed a franchisee. To the extent there is substantial control, the buyer may be deemed a franchisee, making you a franchisor that has not complied with the franchise laws.

An experienced business lawyer will work with you to tailor the transaction documents as much as feasibly possible away from a franchise structure. He or she would attempt to reduce either the transfer of intellectual property or your control over the business as a result of the transaction as much as possible. There is no guarantee, however, that your buyer, if unsuccessful in the business purchased from you, will not attempt to take advantage of the California franchise law remedies described above. As usual, success prevents disputes.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://www.BealBusinessLaw.com

Can my firm change an employee from a full-time basis to an as-needed or other basis?

2010-03-16T16:03:00.000-07:00

An employment relationship in California is considered "at will" absent a union agreement or other express personal employment agreement with such employee. "At will" means that an employee may be terminated at any time for a any reason, or no reason, but not for a legally impermissible reason, such as age discrimination. Thus, the conditions of employment for an "at will" employee may also be changed, such as work description, pay, or otherwise, except as stated above and with some exceptions, which follow.

Check your employment policies to ensure there is no provision limiting this practice. Also, your firm must provide employment upon return from certain leaves to the same or similar job at the same or similar pay, working the same or similar hours in the same or similar location, unless the employee would have been laid off had he or she not gone on such leave, or if such employee's job is eliminated during his or her leave, and no equivalent or comparable job is available, then such employee will not be entitled to such reinstatement. These leaves include without limitation bereavement, family and medical, jury and witness, literacy, military, parents school activities, pregnancy disability, religious, and voluntary firefighter leaves.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://www.BealBusinessLaw.com

Do I need to file a Fictitious Business Name (DBA) Statement? What happens if I don’t file a DBA? Can I prevent others from using my DBA?

2010-02-11T14:15:00.000-08:00

There is so much conflicting and erroneous information circulating verbally and upon the Internet about fictitious business names (DBAs), corporate names, and trade names, that I feel compelled to present a substantial treatment of the subject in statutory terms, at least for the State of California.

Every person doing business for profit under a DBA must file a fictitious business name statement within 40 days of commencement of business, which is valid for five years from the date of filing, unless it is abandoned, or there is a change in the facts stated in the application (except a change in a registrant's residence address does not cause the statement to expire if that is the only change).

The following circumstances indicate a need to file for a DBA:
· Individual: When the registrant's family name is not part of the business name, and no other words suggest the existence of additional owners.
· Partnerships or other associations of persons: When the surnames of each general partner are not part of the business name, and no other words suggest the existence of additional owners.
· Corporations: When using a name other than the name registered with the Secretary of State.
· Limited Liability Company: When using a name other than the name registered as a limited liability company with the Secretary of State.
· Words that suggest the existence of additional owners: Company, & Company, & Associates, & Sons, & Group, etc.

The purpose of this law is to protect those dealing with individuals or partnerships doing business under fictitious names, and it is not intended to confer any right or advantage on individuals or firms that fail to comply with the law. The filing of a DBA is designed to make available to the public the identities of persons doing business under the DBA.

A DBA statement shall be filed with the clerk of the county in which the registrant has his, hers, or its principal place of business in California or, if the registrant has no place of business in California, with the Clerk of Sacramento County. The registrant may, but is not required to, file in further counties in California. Further filings may be indicated, as discussed after the next paragraph.

The penalty for not filing a DBA is that no legal action in the DBA name may be maintained in court until all filing requirements are completed. Also, please be aware that any person who executes, files, or publishes any DBA statement knowing that such statement is false, in whole or in part, shall be guilty of a misdemeanor and upon conviction thereof shall be punished by a fine not to exceed $1,000.

Here comes the more confusing part. The DBA law was not intended to eliminate duplication or similarity of fictitious names. The County has no authority to refuse a filing on grounds that the same or a similar name is already on file. It is recommended that you review the DBA Index to ensure that the name you choose has not already been registered. The filing of a DBA does not, of itself, authorize the use in California of a DBA in violation of the rights of another, as established under federal or California trademark laws or the California DBA or common law.

The filing of a DBA by a person required to file shall establish only a rebuttable presumption that the registrant has the exclusive right to use as a trade name the DBA, as well as any confusingly similar trade name, in the county in which the statement is filed, if the registrant is the first to file such a statement containing the DBA in that county, and is actually engaged in a trade or business utilizing such DBA or a confusingly similar name in that county. The rebuttable presumption created by this section shall be one affecting the burden of producing evidence. In other words, a same or similar business who can satisfactorily prove that it has previously used a same or confusingly similar name in that county may be able to legally stop you from using your name and make you terminate your registrations for that name.

Similarly, the filing of articles of incorporation in the case of a California corporation (or the obtaining of a certificate of qualification in the case of a “foreign” corporation) shall establish only a rebuttable presumption that the corporation has the exclusive right to use as a trade name in California the corporate name set forth in the articles (or certificate), as well as any confusingly similar trade name, if the corporation is the first to have filed the articles (or certificate) containing the corporate name, and is actually engaged in a trade or business utilizing that corporate name or a confusingly similar name. Thus, the filing of articles (or certificate) shall not of itself authorize the use in California of a corporate name in violation of the rights of another under federal or California trademark laws or the California DBA or common law, including rights in a trade name.

So, if there are both a corporation and a DBA registrant using the same or a confusingly similar trade name in a county, and both entitled to the rebuttable presumption, whichever has filed the DBA or filed the articles (or certificate) first in time and is actually engaged in a trade or business utilizing such DBA, corporate, or a confusingly similar name, shall be entitled to the presumption as against the other, that it has the exclusive right to use such DBA, corporate, or confusingly similar name, as a trade name in the county.

It behooves all businesses to determine prior to filing for a DBA whether other same or similar businesses have previously filed for the same or confusingly similar trade name in each county in which they desire to actually engage in a trade or business utilizing that name. Similarly, businesses should determine whether similar businesses have previously filed for the same or a confusingly similar trade name in each county in which they desire to actually engage in a trade or business utilizing that name, prior to filing corporate articles (or certificates) with the same or confusingly similar trade name.

In both cases above, it also behooves all businesses to determine prior to filing for either a DBA or corporate name whether such name would violate the rights (under federal or California trademark laws and the California DBA or common law) of another business in the same or similar business for a trade name actually engaged in a trade or business utilizing such DBA, corporate, or a confusingly similar name, in the county or counties you wish to do same. Wow, what a mouthful.

Failure to perform the above due diligence puts your business at risk of having to cease using your DBA or corporate name in one or more counties in California, or all of California, where other same or similar businesses have previously used or filed for the same or confusingly similar trade name. This will also eliminate in one or more counties, or all of California, any good will associated with your name prior to having to cease use of your name, confuse your business operations with other names you will have to use in substitution for your name, as well as waste your significant investment in the cost, time and effort initially used to file for your name.

Valuable Tip: The use of a truly unique name (such as “Exxon”) hugely simplifies the complications of all of the above issues, including especially the registration of federal trademarks.

Important Proviso: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney.

Contact: If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided through my firm’s website located at http://www.BealBusinessLaw.com

How can I be fired for a Facebook post?

2010-01-15T14:59:00.001-08:00

Most employment in this country (excluding collective bargaining and key employment agreements) is “at-will”, which means that you can be fired for any legal work-related reason or no reason. So, your employer may generally terminate you for a Facebook public posting. If you posted in a user-restricted area, you may have an action based upon your employer’s unlawful access, although you may have no reasonable expectation of privacy posting on Facebook or similar social networks, especially where your friends can open up postings to others. Be careful. Employers may legally monitor your electronic activity occurring upon company-owned technology and may be sophisticated enough to already have adopted an electronic media and communications policy, including a policy against the use of social media for other than business-related purposes, and then only when approved in advance by your employer.

IMPORTANT DISCLAIMER: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney. For more information, please visit: http://www.BealBusinessLaw.com

I want to protect my personal assets from my business. Can I use a trust? An LLC?

2009-10-01T15:59:00.001-07:00

A trust does not protect any of your assets, unless you give up all of your rights to benefit from the assets. What you do need is a limited liability entity, such as a corporation or limited liability company, to protect your personal assets from your business assets, or even some of your business assets from other of your business assets, if any, as well. There is a caveat here, however. Lenders, landlords, and other financial parties will usually require your personal guarantee in addition to the limited liability entity's contract signature, especially in the case of newer and smaller entities. Thus, protection from many of the most common major contractual financial exposures is doubtful. If your business operation has technical risks, i.e. potential significant damage to persons or property that cannot be reasonably insured, e.g. giving helicopter rides or selling vitamins to the public, then limited liability is of potentially great value. Another consideration is that there are costs and efforts associated with organizing and maintaining limited liability entities, including an annual $800 franchise fee for the privilege of being a limited liability entity in California, whether your business makes a profit or not.

IMPORTANT DISCLAIMER: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney. For more information, please visit: http://www.BealBusinessLaw.com

How can I get sued without a signed and written contract?

2009-09-17T15:31:00.001-07:00

Actually, you can enter into a contract in many ways without a signed, written contract. The legal key is to unequivocally accept the terms of any offer, which can be done (1) orally ("I agree and will do it."), or (2) performance (You perform as requested by the person offering consideration for same, e.g. a reward offer.), or (3) even by silence, if this is the custom between particular parties (You routinely allow a vendor to leave certain supplies in your shop.).

Although an oral contract is just as valid as a written agreement, there can be real problems proving its existence or its terms, when in dispute. Hint: "An oral contract is as good as the paper it's written on." Or: "It's her word against his." The other significant difference between oral and written contracts in California is that the time to sue for breach of an oral contract is shorter, i.e. two years, rather than four years, for written contracts.

There are some exceptions in California (the biggest being real estate transactions) of contracts that cannot be enforced without a writing. See, California Civil Code section 1624.

IMPORTANT DISCLAIMER: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney. For more information, please visit: http://www.BealBusinessLaw.com

I work as an independent contractor with my present employer. Can they make me sign that I will not work with any client of theirs for one year?

2009-09-02T09:54:00.000-07:00

Non-compete agreements are unenforceable in California with certain exceptions. There is widespread belief that this restriction applies only in the employer-employee relationship; however, that position is not supported by the language of the California Code, and it has been rejected by the courts. The Code protects independent contractors as well, especially independent contractors that are essentially employees, that is, persons who don't work for more than one "employer" at a time in their line of work.

IMPORTANT DISCLAIMER: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney. For more information, please visit: http://www.BealBusinessLaw.com

Everyone seems to be recording everything in this new modern world. Can I record someone's conversation without their knowledge?

2009-08-24T15:33:00.000-07:00

In California (many other states are more liberal), you should always get the consent of all parties before recording any conversation that a reasonable person would find "private" or "confidential." Not to do so, exposes you to possible criminal prosecution, or more probably, a lawsuit for damages.

Conversations that occur in a "public" or in an area where the parties do not have any "expectation of privacy" are not covered by the unanimous consent requirement. You may record a conversation amongst people in a public place, such as a street or park, even without consent. For example, a California court has upheld a television network's right to use a hidden camera to videotape a conversation that took place during a business lunch on an outdoor patio of a public restaurant.

IMPORTANT DISCLAIMER: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney. For more information, please visit: http://www.BealBusinessLaw.com

How do I remove my image that someone posted on the Internet without my permission?

2009-07-28T10:05:00.001-07:00

Whether you can remove this image depends on the facts. Generally, one can photograph people in public places without consent with some exceptions, e.g. if the people have a reasonable expectation of privacy, such as restrooms, or if the photos are used for commercial or defamatory purposes without your consent. Assuming the latter purposes, you could employ a PCMA takedown notice to your internet service provider and/or the Internet Service Providers' Association (ISPA). For ISPA instructions in this regard, please visit the following link: http://www.ispa.org.za/code/how_to_request_takedown.shtml

IMPORTANT DISCLAIMER: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney. For more information, please visit: http://www.BealBusinessLaw.com

May I contractually charge a 10% late charge per month?

2009-07-23T14:14:00.001-07:00

The California Supreme Court has ruled that late charges are not subject to the usury laws, because they are not interest for the loan of money; however, the Court did not state what limits might apply. There is still uncertainty regarding the rules that apply to these charges.

Late charges of 1.5% per month on unpaid invoices appear to be proper and enforceable at this point. Late charges in the amount shown in your case (especially the "10% each month" part) might very well be subject to attack under Civil Code 1671, which states that a provision in a contract liquidating the damages for the breach of the contract (late charges) is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made.
An exception to the above applies to real property rental agreements and retail purchases or rentals personal property or services, primarily for the party's personal, family, or household purposes, where the liquidated damages (late charges) must be the amount of damage actually sustained by a breach thereof or a negotiated presumed amount, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage. No bright lines here.

IMPORTANT DISCLAIMER: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney. For more information, please visit: http://www.BealBusinessLaw.com

May contracts last indefinitely in California?

2009-07-22T12:04:00.001-07:00

Assuming that the parties are either entities that may exist "into perpetuity" or may assign their interests and assuming that there is no termination date, no termination conditions, or termination conditions that never occur, technically such an agreement could exist into perpetuity. Under California law, a contract may, by its express terms, provide for a term of duration of indefinite length and without specific limitation, tied not to the calendar but to the conduct of the contracting parties.

IMPORTANT DISCLAIMER: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney. For more information, please visit: http://www.BealBusinessLaw.com

I want to cancel my LLC. May I just file a paper with the State?

2009-07-22T11:54:00.001-07:00

1. An LLC may be dissolved and its affairs shall be wound up upon the happening of a vote of a majority in interest of the members.

2. You will need a list of all known creditors and claimants of the LLC. In the event of a dissolution of the LLC, the manager(s) may wind up the LLC's affairs and shall give written notice of the commencement of winding up by mail to all known creditors and claimants whose addresses appear on the records of the LLC.

3. After determining that all the known debts and liabilities of the LLC in the process of winding up, including, without limitation, debts and liabilities to members, if you are creditors of the LLC, have been paid or adequately provided for, the remaining assets shall be distributed among the members according to their respective rights and preferences. There may be no remaining assets to be distributed to the members.

4. A clearly marked "FINAL" Franchise Tax Return must be filed for the LLC.

5. The LLC will nevertheless continue to exist for the purpose of winding up its affairs, prosecuting and defending actions by or against it in order to collect and discharge obligations, disposing of and conveying its property, and collecting and dividing its assets. The LLC shall not continue business except so far as necessary for the winding up thereof.

6. If a dissolution is made by the vote of all members, and a statement to that effect is added to the certificate of cancellation of articles of organization, the separate prior filing of a certificate of dissolution is not required. The certificate of cancellation of articles of organization shall set forth all of the following:

a. The name of the LLC and the Secretary of State's file number.

b. That a final franchise tax return, or a final annual tax return has been or will be filed with the Franchise Tax board.

c. The Secretary of State shall notify the Franchise Tax Board of the filing.

IMPORTANT DISCLAIMER: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney. For more information, please visit: http://www.BealBusinessLaw.com

Do I Need to Organize or Register my Foreign Business in California?

2009-07-22T11:24:00.001-07:00

A foreign corporation shall not "transact business" in California without having first obtained from the Secretary of State a certificate of qualification. This is a substantial administrative and taxation step.

According to California case law, activities that almost invariably lead to a finding of "transacting business" in California are the physical presence of corporate employees or agents, rather than independent contractors, in California, or the physical location of offices, particularly headquarters, in California. Other key factors are signing of contracts, particularly those to be performed within California.

If your circumstances fall into the grey area between the need to qualify or not qualify, it is important to plan this properly, as there are significant penalties, if you do not qualify, when the State of California thinks you should have.

IMPORTANT DISCLAIMER: The above material does not constitute legal advice and should not be relied on. It does not create an attorney-client relationship. Each locality has differing laws. A legal matter cannot be satisfactorily resolved without a comprehensive review and analysis of all the unique facts and laws at issue by an able attorney. Your matter may result in a loss of rights if you do not timely retain such an attorney. For more information, please visit: http://www.BealBusinessLaw.com