When may I compete with my employer?

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

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?

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?

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?

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?

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?

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