You have an Idea for a Startup

How often are we at dinner with our friends, or grabbing coffee with a co-worker, when an idea strikes us… Wouldn’t it be great if there was startup company that ______? There should be a startup service that______! Why can’t they just add ______ to _______, I would use that all the time! What should be your first step? (Besides a killer algorithm that isn’t buggy, of course) First – you must think of a startup name! A name that grabs the user, but also encapsulates the idea of your product. Thought of a startup name? Dreaming of the way the logo will look like as Apple’s Featured App of the Week? Not so fast… you must make sure that you have the right to use the name in connection with your product and brand. There are several things you can do in the comfort of your own home, to check whether or not a name is available to use. Trademark Search  A simple trademark search will let you know if you will be able to trademark the product and use the startup name and logo in commerce.  You can conduct a trademark search on the www.USPTO.gov. State of Delaware – Division of Corporations You may use the Delaware Division of Corporations Entity Search to check if the name of your corporation is available. The name of your corporation cannot be the same of the name of any other corporation, although slight variation in the name is perfectly acceptable. You can conduct the search here: Internet Presence  Once you have figured out what the name of the corporation will be, it’s wise to reserve the name of your new corporation as a domain...

Non Disclosure Agreement and Startup Investors

Mutual Non Disclosure Agreements AKA NDA A mutual non – disclosure binds both parties to confidentiality. Definition of Confidential Information  The information that is bound to confidentiality is all information that the parties exchange. It is important to take note of the specific definition of what “information” includes, as written in your NDA. Intellectual Property Ownership A great concern for any company is to maintain full control and possession of its intellectual property. It’s important to specify whether or not the disclosure of confidential information would disturb the ownership of intellectual property. It’s preferable for any start up to include a provision that explicitly states that confidential information remains the Disclosing party’s property. Governing Law The governing law section is not one to skip over. By signing the non – disclosure agreement, you consent to be sued in the state specified in the clause, if a legal dispute shall arise. NDA Enforcement Before you disclose your startup corporation’s confidential information you should be aware that you need to resources to enforce your agreement. This means you will need a legal ‘war chest’ to pursue any violators. Even with an NDA you should be very careful who you share your confidential information with. As a general rule you can show someone WHAT your product does, without showing HOW it works. The HOW is what you want to protect. NDA’s and Investors Typically Angel or Venture Capital (VC) investor will not sign an NDA. Investors are pitched startups all day long; they fear that if they sign an NDA from each startup they will be exposing themselves to significant legal risk. Since investor...

Venture Capital, Investments and Form D

Venture Capital, Investments and Form D Startups and Privately held companies that are raising capital investment are required to register with the Securities and Exchange Commission, or file a Form D with the SEC to declare an exempt offering of securities. Form D is a notice that a Startup company is issuing an offering of securities that is exempt from registration with the SEC. Using Form D, a Startup company discloses information about the company and the offering to the SEC. This information includes names and the addresses of the Startups  executive officers, the size of the offering, and the date of the first sale. The form can be found here (https://www.sec.gov/about/forms/formd.pdf) Form D must be filed within 15 days after the first sale of securities in the offering . The date of first sale is the date on which the first investor is contractually committed to invest (ex: the date the Startup receives the investor’s subscription agreement or check). The form is filed online, for free, using the EDGAR system. If you would like to set up a free consultation with an experienced San Francisco business attorney, please reach out to us at Sutter Law Firm....

Professional Law Corporation

        Professional Law Corporation Attorneys that seek to incorporate their law practice in California must be aware of the various nuanced rules that govern the formation and practices of their professional law corporation. Governing Body The governing body of a Professional Law Corporation is the California State Bar. In accordance with the rules promulgated by the California State Bar, the corporation must be certified by the California Secretary of State and registered with the State Bar. The professional corporation must apply for a certificate of Registration as a Law Corporation. In order to apply for the certification, the law corporation must have a certified copy of the law corporation’s articles of the incorporation, as well as the proper bylaws excerpts. Name of the Corporation The name under which the law corporation intends to practice law must comply with the California State rules of Professional Responsibility and shall not be misleading. Ownership and Transfer of Shares The exact language from Rule 3.157 of the Law Corporation Rules of the State Bar must be used in the bylaws, when discussing the ownership and transfer of shares in the corporation. The purpose of the professional law corporation is to practice law, therefore the shares of the corporation must be owned by either an attorney at law or the corporation. What if a shareholder of a professional law corporation is disbarred or passes away? Rules regarding the transfer of shares are different depending on the circumstances of the removal of the attorney from the practice of law. Shares of a deceased shareholder must be sold or transferred to the law...

What is an “S” Corp?

What is an “S” Corp? So you want to incorporate in California. [Do not pass go if you would rather incorporate in Delaware – instead read this blog].  Which Corporation should you choose to incorporate under? S Corporation:  What’s in a name? An S Corporation (also known as S-Corp) gets its name from the Chapter 1, Subchapter (S), Part I of the Internal Revenue Code. The Code defines an “S Corporation” as a small business corporation for which an election under Section 1362(A) is in effect for the year. What is it? Corporation elects a special taxation status with the IRS. In order to elect S Corporation status, you must file Form 2553 with the IRS. The form must be re-filed each year with the IRS. Requirements: A corporation may elect to be treated as an S Corporation only if its: A domestic corporation, Has no more than 100 shareholders, Its only shareholders are individuals, estates or exempt organizations, And has only one class of stock. Owners of the corporation must be US Citizens or Residents. S Corporations cannot be owned by C Corporations nor LLC. Corporations that are ineligible to elect S Corporation status include financial institutions, insurance companies, corporations to which the 936 election applies, or former Domestic International Sales Corporation. Taxation Benefits: S Corporations elect to pass corporate income through to the shareholders for federal tax purposes. This avoids the double taxation on the corporate income on both the corporate and the individual shareholder level. The profits and losses of the business are instead “passed – through” the business and reported on the owner’s’ personal tax...