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Your idea may belong to someone with a patent, trademark, copyright, or trade secret. Rules for your market get set by major suppliers, landlords, federal "czars", state regulators, local governments, and your customers. Teamwork depends on EEO compliance, enforceable employment contracts, and avoiding "1099" abuse, Your business plan needs industry-appropriate contracts, clear and affordable financing arrangements, and legal, insurance, and business arrangements in place for death, retirement, resignation, or disability exits. This slide show identifies problems and suggests solutions relevant to each of these issues.
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Lecherous Supervisor
Office Party
Fondles Staff Lawyer
She Sues/Is Fired
$600k For Wrongful
Termination
Unanticipated Legal Problems
The IdeaThe MarketThe TeamThe Plan
Where Could Your Business Have Legal Problems?
The Business IdeaWhat Ownership Problems Are There?
Your product or service may already be:
1. Patented: Business processes, products, or formulas may already be subject to competitor patents – e.g. square cellphone “look and feel”. Check uspto.gov and license if necessary.
Who Owns Your Idea?
2. Trademarked: Competitors may have registered the names you want to use, or established common law trademark rights. Check web and uspto.gov, and license as needed.
Who Owns Your Idea?
3. Copyrighted: Getty Images or an artist may own your website pictures, designs, and blocks of text: $800-$1,500 or more each image to settle: Check your rights on each file. Switch to stuff you clearly own.
Who Owns Your Idea?
4. Trade Secrets:Your former employer or your employee’s and agent’s former employers or other contacts may have rights to customer names, marketing plans, product formulas, computer code, and other things you use in your business. Negotiate releases and get hold harmless clauses in your employee and supplier deals.
Who Owns Your Idea?
Your MarketWho Regulates Your Business?
1. Manufacturer dealership rules2. Secretary of State auto dealership license3. Commerce Commission relocation towing
license/other towing licenses4. County zoning district compliance5. County general business license6. State business organization registration7. Federal, state, and local income, retailer’s
occupation, special auto taxes and reports8. Auto license plates for customers
Auto Dealer Example
1. Major Suppliers: Unless you make your own stuff from standard components, you probably are a dealer for one or more manufacturers, or a franchisee using someone else’s supply chain and business methods, or a professional using invoicing, forms, accounting, web services, and other systems that let you be market competitive. Big suppliers determine who they will serve, and what the service rules (capital, hours, etc..) are. Know the rules.
Who Rules Your Market?
2. Landlords: Shopping centers or downtown business districts may set hours, require joint advertising, regulate or provide street and storefront or office signage, negotiate build-out or other site adaptation assistance, and provide services (heat, light, phone/web access) needed to operate, plus charging (and annually escalating) rents. Sites vary. Get a friendly landlord, or own your own.
Who Rules Your Market?
3. Federal “Czars”: The US may be large, and Washington far away, but federal regulations are pervasive. Your product formulation (e.g. ethanol percentage in gasoline), your basic design (emissions controls for woodstoves, power plants), or your operations (migratory bird kills in wind farms, dairy and pipeline pricing) may be set by (frequently changing) rules. Know the rules, and have a compliance and prompt reporting program.
Who Rules Your Market?
4. State Regulators: The Illinois Department of Financial and Professional Regulation website takes 12 pages just to list the titles of the different businesses and professions it regulates. Your license could be revoked, with a hearing board dominated by professionals in a competing line of work – like chiropractors, governed in part by physicians. Get the right qualifications, keep your license and professional education current, and have a compliance program.
Who Rules Your Market?
5. Local Governments: Zoning and “general business” or other industry-specific licenses can cost more to comply with than federal or state regulations, especially where, as in foodservice, home services, or other very local services and professions, most of your work will be done in one or two communities. Check for compliance, and get and renew whatever licenses are required annually. Make sure your site complies with building and zoning rules.
Who Rules Your Market?
6. Your Customers: Customer expectations change, and you need to provide them the predictable and competitive prices, the convenient service, and the fashionable “extras” that define the state of your profession’s art. Architects need to have “green” elements in their building plans. Lawyers need “industry experience” and good referrals. Accountants and payroll services need add-on knowledge, like health insurance.
Who Rules Your Market?
The TeamWhat Can They Do To You?
1. No Illegal Discrimination: Federal, state, and local EEO statutes and rules make age, sex, sexual orientation, national origin, and religion all inappropriate as decision factors for hiring, discipline, or discharge. Is your employee handbook up to date, with policies and plans for employees with sexually transmitted diseases, or chronic health problems, or unpopular religious holidays?
What Are The Teamwork Rules?
2. Employment Agreements: Noncompetes are hard to enforce, and nondisclosure terms are difficult to monitor or to enforce unless you keep your secrets as securely as possible. Personal bankruptcy lets employees out of deals. If you can afford it, “golden handcuffs” (pensions that take time to vest, performance-based bonuses, profit sharing, good salaries) that make leaving very expensive for your key performers can be a very good investment.
What Are The Teamwork Rules?
3. Independent Contractors: Unless there are clear statutory exceptions, like those for truck drivers, realtors, or insurance agents, almost all the “1099” workers Illinois businesses use are really employees. Illinois Department of Employment Security audits and penalties, IRS penalties, workers compensation liability (even for temps), and Social Security/Medicaid taxes, Affordable Care Act mandates, and ERISA rules for benefit programs may all apply to these supposedly “independent” contractors.
What Are The Teamwork Rules?
The PlanWhat Documents Do You Need To Move Forward?
1. Industry-Appropriate Contracts: Where a business broker needs a fee agreement with noncircumvent clauses, a rock star may need demo shopping agreements, an exclusive license agreement with a publisher, a songwriter contract, live concert appearance contracts (with provision for exclusively blue or red M&M’s, of course), a personal manager contract, and various national or international licensing deals. What contracts can help make sure you get paid?
Documents For Your Deals
2. Financing Arrangements: If you are a professional employer organization, you may “factor” the employee services orders you receive, or, more likely, the invoices you can send after each month’s leased employee hours and expenses have been incurred. Or, you could have an “asset based loan.” Know the financing terms that apply to any type of capital, loan, or factoring arrangement: when and how much do you get, and how much do you pay?
Documents For Your Deals
3. Sources of Capital:Whoever funds a capital round basically sets the terms of your deal. Know what the contract terms mean, and which ones might be negotiable. “Double ratchet” protection, for instance, means they keep their percentage of your company whether your valuation goes up, or down. You don’t.
Documents for Your Deals
4. Exit Events: Death, retirement, resignation (voluntary or forced), and bankruptcy are the usual reasons a founder leaves the company. You need insurance for the first, a savings or investment plan (and/or a good business valuation and business broker or lawyer) for the second, a capital structure that preserves your control (and option to fire partners) for the third, and good cash flow, marriage partners, and tax compliance to avoid the last. Review these arrangements annually.
Documents for Your Deals
