Ask Maury’s Nephew: Legal FAQ
In addition to being Maury’s nephew, Eric Forman is an accomplished lawyer practicing in New York. His practice is focused on providing counsel to entrepreneurs and start-up companies in all industry groups, as well as small closely-held businesses. His resume will now also include regular contributor to the Maury Forum and answering some of the most frequently asked questions about business start-ups.
What are some good self-help legal resources for entrepreneurs and start-ups?
I’ve always been a big fan of the DIY (do-it-yourself) ethos and for any successful entrepreneur or start-up, that kind of attitude is essential in order to make any progress. One of the near universal challenges for new businesses is limited financial resources. No doubt for some things, it’s worth paying an outside vendor for a service. However, living in the information age now makes figuring things out yourself easier than ever before (see, e.g. this website!). Not to mention an excellent way to save money – every dollar you save by not having to outsource a service is a dollar you can instead deploy towards supporting your business.
To be sure, there are many legal components that are best left to an expert. If you don’t understand a term in a contract you’re being asked to sign, it will end up being far more painful to skimp on having an attorney review it upfront versus the legal fees you’ll pay to resolve the inevitable conflicts that result from a lack of due diligence. With that in mind, here are some DIY legal resources for start-ups that I think are particularly useful.
NOLO. NOLO is a publisher of legal self-help books for laypeople. These books are often available at your local library and they are an excellent starting point for things like corporate formation, writing a business plan, and intellectual property. Importantly, they will often assess for you when you can do something yourself, and when you’re better off hiring a lawyer to do it. Their website has a number of articles that provide short summaries/excerpts from their published books.
Start Up Forms Library. Orrick, a law firm that specializes in tech, has a library of forms for start-ups that can be very useful; especially in the beginning when you are figuring out how to structure things. Their forms, which they provide for free, include documents covering corporate formation; founders’ stock purchase; director and officer; employment & consultant; technology; and equity compensation.
NPR’s How I Built This podcast. I just started listening to this podcast and it’s inspiring and informative. The episode on how Sara Blakely created Spanx is especially cool – particularly the part about how she patented her idea herself after being unable to find any female patent attorneys who could help her (according to the Georgia Bar Association, there were none at that time in her state). They have done stories on companies like WeWork, Five Guys; TOMS shoes; Whole Foods Market; and Lonely Planet. Here is NPR’s description: How I Built This is a podcast about innovators, entrepreneurs, and idealists, and the stories behind the movements they built. Each episode is a narrative journey marked by triumphs, failures, serendipity and insight — told by the founders of some of the world’s best known companies and brands. If you’ve ever built something from nothing, something you really care about — or even just dream about it — check out How I Built This hosted by Guy Raz.
These are just a few of the resources that entrepreneurs have at their disposal. Stay tuned for more!
What is an LLC and how do I form one?
LLC stands for Limited Liability Company. It’s a popular form of corporate entity for start-ups and there is a good chance that it’s what you’ll want to use if you’re starting a business in the US (but, as always, talk to a/your lawyer first before deciding!). Here are the basics. The owners of an LLC are known as “members.” It shields its members from being held personally liable for the debts/liabilities of the company (this is the “limited liability part”). It allows for pass-through income taxation (the profits and losses “pass through” to the members who report them on their personal tax returns), which is similar to a partnership or sole proprietorship.
These are the fundamental steps to form one:
- Select your business name and make sure it satisfies your state’s rules. You can find these on the corporations department website for your particular state.
- Submit the official paperwork (typically known as the “articles of organization”) and pay the filing fee (approximately $100 – $800, depending on your state).
- Draft an operating agreement for your LLC. This lays out the LLC members’ rights and responsibilities.
- Acquire any necessary permits/licenses that your type of business may require (e.g. a restaurant will need different permits from a nail salon).
- Some states require that you publish a notice of your LLC, in which you announce your existence to the world in a newspaper ad (New York is one state where this is a particularly expensive hoop to have to jump through. NY start-ups with often limited starting capital are less than enthralled with this obligation…). Check to see what the rules are in your state though – you may be off the hook.
Once you’ve done all that (which is easier than it sounds, and there are many legal service websites that will do it for you for a fee), you’ll be, quite literally, “in business!”
Feel free to get in touch with me if you’d like to discuss further. I may be able to help! firstname.lastname@example.org
I just started a new business – do I need to trademark the name?
Yes! First off, congratulations on your new venture. May fame, fortune (and, of course, making the world a better place) be just around the corner for you. You’ve chosen a name, which is often the hardest part of starting a business. Just ask Homer Simpson.
Ideally, before you choose the name, you should do some research first to make sure no one else has used it. In reality, many start-ups select their name before checking if it’s been taken. The good news is that even if the name is already being used, you don’t necessarily need to start over. Trademark protection distinguishes between different “classes” so if your business is designing mobile apps and your name is “X”, then another business called “X” that makes artisanal pickles would not on its face lead to a conflict or prevent you from getting a trademark for the “X” name.
Nonetheless, to minimize the ‘likelihood of confusion’ (which is the term the US Patent and Trademark Office uses to determine whether a new trademark application might conflict with an existing trademark), you should do some legwork upfront and google your prospective name, search on your state’s corporations website, and do a basic word mark search on the TESS site.
While you are doing this, you should buy the domain name for your business. Even if you are unsure of whether your name can be trademarked (and here’s where an attorney can really be helpful), it’s wise to buy the domain name before you file a trademark application. Trademark applications are public record and domain name squatters will often take advantage of that to buy up all the domain names associated with your name and then try and sell them to you at an extortionate price. Better to pay $10-15 to register CompuGlobalHyperMeganet.com and then not need it than to have to pay a $10,000 ransom to the evil opportunist who beat you to it.
There’s a lot that goes into trademark protection, but the bottom line is that it’s worth the $225 application fee to own the rights to your name. And even if you haven’t done any commercial business under the name yet, you can still file an “Intent to Use (ITU)” application which gives you priority on the filing while allowing 6 months to submit proof of your use of the name in commerce. This is an overly-simplified introduction to trademark issues, but it should help you get the ball rolling. For more information on how all of this works, a good starting place is the USPTO’s Trademark Basics website.
And feel free to get in touch with me if you’d like to discuss further. I may be able to help! email@example.com
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