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Welcome to our September 2016 Newsletter! Please take the time to read the article and contact us should you have any questions or concerns.


Law Offices of Salar Atrizadeh

Entrepreneurship in a Nutshell

In beginning a business, an entrepreneur should figure out the basic steps first, apart from how he or she will earn profits. The entrepreneur must consider whether to be a corporation, and if so what type of corporation? He or she must consider the options, such as, obtaining loans, selling shares, or crowdfunding. An entrepreneur should consider the trademark of the business, and begin work to establish a strong, recognizable, and protectable brand. So, what is a business's to-do list? How expansive is this decision? Can any of these decisions be changed later on?

Upon starting a business, individuals have the choice to form different legal entities. For example, they include: (i) sole proprietorship; (ii) partnership; (iii) limited liability company; or (iv) corporation. These entities help structure the legal and financial liabilities for the business and individual. Sole proprietorships impose direct liability on an individual for debts and misconduct, direct control, and direct taxation. Partnerships tend to be more like sole proprietorships in most respects, but there are various structures when forming the partnership (e.g., limited partnerships) that can limit liability to the partner's capital contributions. Corporations grant the most protection against liability, but generally provide less control. Corporations are the more complicated to set up, requiring various filings with the Secretary of State, Franchise Tax Board, and Internal Revenue Service. Importantly, the state of incorporation will also impose that state's laws on the corporation, which is why business owners incorporate in Delaware, due to its friendly take on corporate law.

Following the formation of the entity comes capitalizing the business. In sole proprietorships and partnerships, this may be a simple loan from a bank, leveraging assets that the entrepreneur or the business owns. However, crowdfunding is another option with recent laws most benefitting corporate crowdfunding among casual investors by offering equity options, and transferring interest in the corporation. This is not to discount non-equity crowdfunding in some cases, where no financial interest would arise, as the investors may contribute funds for various rewards, t-shirts, books, or even the product.

Yet, throughout the entire process it is important to continue developing and setting forth a plan for the entity's intellectual property. Most commonly, this would be a trademark or service name, or some design associated with the business. After creation, the marks would have to be filed with the proper state or federal agencies (e.g., USPTO). For individuals that may want to conduct business across state lines, federal registration with the United States Trademark and Patent Office would be required to properly protect a mark. Yet, if there are more regional aims, a filing with the Secretary of State may be all that is needed to protect the mark.

Ultimately, an entity's goals would need to take into account its needs. An insurance company may be better suited to be an S-corp, while small eateries may be served just as well as a partnership or sole proprietorship.

At our law firm, we guide clients in legal matters involving business, technology, and e-commerce transactions by using our knowledge and skills to create innovative solutions. You may contact us today to set up a confidential consultation.

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