Melissa D. Goolsarran Ramnauth, Esq. | Trademark and Business Lawyer for the U.S. and Caribbean Diaspora
This Business Law Checklist includes 4 key areas of business law that you need to legally protect your business!
Certain federal laws and state laws apply to businesses. Federal laws apply to everyone in the country, regardless of the state. State laws apply to those that are living and/or conducting business in a specific state.
Here are the 4 main areas of business law for growing businesses:
Trademarks
Entity Formation
Contracts
Copyrights
A business owner should make sure that the business is covered in these 4 main areas. Understanding these legal protections can save you tons of time and money. A new, growing company, and/or existing company should do everything it can to save money. Consider these tips when drafting your business plan.
My name is Melissa Ramnauth, Esq. and I am a Trademark and Business Attorney. I help entrepreneurs protect their businesses. I can also speak from first hand experience because I opened my own law firm. I can relate to other business owners and understand both the legal and practical importance of business formations, contracts, copyrights, and trademarks.
If I had to recommend a first step, it would probably be the trademark clearance search. Nevertheless, these areas work in very closely together.
Here is an explanation of each area:
1. Trademarks
Nearly all businesses should register their trademarks, and ALL businesses should conduct a trademark clearance search before using the business name, logo, or design. And if you did not, then you should do it right away. It is a good idea to implement best practices as soon as you learn about it.
What is a trademark?
Trademarks are names, designs, logos, or anything that identifies a business as the source of a good or service. Trademarks can even be sounds or smells. For example, the PlayDoh smell and the "You've got mail" chime are trademarks. Trademark and service mark are terms that are often used interchangeably.
You should apply for federal registration of a trademark at the beginning of a business (ideally before you start using the mark) to maximize trademark protection and reduce the risk of lawsuits.
What is the trademark process?
The trademark process is two steps. First is the trademark clearance search. Second is the federal application.
The trademark clearance search is conducted to uncover whether there are any similar trademarks out there. If there are similar trademarks, then a business owner should consider changing or altering the mark. Otherwise, the owner runs the risk of being sued for infringement. It is also important to remember that your trademark does not have to be the exact same as another mark in order to be sued for infringement. Someone can sue you if he or she believes that your mark is too similar to his or her mark.
Moreover, a google search is not enough to see if there are similar marks out there. You should have an experienced trademark attorney conduct a search of all federal trademark registrations, federal trademark applications, state business listings, and common law searches.
After you have completed the trademark clearance search, you should file a trademark application with the United States Patent and Trademark Office. This step also helps to reduce the risk of lawsuits because it could deter others from copying your trademark. The United States Patent and Trademark Office easily displays trademark applications. Therefore, if you file your application, your mark will likely come up in a trademark clearance search for someone else. A potential infringer might consider changing their mark because the potential infringer would not want to be sued by you.
If trademark registration at the federal level is not an option for you, you can consider applying for a state trademark for your trademark or service mark.
Can trademarks save you money?
Yes, trademarks can save you money.
One way that trademarks can save you money is that it grants you access to federal courts. A federal trademark registration allows you to sue an infringer in federal court as opposed to state court. Federal courts are more efficient and faster. This means that you will spend less money having an attorney litigate your case for a long time.
Another way that trademarks can save you money is that it can reduce your risk of getting sued. For example, if you come up with a company name, you should hire an attorney to conduct a trademark clearance search to make sure that the name is not already taken. If the name is already taken, you can be sued for infringement. You could be forced to create a new name, website, products, and marketing material with a new name if you lose. This could cost thousands of dollars and loss of customers.
Altogether, analyzing trademarks is a vital step that all businesses should take before the business begins using a trademark, or right away if not already completed.
2. Business Entity Formation
The main business entities or business structures are:
Sole Proprietorship
Partnership
Corporation
Limited Liability Company (LLC)
It is important for businesses to have a strong business entity to limit the liability of the company. You can form an entity through your state's Secretary of State office or website. State law dictates the requirements for these formations.
Limiting liability means limiting the liability exposure of the company to the company assets. If someone sues your company, that person can only recover money or assets from the company. That person, depending on your entity structure, cannot recover money from your personal bank accounts or personal house.
This chart summarizes the pros and cons of these 4 entity structures:
Sole Proprietorship
A sole proprietorship is hardly ever recommend. That is because the business owner has unlimited personal liability for the business debts and lawsuits. A sole proprietorship is not recommended for businesses that have multiple owners, need funding, need employees, have customers, and deal with money. As you can see, there is arguably no valid reason to have a sole proprietorship.
Partnership
A partnership is also rarely recommended. The liability protection varies by state but usually 1 partner has to have unlimited liability. A lawsuit against the business could mean that the partner's personal bank accounts can be used to pay a judgment.
Corporation
A corporation is a strong legal structure that protects shareholders from business liability. However, there are complex tax and legal requirements. These strict formalities might be too much for a new or growing business. Nevertheless, once your business grows, you can always change your entity structure if you want to start issuing shares. Non-profits must also be corporations.
LLC
Finally, a limited liability company (LLC) is usually the best business entity for a new and growing business. The LLC affords strong legal protections and limits the liability of the business to the business' assets. There are usually minimal legal formalities in the form of annual state registrations. The management can also be flexible and defined in an Operating Agreement. Altogether, the LLC is best for new companies that want strong limited liability, minimal formalities, and pass-through taxation.
In all of these formations, it is important to keep personal and business funds separate. Do not commingle funds. Use the business credit card for business. Use the personal credit card for personal matters. If you commingle business and personal funds, a court could "pierce the corporate veil" and find you personally liable for a business debt, even though you had a business formation.
Limited liability companies are usually the way to go but you should consult with your accountant on the best entity for your tax situation.
3. Contracts
You might be wondering what kind of contract you need for a specific transaction in your business. And if you are, you are on the right track. Business contracts are very important to running a successful business.
The good thing about contracts is that you do not need to reinvent the wheel every time you need a contract. A contract can be a simple agreement or a complex document. Regardless, an attorney can draft a contract template for your business to re-use in similar dealings.
Here are the most common contracts that new businesses often need:
Independent Contractor Agreement
An Independent Contractor Agreement is best used when you hiring another person or company to complete a task. Independent contractors are different than employees. Independent contractors are not employed by the hiring company. Employees, on the other hand, are more long term and not hired just for a specific project. Employees are also usually on a payroll. Having an Independent Contractor Agreement helps to reduce the risk of conflict by clearly laying out all the applicable terms.
Make sure your expectations are written out. Do not assume that just orally telling the hired person or vendor will be sufficient.
For example, you can use an Independent Contractor Agreement if you are hiring someone else to paint your house.
Proper contracts should include the scope of work, payment terms, deadlines, and court venues in the event of litigation.
Client Services Agreement
A Client Service Agreement is best used when you are being hired by another person to complete a task. For example, if you are being hired to paint a house, you should fill out a Service Agreement and have the homeowner, or the person hiring you, sign the agreement.
This can help ensure that both parties have the same expectations and understanding about the work that needs to be done.
A written agreement is also necessary if the amount of money involved is over $500 in Florida. In Florida, a court will not enforce an oral agreement relating to money over $500.
Copyright Assignment Agreement
Copyright is one of the three branches of intellectual property. The other two branches are trademark and patent.
I discuss copyrights in detail below. In sum, a copyright is a creative work that was authored and in a fixed medium.
The most important basic rule about copyrights is "whoever creates it, owns it!"
So you and your business might not own the logos, photos, and videos you had made! If you did not draw the logo, take the photo, or take the video, the chances are that you do not own the copyrights to those.
What can you do if you do not own the copyrights to your brand material? You need to transfer the ownership of the copyright from the author/creator to your business through a Copyright Assignment Agreement.
A copyright assignment agreement is a contract signed by the creator of the copyrighted work, with the intention (clearly stated) to transfer ownership and the exclusive rights to your business.
It is important that businesses own all copyrights for its content. Or else, the copyright owner can give it to someone else to use. You do not want to create additional expenses for your business by trying to stop others from using material that you want to exclusively use.
Non-Disclosure Agreement
A Non-Disclosure Agreement should be used if you want to prevent a person from revealing confidential information about you or your company.
Employers often include Non-Disclosure Agreements and Non-Compete Agreements as part of their hiring package. Nevertheless, an employer can still have an existing employee sign these agreements under certain conditions.
Non-Disclosure Agreements are important to protect a company's confidential and secret information from being revealed to the public or the company's competitors.
For example, a Non-Disclosure Agreement could require an employee never to disclose or reveal a company's marketing strategies, customer list, pricing strategies, and secret formulas.
Coca-Cola likely requires any employees who deal with their secret drink formula to sign NDAs in order to avoid this trade secret from being revealed and copied.
Non-Compete Agreement
A Non-Compete Agreement should be used to prevent a former employee from soliciting your customers or working for your competitor.
In conjunction with the Non-Disclosure Agreement, a Non-Compete Agreement is valuable to protect a company against unfair competition.
A Non-Compete Agreement can restrict a former employee from taking your customers and working for a company in a similar industry.
It is important to note that not all states enforce these agreements on the grounds that is contrary to public policy.
However, Florida law does allow an employer and employee to enter into a Non-Compete Agreement. The restraints on time and geographical area must be in accordance with Florida law or else a court will refuse to enforce it. For example, a Non-Compete Agreement restricting a former employee from working for a competitor for over 5 years would almost certainly be struck down by a Florida court.
These contracts can greatly reduce the legal issues you have in your business. Reach out to me if you have questions about your legal documents. I'm happy to help you draft a contracts and conduct a review of contracts.
4. Copyrights
According to the U.S. Copyright Office: "Copyright is a type of intellectual property that protects original works of authorship as soon as an author fixes the work in a tangible form of expression."
A copyright is a creative work that is fixed in a tangible medium.
What can I copyright?
Here are some examples of creative works that can be protected by a copyright:
Photos
Videos
Music
Graphics
Logos
Lyrics
Choreography
Sculptures
Books & Ebooks
Literature
Podcasts
Website Content
Speeches
Presentations
Webinars
What cannot be copyrighted?
Here are some examples of creative works that cannot be protected by copyright:
Facts
Recipes
Words
Ideas
Concepts
Methods
Systems
Titles
Names
Blank Forms
Short sayings
Replicas without sufficient distinction
Fonts
What are the benefits of registering my copyright?
A copyright is created automatically if it meets the above-mentioned requirements. However, there are certain benefits to registering your copyright with the U.S. Copyright Office.
For example, a registered copyright establishes a public record of the ownership. It also provides evidence in court as to the copyright's validity. A registered copyright also enables the owner to sue in federal court, and for statutory damages and attorneys' fees. Lastly, a registered copyright can protect against counterfeit goods through U.S. Customs.
It is important to note that copyright laws vary by country. Please check the laws of your resident country to make sure that you are in compliance.
Reach out to my office anytime if you'd like assistance with any of the above. I'd be happy to help!
Melissa D. Goolsarran Ramnauth, Esq. is a trademark and business attorney. She primarily helps new and small businesses with trademarks and contracts. She writes articles on the importance of trademarks, trademark law updates, and also West Indian history (with an emphasis on Indian indentured servant ships).
Melissa D. Goolsarran Ramnauth, Esq.
MDGR LAW
Trademark & Business Law Firm
(754) 800-4481
melissa@mdgrlaw.com
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