Entrepreneurship - Chapter 18

Design patent

A 14-year patent for a new, original, and ornamental design for an article of manufacture.

Utility patent

A 20-year patent covering a process, machine, article of manufacture, composition of matter, or any new or useful improvement of an existing one.

Plant patent

A 20-year patent that covers new strains of living plant organisms, algae, or macro fungi.

Hourly fees

A basis for legal charges in which the rate is based on a price per hour. Often lawyers will charge for fractions of an hour. Attorneys with more experience often charge more than new law school graduates. Prestigious law firms often charge more than smaller, less recognized firms.

Legal entity

A being, human or nonhuman, such as a corporation, that is recognized as having rights and duties, such as the right to own property.

Check the box taxation

A choice LLCs can make on their tax returns to be taxed as a corporation or a partnership.

Subcontract

A contract by which a new party agrees to perform a duty that one of the original parties to a contract was already legally obligated to perform.

Required for Subchapter S or C

A corporate name. Location of the corporate headquarters. General nature of the business. Names, addresses, and titles of all founders. A time horizon for the firm's existence. Authorized stock and capital. By-laws of the organization.

Arbitration

A dispute resolution process held instead of court cases in which both sides present their case to a legal professional.

Draw

A distribution of funds from the business. It is usually in the form of a cash dispersion in advance of salary, bonus, expected year-end distribution, and the like.

Retainer

A fee paid by a client to an attorney to engage the attorney's services. When using a retainer , the attorney will be paid a specified amount every month regardless of the workload for that month. Usually there is a retainer agreement which specifies what types of work that monthly fee covers and when and how much additional fees are when circumstances change.

Litigation

A formal dispute resolution method that operates using the court system, typically with a lawyer representing each party.

Patent

A grant by the U.S. government to an inventor for an idea that is new, useful, and non-obvious, giving the inventor the exclusive right to make, use, or sell his idea

Flat fees

A method of billing for lawyers in which a fixed amount is paid for a certain task. For example, an attorney may have a flat fee for handling all the paperwork to establish a corporation.

partnership

A type of business formed between individuals directly. It includes both general and limited varieties.

Hold harmless

A type of waiver in which a party agrees not to hold another party responsible for certain events.

Articles of partnership

Agreement between the partners of a firm on matters pertaining to the formation and operation of the partnership.

Subchapter C Corporation

An organizational form that treats the firm as a unique entity responsible for its own taxes. There are no limitations to shareholder participation and the "owners" are protected beyond their equity investment.

Subchapter S Corporation

An organizational form that treats the firm as an entity separate from the individuals. This allows the owners to treat the income as they would if the firm were a sole proprietorship or a partnership. It has limitations in the number and type of shareholders.

To be an independent contractor the person has to display three characteristics

Behavioral: The contractor solely decides how the work is to be done. Financial: The contractor pays his own expenses directly Relational: The independent contractor is employed for a project and the service the contractor provides is not central to the operation of the business.

Trade secret

Confidential information within a company that gives that company a competitive advantage

Trademark

Distinctive word, slogan, or image that identifies a product and its origin.

Articles of organization

Document setting forth information about a limited liability company that is filed with the state to establish an LLC.

Pass through (taxation)

Earnings of the business are distributed to the business owners and those owners pay individual tax on the earnings.

Single taxation

Earnings of the business are taxed once with the owners paying the taxes.

Double taxation

Earnings of the business are taxed twice with the business as well as its owners being subject to tax.

Copyright

Exclusive right given to the creator of a literary or artistic work to make use of that work.

Contingency fee

Fee paid by a client to an attorney for legal services that is dependent upon the outcome of a case. You have seen the attorney ads on television announcing, "I don't get paid unless you get paid." That ad is describing a contingency fee. Contingency fees are typical in accident (especially personal injury) situations, but are not usually used in everyday contract and business-related matters. With a contingency fee, the attorney will take a percentage of your recovery (if your side wins) as his or her fee.

Assumed name filing or a fictitious name filing

Filing made with a state(s) in which the business operates disclosing the trade name or assumed name of the business along with the owners of the business.

Three elements to most aspects of business law

Finding the right information, Negotiating the specific outcome you want Taking care of the paperwork associated with it

Subchapter S Disadvantages

Formation process is cumbersome and expensive. Limited shareholder numbers. Currently limited to 75. Significant limitation for a company that wishes to go public.

General Partnership

Formed by two or more people. Formation is simple but may require a partnership agreement specifying: Who is involved and their contributions, How profits, losses, and draws are to be treated, How one partner can buyout the other, How new partners are brought in, and How disputes are to be settled.

general partner

In an LLP, the individual considered the manage of the firm, who as such, has unlimited liability for the debts or judgments against the firm.

Vicarious (indirect) liability

Indirect liability or responsibility for the actions of another.

Subchapter S Advantages

Owner's limited liability. Potential tax benefit. Relatively easy formation. Compared to the Subchapter C. Legitimacy in the market.

General Partnership Advantages

Owners report profit or losses on their personal income tax. Some business expenses may be claimed. Easy to establish and easy to dissolve.

Waiver

Part of a contract in which a party intentionally gives up legal rights or claims.

Exculpatory clause

Part of a contract in which a party to the contract states that he or she will not be responsible for certain actions.

Noncompete clause

Part of a contract in which a person agrees not to open a certain type of business or seek employment doing certain things in a particular area for a period of time.

General Partnership Disadvantages

Partners are jointly liable for all debts. Partners have a responsibility to watch out for the best interests of other partners.

Independent contractors

Persons working to achieve a certain goal without being subjected to substantial controls by another.

4 steps to structure a negotiation

Prepare what you need to achieve Position by putting your best foot forward Propose solutions that provide value and balance Pounce when agreement on any part of the negotiation appears at hand

Intellectual property

Property coming from some sort of original thought; for example, patents, trade secrets, trademarks, and copyrights.

Intangible property

Property that has no value of its own but that represents value, such as a stock certificate.

Six major factors for Choosing a Business Form

Six major factors at play: Personal liability of the business owner Taxation of both the entity and its owners Complexity and organizational costs in setting up Control of the business Continuity of the business Ability of the business to raise capital

Infringer

Someone who uses intellectual property without the permission of the owner.

Piercing the veil

The dissolution of a corporate form, making it back into a sole proprietorship or general partnership, if the court finds that the owner carelessly mixed up personal and business assets or finances.

Trade name or assumed name or a doing business as (dba)

The name under which a business is operated.

LLC A limited liability corporation.

This business form is still relatively new. Limited liability feature. Allows more investors. Allows other corporations to hold stock. May have as few as one "member". Flexible profits. Owners avoid double taxation. Cost of formation is low. Some states apply limits.

LLP A limited liability partnership.

Two classes of partners: General partner, Limited partners who can work for the firm but cannot actively manage. One partner must be the general partner.

Standard contracts

company can just fill in the blanks as needed

Mediation

the dispute is put to a neutral third party who is not a judge.

Specialty contracts

unique contract terms, large dollar amounts at stake