MUST KNOW LEGAL KNOWLEDGE FOR STARTUPS FOR NEUCSSA CONNIE DAI CUTLER & WILENSKY, LLP OCTOBER 16,

TOPICS COVERED Speaker profile American legal system Incorporation Employment law basics Asset purchase Common problems in business deals Resolving disputes 2

AMERICAN LEGAL SYSTEM Common law v. Civil law Equity Federal v. State Value of writing Fair (example of discovery) Cannot give a simple answer (example copyright infringement) 3

PROFESSIONAL EXPERIENCE Practice business, employment and business litigation Business - transaction, incorporate, commercial contracts, general corporate matters Employment – wage & hour, wrongful termination, misclassification, severance, non-compete, non-solicitation Business consulting in Canada and U.S. B.A., M.B.A., and J.D. Licensed in Massachusetts and New York State Rising Star in business practice by Super Lawyers Magazine in 2014 and

INCORPORATION 注册公司 Why When Type – Sole proprietor, partnership, corporation, LLC, LP Where How Corporation  Double tax, formality, cheaper  Fill in Articles or Organization – officer, board of director, shareholder  Draft bylaws  Draft internal legal document  Apply employer identification tax number from IRS  Prepare stock certificates (optional but recommend)  Other agreements – partnership agreement, shareholder agreement, buy and sell agreement, confidentiality/non-solicitation/non-compete/assignment of patent? 5

INCORPORATION 注册公司 Limited Liability Company (LLC)  Fill Certificate of Formation – manager, member  Draft Operating Agreement  Member  Manager – he has management right unless agreed otherwise  Obligation to contribute additional capital  Member resigns – entitled to receive fair value unless agreed otherwise  Restriction on interest transfer (or by buy-sell agreement)  Voting right – member with > 50% interests control unless agreed otherwise  Admit new members – full member consent or by agreement IT IS NOT JUST ABOUT FILL IN THE PAPER, IT’S ABOUT UNDERSTAND THE SIGNFICENCE OF THE TERMS 6

BASIC EMPLOYMENT LAW At-will Employment agreement not required by law Use offer letter Wage and hour  Minimum hourly wage $9.00  Pay bi-weekly  Overtime 1.5 required except for EXEMPT employees  Worker’s compensation required  Unemployment benefit required  Social security  Medicare  Federal and state tax 7

BASIC EMPLOYMENT LAW – CONTI. Misclassification employee v. independent contractor  Employee may report to AG’s Office, DOL, or IRS  Fine or penalty is heavy NDA/confidentiality  Term can be as long as it is published  Contract gives owner/possessor most protection  May be common law protected Non-solicitation  Term be reasonable  Contract gives best protection 8

BASIC EMPLOYMENT LAW – CONT. Non-compete  Employment – only contract based, reasonableness, protect employer’s legitimate business interest (trade secret/confidential information/good will), sign non-compete does not make it automatically valid  Business sale – protect buyer, justify what buyer pays for, reasonable, good will is common, court may imply if not in contract Assignment of intellectual property  IP developed before employment  IP developed during employment  Who owns it Termination  Terminate for any reason except for age, color, nationality, disability, pregnancy, ethnicity, sexual orientation, etc. 9

ASSET PURHASE Negotiate the deal  What are you buying?  Fair value?  Exclude current and known liability?  Contingencies Incorporate a business (if don’t have one) Draft purchase & sales agreement Pay deposit if applicable  Not usual Conduct due diligence of seller  Legal – legal structure, officer, director, shareholder, share structure, whether has appropriate consent/vote, any threatened or current law suit  Business – manager, employee, employment related agreement, all contracts with obligation not fulfilled need assignment  Finance – books, accounting, records, debt 10

ASSET PURCHASE - CONTINUED Due diligence (continue)  Others – administrative proceeding, environmental More documents draft  Employment agreement, NDA, non-compete, patent assignment Assignment/transfer  Website/domain  Trademark  Contracts  Lease  Patent – must seek patent counsel  Business licenses Closing  Sign closing documents  Pay money 11

COMMON PROBLEM IN BUSINESS DEAL Lack understanding of US laws and US business customs Oversimplify process Underestimate complexity and want to cut corner Lack knowledge of complexity IP Ignore tax consequences Downplay or lack understanding of due diligence Don’t know power of “representation” Difficulty understand “conflict of interest” among company, founders, employees 12

Negotiate Demand letter Mediate Arbitrate Litigation Tools to avoid disputes – consult with lawyers, enter into written agreement, have something in writing Verbal agreement is also evidence – but hard to prove Recording without speaker’s knowledge not admissible in court When to hire lawyer – don’t have to unless sue or be sued as company 13 RESOLVING DISPUTES

CONNIE DAI CUTLER & WILENSKY, LLP (OFFICE) (CELL) WHCHAT: CONNIECHENFANGDAI 14 Q & A