1. Business Legal Services for Entrepreneurs
Legal Services of Eastern Missouri
Community Economic Development Program
December 8 & 10, 2015
© Legal Services of Eastern Missouri, Inc. 2015

2. © Legal Services of Eastern Missouri, Inc. 2015
This presentation is for general information only. The information presented is not legal advice, and your use of it does not create an attorney-client relationship.
No recipient should act on the basis of any content included in this presentation, including the audio and visual parts, without seeking the appropriate legal advice from counsel.
© Legal Services of Eastern Missouri, Inc. 2015

3. Program Overview Free business legal assistance to
Existing businesses AND
Start-ups
Range of legal issues
Entity formation
Commercial leases
Employment
Contracts
Intellectual property

4. Program Overview Benefits to Businesses Services offered
Avoid time-consuming, potentially devastating problems
Help business grow
Services offered
One-on-one legal representation
Business legal workshops
Legal counseling

5. Topics covered Maintaining your legal entity Regulatory requirements
Hiring and firing
Protecting your intellectual property
Commercial leases and other contracts

6. Choice of Legal Entity Operate as sole proprietor/partnership? OR
Form separate legal entity, e.g., corporation or LLC?
Factors to consider
Who has formed an LLC or corporation? Have people say
Ask reasons why people formed one or the other
Be prepared to explain basics on each form based on liability, taxation, ongoing obligations, ease of getting investments or loans

7. Choice of Entity – Considerations
Liability
Taxation
Ability to raise $
Ongoing requirements and fees
Management and ownership of business
Ability to transfer ownership

8. Main types of legal entities
Sole Proprietorship
Partnership
Corporation
S Corporation
Limited Liability Company

9. Business legal structure –what does it mean?
Independent entity, separate from owner/s
No personal liability
Draw picture on board – sole p and pship vs. llc and corp

10. A few details on LLCs
Formed by filing Articles of Organization with the state (currently $50)
Few on-going formalities: no stock certificates; no board of directors; officers are optional
No personal liability if done correctly (is like corporation)

11. LLC (cont’d) Owned by members
Flexible ownership and management structure
Managed by members or a manager chosen by members
Pass-through taxation if single-member
Briefly mention corp and s corp

12. Protect your legal entity
Adequate capitalization
Separate bank accounts
Uses business name on all marketing materials
Somewhere must show full legal name (e.g., Opaque Glass Co, LLC)
Can have a separate DBA (“doing business as”)

13. Protect your legal entity
If LLC, must have written operating agreement
Required by law with 2+ members
If corporation
Board of directors must meet at least 1x/year
Shareholders elect directors
Maintain minutes
File annual/semi-annual reports

14. Protect your legal entity
Contracts must be in the name of the entity itself (never your name):
This agreement is made December 10, 2012 by Opaque Glass Co., Inc. and Transparent Window Awning Co., LLC (or Transparent Window Awning Co., Inc.) by which

15. Protect your legal entity -- contract signature
Sign with business entity’s name, not your name
Transparent Window Awning, LLC
By: _________________
Name: [Tom Jones]
Title: [Chief Executive Officer]

16. Maintain adequate insurance
General commercial liability policy
Depending on type of business
Auto insurance
Product liability insurance
Professional liability insurance for services businesses
Coverage for home-based businesses
Way to protect against personal liability for a sole proprietorship or partnership

17. Sales/Use Tax
If selling a product or service at retail, must obtain a sales tax license and collect sales tax
If storing, using or consuming property must obtain a Vendor’s use tax license
Required to post a bond, amount based on estimated monthly sales

18. Sales/Use tax – bond requierments
Secure funding for the bond with
Cash
Surety bond from an insurance company
Letter of credit from a bank
Certificate of deposit

19. Employment Anti discrimination laws
Employee vs. independent contractor
Policies and procedures
terminations
For anti-discrimination:
Federal: Title VII of the Civil Rights Act of 1964 applies to businesses with 15 or more employees
State: Missouri Human Rights Act = businesses with 6 or more employees. Can have personal liability

20. Employee v. Indep. Contractor
Pivotal Question: Who has the right to control when, where and how work is completed?
Employer has right to control how the work is performed
Independent contractors choose method of completing work 20

21. Employee v. Indep. Contractor
Major Factors to Determine:
Who supplies equipment?
Who determines when person works?
Regular salary? Hourly? Based on project deliverables?
Duration of employment
Right to discharge 21

22. Employee v. Indep Contractor
See Missouri and IRS 20 factor test at:

23. Employment Policies and Procedures
Employee handbook
Discipline
Regular performance evaluations

24. Employment - Terminations
“At will” relationship: can fire anyone for any reason as long as it is not an illegal reason
BUT…

25. Employment - Terminations
Before termination, consider:
Prior notice for unacceptable behavior
Reasonableness of policy and fair application
Adequate investigation
Proof of policy violation
Progressive discipline
3rd person present in termination meeting

26. Intellectual Property
Trademarks
Copyright
Trade secrets
Patents
Websites

27. Trademark
Word, symbol, and/or design used to identify and distinguish a product service or business from others
Must be non-generic
Identifies source of good or service
KODAK ®

28. Trademark Trademark – used with products ™
BIG MAC, Coca Cola
Servicemark – used with services (SM)
Hertz (rental car services)
Facebook

29. Trademark Types of trademarks
Word marks (NIKE)
Slogans and tag lines (just do it)
Stylized words (Coca cola)
Logos, designs (apple icon) (note, just the design is protected)

30. Trademark Types of trademarks (cont’d)
Colors, sounds (T-Mob jingle), smells (perfume)
Trade dress – design of
product or package

31. Trademark (protecting your mark)
Notice: use “TM” “SM” or ®
State vs. Federal
Must actively enforce rights
Cease and desist letters
Renewal every 10 yrs with USPTO

32. Trademark Avoiding Infringement on Other’s Marks
Do not duplicate existing trademarks
Search US Patent Office web site ( and the internet to determine if there are existing trademarks in that name
Letters from other businesses claiming trademark infringement must be taken seriously

33. Copyright
Original artistic or intellectual expressions fixed in a tangible medium (e.g., curriculum, books, computer programs, databases)
Gives business/individual exclusive right to control the use, distribution, adaptation, display and performance of the work 33

34. Copyright Copyright created automatically
Add © or “copyright” and the year (e.g., “copyright 2012”)
Can register with Library of Congress

35. Copyright Practical Tips
Avoid infringing others’ copyrights:
Generate your own pictures, images and marketing materials
Do not copy software
When in doubt seek a license
Fair Use not an infringement
Amount used
Purpose and nature of the use (educational generally okay) 35

36. Copyright
If contractor prepares materials, have him/her assign ownership of materials to business

37. Copyright & Trademark For more information on copyright see:
For more information on trademarks and copyrights see:
www.

38. Trade Secrets
Information that has independent economic value because it is not generally known to other people
Examples: recipes, client lists, business information, software code
Non-disclosure agreement

39. Patents
Right to exclude others from making, using or selling an invention
Two principal types
Design patent: what the product looks like
Use patent: how the product works

40. Patents cont. Limited duration Involves filing and maintenance fees
If you think you have a patentable design or invention only share it with legal counsel

41. Websites Have a written contract with web designer/host
Use own pictures and other material
Can put links to other websites on your site

42. Work for Hire Who owns intellectual property created for the business?
Business if created by employee
Individual if created by independent contractor
Can change these default rules by written agreement

43. Commercial leases Total economic costs
Other essential terms that could impact the business
Do not rely on verbal promises from landlord or landlord’s attorney

44. Lease Agreements Essential terms (required by MO law):
Identification of the parties
Description of the property
Rent
Term of lease
Include name and address. Remember to use corporate name for liability shield. LL must include his/her name and address as well as manager’s if there is one
Don’t just use address. Spell out what T has exclusive control over, parts of common area T can use, and parking (e.g., nonexclusive use to use halls, stairs, elevators, restrooms, other common areas and access points)
Term of lease means duration – start and end date. Lease may be effective before term of lease begins. Date of termination must be clear or could become tenancy at will or year to year.
If property is unfinished and/or needs substantial improvement lease should state that term begins when property is ready for occupancy rather than specifying a date.

45. Lease Agreements: Economic Factors
Space—confirm sq. footage, delivery date
Security deposit
Rent

46. Lease Agreements: Rent
Base Rent (Formula? $/sq. foot; % gross sales)
Additional Rent
Other costs (e.g., utilities, property taxes, insurance, maintenance)
Look out for vague language -- “costs of managing and operating the building . . .”
Annual increases in multi-year leases (specify how increases are calculated)
Re: additional rent. Often see an “escalation clause” allowing for increased rent in correlation with LL’s increased operating costs. TIP: try to get as much specificity as possible with additional rent.
Could ask for estimated range of cost increases and propose a cap

47. Rent (cont’d) Specify when rent due Late fees, if any
When first and last payments are due
Place of payment
When rent due – custom in MO is one mo in advance

48. Economic Factors (cont’d)
Insurance often required
General liability
Casualty to protect personal property
Improvements
Often requires LL approval
Who pays?
Removable fixtures
Maintenance/repairs – who covers expensive items?
Pre-existing environmental problems
T has no obligation to insure the property and LL has no obligation to rebuild after a fire, flood or other casualty. Leases often contain these clauses. Want a clause allowing for rent abatement while LL rebuilds.
RE: repairs. Typically LL responsible for structural repairs and Tenant for non-structural. Who responsible for snow and ice removal?
Re: environmental problems, if have question about property want LL to include a representation that t here are no problems (e.g., asbestos, hazardous substances)

49. Lease Agreements: Flexibility
Change in use
Assignment -- right to sell business
Sublease
Extend term
Agree on rent or formula to calculate rent for extended terms
Notice to LL often required
Expand space
Option to purchase
Assignments and subleases --- need LL written consent if lease term is less than 2 yrs. If longer, freely assignable. HOWEVER, often lease will still require written consent
If sublease LL may want any profit T collects
Extend term—may require notice to LL by certain time. Could be automatic renewal unless T gives notice or onus on T to provide notice to renew

50. Lease Agreements: Other Important Terms
Right to refuse to lease other space
--e.g., no competing businesses
Termination
Events of Default
Subordination (to mortgage or other lien)
Personal Guaranty
Default – notice not required by law. Try to negotiate notice so T has chance to cure default. Spell out what constitutes default (e.g., failure pay rent or make repairs, use property illegal way or use not specified in lease, LL mortgaging or selling property, T fail comply with other promises in lease. LL fail to provide services stipulated in lease
Personal guaranty often required unless can show corp’s financials can perform tenant’s obligations during lease term

51. Lease Agreement: Default by Tenant
LL can ignore default
Give Tenant notice, take possession and relet
Terminate lease

52. Lease Agreement: Termination
If tenant stays after end of lease, terms of lease apply
Who keeps fixtures?
Unless lease states otherwise
Fixtures left for LL or T must remove. Depending on business, if large amount invested in fixtures could be costly for T if LL keeps. Best to spell out what T gets to take, what must leave for LL

53. Lease Agreements -- Tips
Consult an attorney
If LL has an attorney, do not rely on him/her
If business is a legal entity, sign with corporate name
Put lease in writing
Law requires it if longer than 1 year or
if term is other than month to month
If legal entity, sign as follows: ABC Corp, Inc., a MO corporation. Then name and title e.g., John Smith, President
If lease is just oral, will be deemed month to month. Also, if circumstances change (e.g., landlord sells to new person), that person might not follow understood agreement you have had with original LL)

54. Contracts May be oral or written
Advisable to put agreements in writing
Clearly describe terms of agreement
Avoid “piercing the corporate veil”

55. Contracts Why Make a Contract?
Written Agreement: Less room for misunderstanding
Helps identify and resolve differences
Legally enforceable: Protect yourself from unfair business practices
Clearly articulate business terms

56. Certain Agreements MUST Be In Writing
Purchase of land
Goods specifically manufactured for the buyer
Sale of good greater than $500
Contracts that cannot be completed within one year
Goods specifically manufactured: Tshirts for a nonprofit fundraiser event
Oh yes, and marriage

57. Key provisions Breach and termination Remedies for breach
Term and any renewal term
Representations and warranties
Reps – induce one to enter into contract e.g. house purchase agreement make rep as to age of roof. In purchasing a business, may want reps that there are no outstanding taxes or liens, no unpaid debts
Warranty mostly with goods, that they will not be defective for certain period of time

58. Contact information
Laurie Hauber, Program Director and Staff Attorney
Ebonie Reed, Staff Attorney
Legal Services of Eastern Missouri, Inc.
Community Economic Development Program
4232 Forest Park Ave.
St. Louis, MO 63108