Entrepreneur Guide To Business Law

Entrepreneur’s Guide to Business Law 1. Taking the plunge a. Who owns the technology b. What should a entrepreneur do make the departure from company amicable c. Can you ask co-workers to join new enterprise d. Should he hire attorney, budget e. Choosing the legal form of business, tax standpoint f. How should he split the equity among founders g. How will he manage the venture? h. Adv/disadv of board of directors? Who? i. Options of financing the new venture? j. Ensuring that customers pay on time & suppliers are paid on time? k. Warranties implied in selling the product? l. Minimum wages, overtime, ssn, taxes, insurance m. Leasing vs. buying n. Operational liabilities & insurance o. What happens if company runs out of cash or can’t pay off its debts. p. How to seek venture capital q. Protecting IP r. Market: domestic vs. international s. Going public 2. Leave a. b. c. d.

your employer Position with the company Type of new venture – non-competing Solicitation of co-workers Post-employment restrictions & covenant not to compete i. Anciliary to another agreement ii.Legitimate interests iii.Limited in scope e. Interest of public f. Trade Secrets : information that is not generally known i. Misappropriation of trade secrets: NDA ii.Criminal liability g. Invention Assignment Aggreement & Works for hire: assign all invention to employer h. Strategies for leaving on good terms

3. Deciding whether to incorporate a. Partnership agreements & mechanics b. Tax treatments c. Selecting a C corp, S corp, Partnetship

i. Who will be owners? ii.How does business expect to return its profits to owners iii.Is the business initially expected to generate profits or losses? d. Conducting business in other states, local licenses & Insurance e. Choosing and protecting the name of the business 4. Structure the ownership a. Incorporation i. Where to incorporate ii.Certificate of incorporation iii.Bylaws: operating rules are set forth in bylaws iv.Mechanics of incorporation b. Splitting the pie c. Issuing Equity, Consideration & Vesting i. Types of stock ii.Consideration for stock d. Treatment of founder’s stock & ESOP e. Vesting f. Summary of Tax consequences of various forms of equity compensation g. Agreements relating to transfer of shares i. Right of first refusal ii.Buy-sell agreements iii.Co-sale agreements h. Shareholder voting agreements i. Proprietary information and inventions, employments and non-compete agreements 5. Forming & working with the board a. The benefits of having an independent board b. The size of the board c. Frequency & duration of board meetings d. Type of representation desired e. The needed skills f. Personality mix and board structure g. The responsibilities of the board i. Duty of loyalty & good faith ii.Duty of care & oversight iii.Limitations of liability & indemnification h. Business judagement rule i. Compensation of the board members i. Intangible compensation for directors ii.Tangible compensation for directors j. Type of information board of directors need

k. How to make effective use of the board 6. Raising money & Securities regulation a. Sources of funds i. Friends & family ii.Angel investors iii.Venture capital funding iv.Use of placement agents v.Self-financing & credit vi.Strategic alliances & joint ventures b. Pitching to Investors c. Requirements of business plan d. The private placement memorandum e. Issues related to investment securities f. Equity financing g. Rights of holders of preferred stock h. Stock purchase & related agreements i. Federal securities registration & exemptions j. Private offerings k. Regulation D: safe harbor exemptions for offerings to the public of up to $1 million & priate placements l. Intrastate offerings i. Regulation A ii.Rule 701: offering to employees, consultants & advisors m. Blue sky laws 7. Contracts & Leases a. Choice of law b. Elements of contract i. Offer & acceptance ii.Counteroffers iii.Authority iv.Consideration: bargained for exchange v.Unilateral contract c. Oral agreement & statute of frauds d. Advantages of putting a contract in writing e. Preparing written contracts i. Drafting language, form ii.Electronic contracts, E-sign act, exclusion f. General contract terms to consider i. Identification, signatures. ii.Establishing intent to enter into contract iii.Terms of agreement iv.Duration & notice of termination v.Renewability of contract

vi.Checklist for contract analysis g. Effect of bankruptcy h. Remedies: monetary damages, non-monetary equitable damages i. Promissory estoppels, quantum meruit, leases j. Contract for the purchase of real property k. Loan agreements 8. E-commerce & Sales of goods and services a. Article 2 of Uniform Commercial Code( sale of goods) i. Definition of goods, contract formation, battle of forms, statute of frauds ii.Article 2 Warranties: Express warranty , Implied Warranty of merchantability/of fitness, limiting liability & disclaimers iii.Magnuson-Moss Warranty act: to protect consumers against deception in warranties b. Electronic contracts i. E-sign act & Uniform Electronic transaction act. c. Strict liability for defective products d. Successor liability: in case of company merger e. Privacy laws f. Unfair competition g. Jurisdiction, settling online disputes in offline courts 9. Marshaling human resources a. Employees vs independent contractors b. Employement legislations: i. Title VII of civil rights act of 1964: disparate treatment, disparate impact, harassment, bonafide occupational qualification, seniority & merit systems, age discrimination in Employment act, disabilities act, family & medical leave laws, c. Prehiring practices i. Job advertisements ii.Applications & interviews d. Employee privacy, monitoring of employee email, limitations on use of employee health information e. Employement at will and wrongful discharge. f. The employment agreement: duties, compensation, benefits, stock option & grants, duration & termination of employement, right to work in US, proprietary information & inventions agreements, noncompetition clauses g. Insurance, health, anti-discrimination 10.Operation Liabilities & Insurance a. Negligence

b.

c. d. e. f.

g. h. i. j. k. l.

i. Duty, standard of conduct, ii.Defenses t onegligence: contributory vs comparative Intentional torts: i. Torts that protect people :battery (contact of harmful substance with plaintiff’s body), false imprisonement, intentional infliction fo emortional distress ii.Torts to protect interests in property: trespass to land, nuisance ( public & privance), conversion( control over left alone property) iii.Torts that protect business interests & economic interests: fraudulent misrepresentation , interference with contractual terms, unfair competition Strict liability: ultra-hazardous activities Toxic Torts: wrongful act that causes exposure to harmful substance Tort Remedies i. Actual damages, punitive(exemplary) damages, equitable relief Tort Liability of Multiple defendents i. Joint or several liability ii.Contribution or indemnification Antitrust violations Environmental liabilities Bribery & foreign corrupt practices act: bribery, record-keeping provisions Tax Fraud Wire & mail fraud Obstruction of Justice & Retaliation against whistleblowers i. Computer crime & CFAA( computer fraud & abuse act) ii.Insurance, implied duty of good faith & fair dealing

11.Creditor’s rights & bankruptcy a. Types of loans: term loans, revolving loans, secured loans b. Loan agreements c. Secured transactions under UCC: terminology, scope of article 9, formal requisites d. Security Agreement: parties, granting clause, description of collateral, after-acquired property, proceeds e. Debtor’s obligation: Cross-collateralization, remedies for default f. Perfecting a security interest: by possession, by filing, by control, automatic perfection g. Types of creditors & their rights: secured creditors, unsecured trade creditors, equiptment lessors, taxing authorities, employees h. Personal guaranties i. Strategies for responding to a financial crisis i. General considerations ii.Out-of-court reorganization

iii.Out-of-court Liqidation iv.Secured creditor & Foreclosures j. Types of Bankruptcy i. Chapter 11 vs Chapter 7 liquidation(straight) ii.Voluntary versus involuntary bankruptcy k. Chapter 11 i. Costs of bankruptcy, automatic stay, types of creditors in bankruptcy, payment priority, executor contracts & leases ii.Exclusivity period, classification of claims, unasserted contingent & unliquidated claims, plan volting requirements, cramdown issues & absolute priority rule l. Running a business in bankruptcy i. Cash collateral, post-petition financing 12.Intellectual property & Cyberlaw a. Trade secret protection b. Enforcing trade secret rights: establishing a trade secret protection program, pre-employment clearance, NDA, Non-competition agreements, employee education, exit interview/agreement, building security c. Copyirghts: gives the owner the exclusive legal right to obtain certain economic benefits from work, fair use, duration of copyrights d. Proving copyright infringement: direct, vicarious, contributory e. DMCA f. Patents: types- utility patents, design patent, the statutory bar: patent will be denied if its is disclosed 1 year before the application is filed, duration: utility:20, design:14 years g. Trademarkes: name, phrase, symbol that makes u distinguishes u h. Licensing: what is to be lincensed, covenants, scope of license, payments, Shrink wrap(packaging) licenses & click wrap(“I Accept”) lincenses, Importance of due diligence, technology & human capital 13.Buying & Selling a business a. Business combination(instant cash, limited returns) vs IPO b. Forms of business combinations: Asset Purchase( with liability), Purchase of equity(no liability) c. Tax treatment: taxable purchase & sales of assets, taxable forward merger, taxable urchse & sale of stock, taxable reverse triangular merger

14.Going a. b. c.

Public IPO vs Sale of company Is the company a viable IPO’s candidate? IPO process:

i. preliminary prospectus, due diligence, road show, pricing committee, final prospectus ii.selecting the managing underwriters: lead underwriter & comanagers, firm commitment offering/best effort offering, syndicating & gross spread, beauty contest or bake-off( selecting the underwriter after presentations) iii.participants: company’s management, underwriters, company’s counsel, underwriter’s counsel, company’s independent accounting firm(auditors) iv.due diligence v.determination of stock price & offering size vi.confidential treatment of material agreements vii.Exchanges, NASDAQ, Blue sky laws viii.SEC Comments, The Road Show, Delayed or Terminated Offerings ix.Pricing, Commencement of Trading & Directed shares, The closing, Restriction on sale of shares, Lock-up agreements, trading of stock not issued in public offering of rule 144, contents of prospectus, liability for misstatement in the prospectus x.Preparing for an IPO: prefiling Publicity, postfiling publicity, posteffective quiet period, board composition, reincorporation in Delaware xi.Responsibilities of Public company & its board of Directors: currents & periodic reports, effect of proxy rules, deirector’s responsibility in a public company, insider trading, safe harbor for pre-existing arrangements or blind trusts, company liability, liability for short swing profits, insider reports, xii.Post IPO disclosure, communications with analysts & regulation FD: disclosure obligations, safe harbor for forward looking statements