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Business 101 class at Outside the Cube

A wonderful entrepreneur in the Bay Area, MF Chapman, founder of Cubes&Crayons, is building a resource for new and aspiring entrepreneurs called Outside the Cube. I went to an event a couple of weeks ago called Entrepreneurs and Eats and was blown away by the support and innovative ideas that the group came up with right away (thanks @kristinafesta @sarahntastic @aligntheself ).  

Now, Outside the Cube has announced a great new crash course for aspiring and new entrepreneurs: Business 101. It will cover the accounting, social media, marketing and legal aspects of starting and running a business that you need to know.I've been asked to teach the legal portion of the class and am so excited. Elizabeth Potts Weinstein and Stefania Pomponi-Butler are my co-faculty for this course. The schedule and signup is here. Please join us!

My new book: Virtual Incorporation

After a year in the making, my co-authors, Julie Tower-Pierce and Paul Gilles, and I are so excited to announce t he rel ease of our book Virtual Incorporation: A Lawyer's Guide to the Formation of Virtual Corporations. It is published by the American Bar Association and is available for pre-order now. This was so much fun to write and I can't wait to see where the discussion leads.

 

Taking Care of Business at BlogHer '08: Blog Law and Incorporation Resources

If you were at the BlogHer '08 session Taking Care of Business and are looking for additional resources, or if you weren't able to be there and want the resources, here they are. We had a lot of great questions on defamation, trademark protection, fair use, incorporation and more. If you have more questions, feel free to ask away.

Be sure to also check out the resources from Kelly Phillips Erb from TaxGirl and Sabrina Parsons from MommyCEO and CEO of Palo Alto Software. Some live blogging from the event: from the BlogHer website, Alexis Neely from the Interpid Mompreneur, and Dr Beth Snow from Miss 604. A copy of our presentation is here in .pdf too.

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Below is a list of resources around the web related to blog law and incorporation. Another thing I am hoping people find helpful, due to all the collaborative blogging we see happening, is my Co-Bloggers Worksheet. This won't give you the answers (maybe more questions!), but will give you issues to talk through with your fellow co-bloggers.   

Electronic Frontier Foundation (EFF)
•    Use this site to understand the current legal battles involving digital rights
•    “EFF is the leading civil liberties group defending your rights in the digital world.”
•    Legal guide for bloggers available

Creative Commons
•    Use this site to attach a license to your content, with conditions
•    ‘Creative Commons provides free tools that let authors, scientists, artists, and educators easily mark their creative work with the freedoms they want it to carry. You can use CC to change your copyright terms from "All Rights Reserved" to "Some Rights Reserved."’
•    Choose from 6 different licenses
•    Case studies available

Podcasting (audio and video blogging):
•    Creative Commons podcasting legal guide

Chilling Effects Clearinghouse
•    Use this site to understand the protections of the 1st Amendment and intellectual property laws.
•    ‘Chilling Effects encourages respect for intellectual property law, while frowning on its misuse to "chill" legitimate activity.’
•    Topic areas: copyright and DMCA, fan fiction, anonymity, linking, patents, protest/parody/criticism, trade secret and trademark
•    Searchable database of cease and desist notices available

Citizen Media Law Project
•    Use this site to learn about legal issues related to being a “citizen media creator” (AKA: citizen journalist)
•    “The mission of the CMLP is to provide education, legal training, and resources for individuals and organizations involved in citizen media. We also provide research and advocacy on free speech, newsgathering, intellectual property, and other legal issues related to online speech.”
•    Legal guide for creators of “citizen media”
•    Includes legal formation information by state

Trademarks:
•    The test for trademark infringement is “likelihood of confusion”
•    You can do preliminary searches for trademarks at Unites States Parent & Trademark Office website

Copyright and Fair Use:
•    There is no general rule (word count, etc.) for fair use. It is up to a judge to determine, using 4 factors: 1) the purpose and character of your use, 2) the nature of the copyrighted work, 3) the amount and substantiality of the portion taken, and 4) the effect of the use upon the potential market.
•    Stanford Copyright & Fair Use

Incorporation:
•    Visit your state’s Secretary of State website (here is California's)
•    Citizen Media Law Project: part of CMLP’s Legal Guide discusses choosing a business form
•    Self-help with incorporation:  check out Nolo press and Palo Alto Software
•    Incorporation services (with no legal advice): a couple of options are The Company Corporation and  Legal Zoom
•    Consult an attorney (and an accountant!) in your jurisdiction to help you with your specific needs

Co-Blogging:
•    Eric Goldman from Technology & Marketing Law Blog – article on co-blogging “No Safety in Numbers”
•    Ideoblog’s post on “Group Blog Agreements”

Disclaimer: The law can change quickly, so these resources may be out of date. Use of this information does not establish an attorney-client relationship between yourself and Linsey Krolik. Use these resources to get you started and consult a lawyer in your jurisdiction for legal advice.

Getting ready to take care of business

I am here at BlogHer and my session is set to start at 10:30am today. My voice is on it's way out, but hopefully it will last a bit longer!

In the session I will be covering some substantive law related to blogs (including defamation and intellectual property), how to limit your liability (via incorporation, agreements and terms of use), and issues related to co-blogging.

Handouts and links to podcasts and posts about the session will be available here following the session.

Hope to see you there.

A Video Interview About Legal Issues for Bloggers: My Upcoming Session at BlogHer '08

Randy Ksar, a running friend from Team in Training years ago and now a social media marketing expert, interviewed me the other day about my upcoming session at BlogHer and some of the main legal issues bloggers face. Thanks Randy!

Weekly Whereas: Virtual Company Incorporation, A New Book About Work-Life Balance for Lawyers, Warantless Wiretapping and My New iPhone

A few interesting things this week:

• Incorporation for virtual companies in Vermont? I'm not familiar with Vermont law. But I think it is very interesting to see a state marketing itself to those who get together for business without (ever?) meeting each other in person.

• A new book by fellow Silicon Valley Moms Group blogger Julie Tower-Pierce is going to be available soon from the American Bar Association (and Amazon, etc.):  "Staying at Home, Staying in the Law: A Guide to Remaining Active in the Legal Profession While Pursuing Your Dreams." And, hey, apparently, I am quoted in it! I am hoping to get my hands on a review copy soon. 

• The EFF is continuing to fight against warantless wiretapping

• I'm totally getting a 3G iPhone today. Will it have to be white?

Come See Me at BlogHer '08

 I've been invited to speak at BlogHer '08 on July 18th on legal issues related to blogging as a business and the schedule has just come out. Hooray!

Here's the description of the session:

Taking Care of Business
If you're a blogger, and your blog contributes to your livelihood...whether through direct monetization or as a platform to get freelance and consulting work...then it's a business. But what does that mean? What should you be thinking about? Three experts are on hand to get down to brass tacks. Starting with taxes. Kelly Phillips Erb is back to give you the low-down. Linsey Krolik will answer your legal questions, including when incorporation makes sense. Finally Sabrina Parsons will try to demystify the number one question many freelancers and consultants have: How do I quote for my services and build a proposal that attaches the appropriate value to my time and the work I do?

Come join me!

May 22, 2008 Update: This session has been moved from July 19th to July 18th.

Keeping Your Business' Corporate Veil Intact

There are many reasons to incorporate a start-up business. One of the biggies is to obtain limited personal liability for the founders and managers of the business. In practice, this means that the liability of the individual shareholders of the corporation (or the members of an LLC) will be limited to the assets of the corporation. In other words, the personal assets of the shareholders, managers, and founders (your house, your car, your Manolos, etc.) are largely protected in the event of a claim against the business.

So you've incorporated your new business. How do you keep that "corporate veil" intact so that your liability as a shareholder, manager, founder or member is truly limited...and remains limited? Here's a top 5 list to help out:

1.  Keep good records about your business decisions. If you have incorporated as a corporation, you must have regular board of directors meetings and annual shareholder meetings. You must document major decisions about the business and keep meeting minutes (or unanimous written consents) in the company's record book. If you have incorporated as an LLC, the formalities are much less stringent, but you should still make sure you document major decisions and the agreement of the managers for those decisions.

2.   Don't comingle funds between personal and business expenses.  Although you might have obtained a Federal tax ID number (FEIN) and opened a bank account for your business right away, it can be tempting to be a bit loose your personal and business accounts. This is NOT a good idea. Just don't do it. You are asking to be audited at the very least. Keep everything strictly separate. Funding your business adequately in the first place will help you to do this.

3.   Treat the business like the separate entity that it is. When you are presented with a new business opportunity, as an officer or director of a corporation, you have a duty to think of the corporation first. That is, before you think of pursuing the opportunity for yourself, you must first present it to the company - if it declines to participate, only then you can go after it yourself. Likewise, all financial interests in a proposed transaction by a director or officer of the company needs to be fully disclosed to the other directors before the board can discuss it and vote upon it. Be up front.   

4.  Be consistent with your company name.  You need to sign documents, get stationary, do marketing and all other company activities under your formal corporate name. Definitely don't sign agreements under your name as an individual, as personal guarantees do not get you the liability shield. And if you are using any name other than the name you incorporated under, you will need to file a fictitious business name statement (otherwise known as a "DBA" or "doing business as").

5.  Be legal.  Don't engage in illegal activity or fraud. Having a corporation or LLC will only protect you so much. Fair is fair, after all.

Original Whereas post. Like any good lawyer, I have to let you know that this is not legal advice and that you should consult with an attorney in your jurisdiction for legal advice. Please see my site disclaimer for more.

Professional Accountants, Lawyers and Architects - To Incorporate or Not To Incorporate?

Many of my clients struggle with what type of entity to choose for their new business. Sole Proprietorship, Partnership, LLC, C Corporation, S Corporation? Wading through the choices, there are pros and cons of each setup in terms of governance/management, raising money, exit strategy, employee ownership and compensation, tax treatment, and more, and it really does take a lawyer to be able to find the right one for your particular business and situation. (Yes, the answer "depends" on many factors - it is not clear cut!)

Professionals in California have some special considerations...

For a few select professions - public accountancy, law and architecture - the Limited Liability Company (LLC) form, which is so attractive for all kinds of other businesses due to its ease of formation and limited personal liability for members, is not available in California. To address this, California created the Registered Limited Liability Partnership (RLLP or LLP) for these three professions. The LLP is similar to an LLC in that it provides limited personal liability for the partners (including regular debt, contracts, and claims) and does not have the burdens associated with a corporation such as keeping meeting minutes, holding annual shareholder meetings and so on. It also has the added bonus of keeping malpractice of the professionals in the LLP separate. In other words, partners won't be held personally liable for their partner's malpractice -- only their own. This is what is sometimes referred to as "full shield" protection. Nice!

However, there are some statutory requirements associated with LLPs in California. The LLP must carry a certain level of professional liability insurance - $100,000 per licensed person rendering services on behalf of the LLP, with a minimum of $500,000 for the LLP as a whole with fewer than 5 licensed persons, and a maximum of $5 million for an architecture or accountancy LLP and $7.5 million for a legal services LLP. Alternatively, these insurance requirements can be foregone by a showing of financial responsibility -- a fairly high net worth of at least $10 million for architecture or accountancy firms and $15 million for legal services firms. In addition to filing (and renewing annually) RLLP paperwork with the California Secretary of State, partners in an LLP should also enter into a partnership agreement to govern all of the terms regarding how contributions will be made, how profits and losses will be divided, what happens if a partner leaves or dies, and other considerations of the partners.

Oh, and and LLP has to have at least two partners licensed in the same profession.

For these three professional types, if they won't meet (or don't want to deal with) the statutory requirements of the LLP, or if there is only one licensed professional in the business, a common alternative is a regular C corporation or, sometimes, a S corporation, which is a regular corporation which has elected, for tax purposes, to be taxed like a partnership with profits and losses flowing to the partners. Corporations, whether the regular C or the S type, have the very attractive limited personal liability for its shareholders, and do not have the professional malpractice insurance requirements of LLPs. The flip side is that corporations have more "maintenance" than LLPs, in that they must be governed by a board of directors, appoint officers to run the corporation day to day, issue stock, hold annual meetings, keep meeting minutes, prepare formal documentation of corporate decisions, and keep very good paper trails of all legal and financial corporate dealings.

Again, the decision always "depends" on the individual business. Good luck, and, if you need help forming your new business, feel free to contact me.

Original Whereas post. Like any good lawyer, I have to let you know that this is not legal advice and that you should consult with an attorney in your jurisdiction for legal advice. Please see my site disclaimer for more.