What is a Force Majeure?

The term force majeure has been in the news a lot lately due to the coronavirus pandemic. Still and unsurprisingly, many startups, small businesses, and individuals are unaware of what that clause refers to.

A force majeure is an event that is typically unforeseen or uncontrollable at the time two parties enter into a contract. A force majeure provision is a “boilerplate” clause in many business contracts that free the contracting parties (or a single party) from their obligations if such an event occurs. The language will typically look something like this:

Force Majeure: Neither party shall be held responsible for delays or non-performance caused by activities or factors beyond its reasonable control, including without limitation, war, weather, strikes, lockouts, fires, acts of God, terrorism, or any other activities or factors beyond its control, whether similar or dissimilar to any of the foregoing. Notwithstanding the foregoing, the affected party shall promptly provide written notice thereof to the other party, which notice shall include a detailed description of the event of force majeure along with the affected party’s best estimate of the length of time such event will delay or prevent performance hereunder.

Some clauses may be broader or more specific than the one above. If your contract has language similar to the paragraph above, you would most likely say that the coronavirus is an “act of God,” or claim that the governments shutting down borders/cities are “other activities..beyond its [your] control.” However, keep in mind that this language obligates you (“Notwithstanding the foregoing, the affected party shall“) to “promptly” provide the other party notice with a “detailed description” of the event and your estimated time of delay.

For questions about force majeure, its impact on your business contracts, or any other business contract provision, contact our firm!

How Much Does it Cost to Form an LLC in NYC?

If you plan on forming an LLC in New York, you should know what the costs of doing business are. To create an LLC in NYC, you need to file “Articles of Organization” with the New York Department of State, Division of Corporations. The associated filing fee for the Articles of Organization is $200.

New York also has a unique requirement for foreign AND domestic LLCs. A “Certificate of Publication” must be filed within 120 after filing the Articles of Organization. NYS will provide a Certificate of Formation after the LLC submits “proof of publication,” stating that it was “published” once a week, for six consecutive weeks, in two newspapers in the town/city of its formation. One paper must be daily and the other, weekly. The publication could cost anywhere between $150-$1,200, depending on the papers chosen. The associated filing fee is $50.

LLCs doing business in NYC need to file a “Biennial Statement” with the State of New York every two years. The filing fee for the Biennial Statement is $9. If you fail to file the Biennial Statement and pay the associated fee, the LLC won’t be in good standing.

Some businesses choose to do business under a name other than the name on their Articles of Organization. If you want to do business under an assumed name/tradename, you must file a Certificate of Assumed Name with the NYS Department of State. The cost of this application is $25. Once submitted, you will be able to legally use the alternate name for marketing, finances, and other business purposes.

In sum, the costs of forming an LLC in NYC are as follows:

  (a) Articles of Organization – $200;

  (b) Certificate of Publication – $50; (plus newspaper fees)

  (c) Biennial Statement – $9; and

  (d) Certificate of Assumed Name – $25 (optional).

How Much Does it Cost to Form an LLC in NJ?

If you plan on forming an LLC in New Jersey, you should know what the cost of doing business is. To create an LLC in NJ, you need to file a “Certificate of Formation” with the NJ Division of Revenue and Enterprise Services. The associated filing fee for the Certificate of Formation is $125. Each year your LLC in NJ is active and doing business; you will need to file an “Annual Report.” The filing fee for the Annual Report is $75. If you fail to file the annual report and pay the associated fee, your LLC won’t be in good standing.

Some businesses choose to do business under a name other than the name on their Certificate of Formation. If you want to do business under an alternate name/tradename, you must file a Form C-150G. This can be done online or by regular mail. The cost of this application is $50. Once submitted, you will be able to legally use the alternate name for marketing, finances, and other business purposes.

In sum, to form an LLC in NJ, the costs are as follows:

  (a) Certificate of Formation – $125;

  (b) Annual Report – $75; and

  (c) Alternate name — $50 (optional).

Should I form an LLC or Corporation?

The question, “should I form an LLC or Corporation,” will come down to a handful of factors. These factors include your short & long term goals, business model, and potential tax liability.

When wearing the hat of a high-tech startup attorney, we typically advise clients to form C-Corps. LLCs (generally) will not be the best fit for your long term plans. Unlike C-Corps, which can issue stock (equity) and large amounts of it, LLCs have membership interests and are a relatively new type of legal entity, which makes them less enticing for venture capitalists. Corporations have been around for over 100 years, so the legal precedent and protections afforded to stockholders, officers, and directors, are generally set in stone (depending on the state).

When the small business lawyer hat is on, and it’s been established that you’re short-medium term plans don’t include venture capital funding, an LLC might be a great fit because they offer pass-through taxation and have less operational red-tape than Corporations.

It’s also possible to start out as one entity and switch to another (harder in some states than others). Both entities have pros and cons, and each matter requires a separate analysis of the facts in order to determine which entity is a better fit. Contact the Law Office of Elliott J. Brown to discuss whether an LLC or Corporation is better for your future plans and goals.

How do I start a business?

Most entrepreneurs and creators get their start by asking a straightforward question, “how do I start a business?” Starting a business requires careful planning, risk tolerance, dedication, and vision. Working with the right business lawyers can make it easier. Once you have determined an initial idea for your business, it is essential to thoroughly evaluate the market in which you will be operating (if there is one), and discover how you can best contribute to, or disrupt it with, your business idea.

You will then need to decide whether to establish a legal structure for your business, such as a C Corporation or a limited liability company. This will depend on the individuals involved in your business, tax implications, and liability risks. Once you have decided on the legal structure that is best for you, you will need to register your business in the jurisdiction(s) where you do business. This could be where you live or where you want your business to operate. This will include filling out some necessary paperwork and paying a registration fee. It is important to remember that this registration will need to be renewed yearly or biannually.

Finally, you will need to obtain a tax ID for your business in order to pay corporate taxes to the IRS. You will also need to apply for any licenses or permits relevant to your business. For instance, if you will be starting a food-related business, you may need to obtain the necessary health and safety permits from your local government.

How Do You Protect Business Ideas?

Depending on what is at stake, there are several options available to protect business ideas from being stolen or copied by others. If you want to ensure that your business partners or employees do not misappropriate or share important business ideas or information with others, your best bet may be to create a non-disclosure or non-compete agreement that includes certain restrictive covenants in it. These restrictive covenants, if drafted reasonably, can protect important and/or proprietary information. These types of agreements help to ensure confidentiality among employees and other individuals associated with your business, and they also protect against their leaving your company to create a competing business nearby that utilizes your ideas.

If your business idea is revolutionary or has required extensive money and time on your part, you may wish to obtain intellectual property protection to protect business ideas. These are legal protections offered by the government and typically require a fee to obtain. The main forms of intellectual property in the U.S. are trademarks, copyrights, patents, and trade secrets. If your idea, design, or trademark is complex or similar to those already registered by others, you may consider hiring an intellectual property attorney to help you navigate the patent, copyright, and/or trademark registration processes.

Why do so many Startups Incorporate in Delaware?

“Why do so many startups incorporate in Delaware” is one of the questions entrepreneurs and startup founders ask us the most. As co-founders or business partner(s) sit around a table and discuss the best ways to bring their startup to life, one of the topics that usually pop up is entity formation.

There are at least a half-dozen reasons startups and businesses choose to incorporate in Delaware over other states. Among the most important reasons that startups choose to incorporate in Delaware are: (1) favorable business tax regime; (2) more predictable legal outcomes in the corporate law realm; (3) a specialized court (Delaware Chancery ) for corporate law disputes; (4) well-established and robust protections for Directors, Shareholders, and Officers; (5) quick and efficient corporate services from the Division of Corporations; (6) corporate statutes allow more flexibility for a corporation than other states. These are some of the reasons more than 50% of publicly traded companies are incorporated in Delaware and more than 60% of the fortune 500.

While there are other benefits which not listed above, some cons exist as well. Among the cons are (1) additional costs, including a registered agent, extra franchise taxes, and foreign qualification fees, and (2) extra reporting requirements.

How long does it take to get a Trademark?

The question “how long does it take to get a trademark” comes up quite often during our initial brand protection consultations. The short answer is; it depends. Perfect applications are rare, and while we have filed applications that were registered less than 7.5 months from the application date, the norm is closer to 9 months.

Each Examiner reviews an application subjectively, so it’s impossible to predict how they will scrutinize any individual application. Because trademark law is a niche field, and trademark applications are technical, an application could have any number of minor defects that are easily curable, such as not providing an appropriate specimen, insufficient identification of the goods/services, or filing the application in the wrong class. Alternatively, an application filed by an inexperienced individual could be flawed in a way that would force the individual to abandon their application altogether.

U.S. citizens do not need to work with a trademark lawyer to apply for a trademark, but it is highly recommended to do so. Additionally, a USPTO regulation that went into effect in August 2019, requires foreign applicants to work with a U.S. licensed attorney. Trademark law is always changing. Working with a lawyer who stays up to date on the latest trends, guidelines, and cases could help you save time, resources, and money.

The chart below will give you a better idea of the entire process:

trademark application timeline

 

What’s the Difference Between Copyright, Trademark, and Patent?

A copyright is an original work of authorship fixed in any tangible medium of expression. Copyright covers both published and unpublished original works. This protection begins at the moment of creation. For works created by an individual, copyright protection lasts for the individual’s life plus 70 years. Anonymous works are protected for 120 years from the date of creation or 95 years from the date of publication. Examples of works covered by copyright include but are not limited to: (1) literary works (which includes computer software); (2) musical works, including any accompanying words; (3) pictorial, graphic, and sculptural works; (4) motion pictures and other audiovisual works; and (5) sound recordings.

A trademark (TM) is a symbol, word, or phrase that connects a product to a company. A service mark (SM) is a symbol, word, or phrase that connects a service to a service provider. A federal registration gives the owner exclusive right to use this registered symbol, word, or phrase throughout the U.S. (and potentially abroad), and prohibits others from using a similar mark, which could confuse consumers about whose product or service they are purchasing. Trademarks do not expire as long as you continue to maintain the mark and use it in commerce.

A patent gives an inventor exclusive rights to their invention for a certain period of time. To qualify for a patent, the invention must be useful, novel, and non-obvious. The United States Patent and Trademark Office (USPTO) issues three types of patents, and each has a limited duration. A design patent is valid for 15 years from the issuance date while utility and plant patents are valid for 20 years from the date the inventor files the application. Types of inventions that may be patented fall into the following categories: (1) machines, usually with circuitry or moving parts; (2) processes for producing tangible, concrete results; (3) matter compositions, like drugs or genetically altered life forms; (4) articles of manufacture; or (5) an improvement on any of the above.

What is an NDA?

An NDA (or confidentiality agreement) is a binding agreement between two (or more) parties that obligates a party (or parties) to maintain the confidentiality of the information being exchanged between such parties. This agreement also sets the exceptions of such obligations, how long the obligations last, and what happens if someone breaches these obligations. It is a widely used document and something many startups and small businesses will come across at least once. This document should be in your files and ready to use with prospective business partners and others, if necessary.  

An NDA is a great way to keep proprietary information and trade secrets protected from a business’s partners/vendors/suppliers, competitors, and even employees. However, one must be careful when drafting an NDA to make sure this proprietary information is truly protected. Most NDAs are set to expire after a certain period of time, thus throwing the trade secret protection into jeopardy. An NDA that expires would allow the receiving party to use the information or disclose it, therefore breaking the prong of secrecy. A properly drafted NDA will have a carve-out to protect the confidentiality of trade secrets for as long as they remain trade secrets under applicable law.