Chapter 13 - Legal and tax issues, including intellectual property. Entrepreneurship and intellectual property (IP) go hand in hand. Intellectual property refers to creations of the mind, such as inventions; literary and artistic works; and symbols, names, images, and designs used in commerce. Business intellectual property includes patents, trade secrets, trademarks, and copyrights. | LEGAL AND TAX ISSUES, INCLUDING INTELLECTUAL PROPERTY Chapter 13 2 CORPORATE OPPORTUNITY DOCTRINE Reduced survival chance CONSIDER LEAVING A COMPANY WHEN 3 INTELLECTUAL PROPERTIES 4 IP CONSIDERATIONS 5 INTERNATIONAL PROTECTIONS FOR INTELLECTUAL PROPERTY 6 CHOICE OF VARIOUS BUSINESS FORMS 7 Forms Brief description Sole Proprietorship Owned and operated by one owner who is in total control Partnership Two or more persons go into business for profit, as co-owners, sharing profits and losses Corporation Separate legal entity, with legal existence apart from its owners, the stockholders Limited Partnership One or more general partners, who conduct the business, and one or more limited partners, who act as passive investors Limited Liability Company Owned by “members,” who either manage the business themselves or appoint “managers” to run it for them COMPARATIVE TABLE OF ENTITIES 8 Form Control Liability Taxation Administrative Obligations Sole Proprietorship Owner has complete control Unlimited personal liability Not a separate taxable entity Only those applicable to all businesses Partnership Partners share control Joint and several unlimited personal liability Not a separate taxable entity Only those applicable to all businesses Corporation Control distributed among shareholders, directors and officers Limited personal liability Separate taxable entity unless subchapter S election Some additional Limited Liability Company Members share control or appoint managers Limited personal liability Not a separate entity unless affirmatively chosen Some additional STOCKHOLDER & OPERATING AGREEMENTS 9 COMPARISON OF STOCK REDEMPTION AGREEMENT & STOCK CROSS-PURCHASE AGREEMENT 10 Effect on Tax Basis Effect on Alternative Minimum Tax Need for Adequate Corporate Surplus Redemption Agreement No stepped-up basis Risks accumulated current earnings preference for larger C corporations Needs adequate surplus Cross-purchase agreement Stepped-up basis No risk Surplus is irrelevant LEGAL AND TAX ISSUES IN HIRING 11 Employees as agents of the company Employee discrimination Other employment status Employment agreements Equity sharing LEGAL ISSUES IN THE SALE OF SECURITIES 12 Public Placement Private Placement RECAP 13 When creating a company while at a job, consider your legal obligations to your employer. Are you violating a non-compete or using proprietary information for your start-up? Choose the form of business that will most benefit you and any stockholders—what are tax implications? Hire a lawyer to draw up legal agreements Before issuing stock, make sure investors are accredited and that stock offering doesn’t have to be registered with the government
