cover your assets got startup meetup 25 jun2015
TRANSCRIPT
Got Startup Meetup June 25, 2015
THIS PRESENTATION IS FOR INFORMATIONAL & EDUCATIONAL PURPOSES
ONLY AND IS NOT TO BE CONTRUED AS LEGAL OR BUSINESS ADVICE1
Cover Your Assetsor
Protecting Your Business and Personal Assets
Assets
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� An asset is defined as “a useful or valuable thing, person, or quality.”
� Today we talk about the protection of personal and business property
Property
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� Tangible property� Real property includes land and things attached to the land
� Personal property includes physical property such as computers, furniture, cars, trucks, etc.
� Intangible property� Intellectual property
� Financial instruments
Methods for Protecting Assets
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� Legal Entities and Structures
� Intellectual property
� Contracts
� Insurance
Personal Legal Entities
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� Trusts
� Family limited partnership
� Limited Liability Company
� Warning: there may be tax, estate and asset control issues with some or all of these structures.
Business Legal Entities
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� Sole proprietorship
� General partnership
� Limited Liability Company (LLC)
� Corporation
� Not discussed: LP, LLP, PC, PLLC, non-profit & publicly held
Sole proprietor
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� Simplest
� Single owner entity
� Typically few, if any, employees
� Owner & business are the same legally, including for tax purposes
Sole Proprietor
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� Pros� Cheap, less complicated
� Owner reports P&L on personal tax return
� Can deduct day-to-day business expenses
� Cons� Owner personally liable for all business debts and court
judgments
� May have higher tax bracket due to business income
� High IRS audit rates
General Partnership
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� If two or more people own and operate together
� The owners and the business are the same legally for tax purposes and liability
� Each partner may be held responsible for another party’s actions (both business and personal)
General Partnership
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� Pros� Cheap, relatively uncomplicated
� Partners report P&L on personal tax return
� Can deduct business expenses
� Cons� Owners personally liable for business debts and court
judgments
� Business income may push you into a higher tax bracket
� Fiduciary duties apply
Limited Liability Company (LLC)
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� A flexible business form which provides for limited liability with few required formalities
� Can choose to be taxed as a partnership or as a corporation
Limited Liability Company (LLC)
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� Pros� Profit and loss can be split unequally among members within
IRS guidelines
� Protects personal assets from business liabilities
� Protects your membership interest from personal liabilities
� Cons� Cost of formation
� Cost of operation
� Member’s shares of profit may be subject to self-employment taxes
Corporations
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� Independent legal entities with a long history
� Shareholders are generally not responsible for business liabilities
� Flexible tax treatment� C type: corporation and shareholders are separate tax entities
� S type: tax liability flows through the shareholders and the corporation is not taxed
The C Corp.
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� Pros� Limited personal liability
� Fringe benefits deducted as a business expense
� Can split corporate profit among owners and corporation
� Cons� Expensive to create
� Many formalities to follow
� Can’t write off business losses on personal tax returns
The S Corp.
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� Pros� Limited liability for business debt
� Losses can be deducted on personal tax returns
� Cons� Expensive to create and maintain
� An LLC offers similar advantages with less paperwork
� Fringe benefits are limited for certain shareholders
� Corporate income must be allocated in proportion to ownership interests
Intellectual Property
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� Patents
� Trademark
� Copyrights
� Trade Secrets
Patent Types and Protection
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� Utility� Machines
� Articles of Manufacture
� Compositions of Matter
� Processes
� Design – ornamental appearance of articles
� Plant – certain types of plants are patentable
Types of Utility Patents
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� Non-provisional patent applications� Protect for 20 years from priority date (in most cases)
� Expensive: expect to pay $25K or more to prepare, prosecute and issue a high-tech patent
� Expensive to enforce
� Provisional patent applications� Are placeholders for one year
� Can be inexpensive if you file it yourself
� The value is dependent upon how well it is written, but is almost always better than nothing!
Advantages of Patents
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� Patent can be used to exclude others from making, using, selling, importing or offering for sale of an invention
� The scope is defined by the patent claims
� Patents and patents pending can slow down competition
� Patents and patents pending can enhance a company’s valuation
Trademarks
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� A trademark is an identifier of the source of a product or service
� Can be a name, logo, slogan, packaging, design, sound, scent
� Trademarks can be protected under the common law to some extent
� Trademarks can be registered at both the State and Federal levels (Federal has many advantages)
� International trademark registration can be obtained through various International Treaties
Copyrights
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� A copyright is a property right in an original work of authorship that is fixed in a tangible medium
� Protects against unauthorized reproduction, adaption, distribution, performance or display
� Is automatic and does not require a notice
� Registration with the Copyright Office affords many benefits
Trade Secrets
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� Information, including a formula, pattern, compilation, program, device, method or process that:� Derives independent economic value from not being generally
known; and
� Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy
Contracts
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� The building blocks of business
� Contracts can be written, oral, actual or implied
� Don’t wing it: see a lawyer when a contract is required
Standard Contracts
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� Certain standard contracts can be made for you by your attorney including� Employment agreements, including provisions for the
company’s intellectual property rights
� Contractor agreements
� Non-disclosure agreements
� Assignment agreements
Insurance
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� There are a wide variety of insurance instruments for protecting the assets of individuals and companies
� In addition to your home and automobile insurance, consider a personal “umbrella” policy
Req’d Business Insurance
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� Insurance for employees� Worker’s Compensation
� Disability
� For business automobiles or trucks you’ll need Commercial Fleet insurance
Other Useful Business Insurance
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� Property insurance
� Liability insurance
� Product liability insurance
� Business income insurance
� Error and Omissions insurance
� Key Person Life Insurance
Summary
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� Protect both your personal and business assets
� Separate business and personal liabilities to the extent possible
� Protect your intellectual property
� Use contracts wisely
� Obtain appropriate insurance protection