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Ask an Attorney!
This is a forum for entrepreneurs to ask an attorney any question they might have about their business.
The attorney, Sam Wayne of Madison Business Law, LLC, Madison, Wisconsin, will answer generally every question asked on this forum, in public if appropriate, and privately if not.
Please note that Sam's answers will not consist of legal advice, but only information, and that any exchange- your question and Sam's answer- (or series of exchanges) does not establish an attorney-client relationship with Sam Wayne or with Madison Business Law, LLC. Of course, further off-site exchanges may create such a relationship.
Lastly, there are many situations where hiring an attorney is advisable, and some where doing so is absolutely necessary. This network is not intended to replace attorney representation.
Network Leader: Sam Wayne
Linda
I am the person your mother (and all of your law school teachers) warned you about. I live in WI and started and LLC with a friend. We have no Opererational or Buyout agreement. And yes, one of us wants out. I am ure this issue will default to state law but I can't find that law anywhere! Help?
Sam Wayne:
Hi Linda,
Chapter 183 of the Wisconsin statutes governs LLC's. They are also governed by almost twenty years of caselaw interpreting these ...MoreHi Linda,
Chapter 183 of the Wisconsin statutes governs LLC's. They are also governed by almost twenty years of caselaw interpreting these statutes, as well as over a hundred years of caselaw regarding the duties that "partners" owe each other in businesses.
If there are significant financial interests here (assets or liabilities) I highly recommend consulting with an attorney about this. Feel free to contact me privately if you'd like to discuss this further.
Best,
Sam
25 weeks ago
Chapter 183 of the Wisconsin statutes governs LLC's. They are also governed by almost twenty years of caselaw interpreting these ...MoreHi Linda,
Chapter 183 of the Wisconsin statutes governs LLC's. They are also governed by almost twenty years of caselaw interpreting these statutes, as well as over a hundred years of caselaw regarding the duties that "partners" owe each other in businesses.
If there are significant financial interests here (assets or liabilities) I highly recommend consulting with an attorney about this. Feel free to contact me privately if you'd like to discuss this further.
Best,
Sam
25 weeks ago
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Brian
I have an idea which is formulating into an actual product, an internet based service actually. I want to pitch this to a couple of large companies with the idea being that we will split profits as I provide the service and they simply push it on their clients. How should I protect myself before making the pitch. Do I just need them to sign a NCA/NDA prior to presenting the product or is there more to it?
Matt Kaplan:
Without knowing more about the product, a well-drafted non-disclosure/confidentiality agreement is the important first step. I would also mark ...MoreWithout knowing more about the product, a well-drafted non-disclosure/confidentiality agreement is the important first step. I would also mark all materials you provide with a "Confidential" or "Property of _____" designation so there is no confusion regarding what is to be considered confidential or yours. Think twice about what, if anything, you leave behind after your presentation. If presented with an NDA from the company you are pitching to, show it to your lawyer to make sure you are not giving anything away by even talking to them. {DISCLAIMER - I am a lawyer - I'm not your lawyer - This is not intended to be legal advice - Your mileage may vary depending on what state you live in, what you are presenting, etc.}
45 weeks ago
45 weeks ago
Cormac Foster:
There was a similar post at MoreThere was a similar post at http://www.brazencareerist.com/conversation/807177 a while back that went over some ideas. The short version is basically "mock up as much as you can beforehand and get them to sign an NDA." And choose wisely–someone with a track record isn't going to steal your idea to make a quick buck at the expense of compromising their rep.
45 weeks ago
45 weeks ago
Brian
I have an idea which is formulating into an actual product, an internet based service actually. I want to pitch this to a couple of large companies with the idea being that we will split profits as I provide the service and they simply push it on their clients. How should I protect myself before making the pitch. Do I just need them to sign a NCA/NDA prior to presenting the product or is there more to it?
Lindsey Donner
Hi Sam! I have a similar question to Rachel's. I too incorporated in DE and now work in CA. I plan to register with the Cali S.O.S as a foreign LLC. Do I need to file an Amendment with DE to change my principal office address (in yet a 3rd state)? Mine is a web-based business so I have a home office but no clients visit me; I rent, so I do not want to spent hundreds of dollars on an Amendment until/unless necessary. I was hoping to wait until I have a more permanent address or an actual office.
Sam Wayne:
Hi Lindsey! Sorry for the delayed response, I'd been traveling. If your principal office address is in DE then you don't have to (and shouldn't) ...MoreHi Lindsey! Sorry for the delayed response, I'd been traveling. If your principal office address is in DE then you don't have to (and shouldn't) change it. If it's in another state and you are no longer registered there and can no longer receive mail there, then it's probably worth it to file the amendment. The change would cost you $200 (paid to Delaware's Division of Corporations). However, if you want to remain organized as a Delaware LLC, I believe you need to keep your Delaware address- so a change would actually be problematic.
Hope that helped!
Sam
101 weeks ago
Hope that helped!
Sam
101 weeks ago
Ryan Healy
Hey Sam, I was talking to a friend the other day and he asked what the difference between an LLC and an S Corp is. I have a vague idea, but what's the legal definition?
Sam Wayne:
Hey Ryan- someone could probably write a book about the differences between LLC's and S-corp's, and I have to note that business entities like ...MoreHey Ryan- someone could probably write a book about the differences between LLC's and S-corp's, and I have to note that business entities like this are created by states, not the federal government, so the differences will vary across borders (except for IRS treatment).
Generally, both entities provide its owners with limited liability (which, depending on circumstances, is not always limited).
The basic decision is a trade off between simplicity (LLC) and scale-up-ability (S-corp).
106 weeks ago
Generally, both entities provide its owners with limited liability (which, depending on circumstances, is not always limited).
The basic decision is a trade off between simplicity (LLC) and scale-up-ability (S-corp).
106 weeks ago
Sam Wayne:
S-corps also have a tax advantage if your earnings fall within a certain sweet spot in relation to self-employment taxes (similar to FICA). This ...MoreS-corps also have a tax advantage if your earnings fall within a certain sweet spot in relation to self-employment taxes (similar to FICA). This article I wrote for my newsletter and then posted on the firm blog sums it up pretty well. Let me know if you have any other questions.
http://madisonbusinesslaw.blogspot.com/2010/01/arranging-your-business-f...
106 weeks ago
http://madisonbusinesslaw.blogspot.com/2010/01/arranging-your-business-f...
106 weeks ago
Daniel Saynuk
I hope you can help me. I want to start a business but want to trademark the name. Should I trademark the entire name such as ""Business Name LLC" or will I be protected if I just trademark "Business Name" and then add LLC after I've formed the entity & file the form to transfer the ownership of the trademark from myself to ownership by the LLC?
Sam Wayne:
The first question I'd ask is "is it worth it to even file for trademark protection?" This costs at least $275, and probably much more because ...MoreThe first question I'd ask is "is it worth it to even file for trademark protection?" This costs at least $275, and probably much more because you'll want to hire an attorney to do it right. It makes sense to file for this protection if the name is the "perfect" name for the good or service or if you've built considerable goodwill into the brand (name) that you'd be protecting, but might not be worth the money otherwise.
Even if you don't file, there are still lesser common law protections.
106 weeks ago
Even if you don't file, there are still lesser common law protections.
106 weeks ago
Sam Wayne:
In that case, the thing to do is to trademark the "Business Name," and you'd write "Business Name" is a trademark of "Business Name LLC." You can ...MoreIn that case, the thing to do is to trademark the "Business Name," and you'd write "Business Name" is a trademark of "Business Name LLC." You can see an example of this at the bottom of this website: www.chrysler.com. (I picked Chrysler because it's the biggest LLC I can think of off the top of my head).
Hope that helps!
106 weeks ago
Hope that helps!
106 weeks ago
Rachel Vincent
Sam, you are awesome for doing this. I have a quick question. My company, Kikini, incorporated in Delaware, but filed for our offices in California (filed all the paperwork there as a foreign corp). But now we have just moved our offices to Seatte, WA. Where can I go to change our address as far as the appropriate gov't entities are concerned? Thanks!
Sam Wayne:
Thank you Rachel!
You want to notify the authorities in all three states. In each of those states you want to go to the Secretary of State ...MoreThank you Rachel!
You want to notify the authorities in all three states. In each of those states you want to go to the Secretary of State website where you should be able to: 1) DE: file an address change, 2) WA: register as a foreign corp. and (unless you're going to continue to do business in CA) 3) CA: dissolve your foreign corporation in CA (or just let it lapse).
Other states have different contacts. Here in WI, it's the Dept. of Financial Institutions.
Hope that helped!
107 weeks ago
You want to notify the authorities in all three states. In each of those states you want to go to the Secretary of State ...MoreThank you Rachel!
You want to notify the authorities in all three states. In each of those states you want to go to the Secretary of State website where you should be able to: 1) DE: file an address change, 2) WA: register as a foreign corp. and (unless you're going to continue to do business in CA) 3) CA: dissolve your foreign corporation in CA (or just let it lapse).
Other states have different contacts. Here in WI, it's the Dept. of Financial Institutions.
Hope that helped!
107 weeks ago
EricHFriedman
Question: What are some great research sources for more info on trusts as business entities?
Sam Wayne:
Your local small business attorney!
I haven't found much online about the use of trusts in lieu of incorporation or LLC organization. I can ...MoreYour local small business attorney!
I haven't found much online about the use of trusts in lieu of incorporation or LLC organization. I can tell you, though, that the "trust" designation requires that the people or person in charge of the trust must not be identical to the beneficiaries of trust. Therefore, to use a trust to run a business, there must be some difference between those controlling the business and those benefitting from the business.
Sorry Erich, wish I had a better answer.
107 weeks ago
I haven't found much online about the use of trusts in lieu of incorporation or LLC organization. I can ...MoreYour local small business attorney!
I haven't found much online about the use of trusts in lieu of incorporation or LLC organization. I can tell you, though, that the "trust" designation requires that the people or person in charge of the trust must not be identical to the beneficiaries of trust. Therefore, to use a trust to run a business, there must be some difference between those controlling the business and those benefitting from the business.
Sorry Erich, wish I had a better answer.
107 weeks ago
EricHFriedman:
Dear Sam: Thank you for your candor, if you come across any specialists in business trusts, please let me know.
107 weeks ago
107 weeks ago
Ryan Healy
Great network, Sam. Looking forward to learning all kinds of great legal tips. Attorneys are too expensive!
Sam Wayne:
Thanks Ryan! We're expensive because we're so freakin' important :).
I really hope I can help people out with what they need, but I have to ...MoreThanks Ryan! We're expensive because we're so freakin' important :).
I really hope I can help people out with what they need, but I have to say that this network is NOT intended to replace actual legal representation.
107 weeks ago
I really hope I can help people out with what they need, but I have to ...MoreThanks Ryan! We're expensive because we're so freakin' important :).
I really hope I can help people out with what they need, but I have to say that this network is NOT intended to replace actual legal representation.
107 weeks ago
Ryan Healy:
Don't worry I won't be making any rash legal decisions based on your feedback!
107 weeks ago
107 weeks ago
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Brad Holt
Yeah Sam this is great! I'm a video producer (sole proprietor) in need of a million dollar liability insurance policy. Where do I start?? I've also got all my paperwork filled out to become an LLC...but some people have been telling me it's not very important or useful for me...help?
Thanks!!
Sam Wayne:
Thanks Brad! As far as insurance goes, there have got to be numerous insurance agents in Denton, and if not then in the greater DFW area. ...MoreThanks Brad! As far as insurance goes, there have got to be numerous insurance agents in Denton, and if not then in the greater DFW area. Obviously I can't give you a quote, but a million dollar policy shouldn't cost too much. Also, I'm not sure, but filing as an LLC might bring down your insurance costs.
Filing as an LLC in Texas costs $300. Generally, people organize as an LLC if they think there's a good chance that they'd get sued for more than or for things outside the scope of their
107 weeks ago
Filing as an LLC in Texas costs $300. Generally, people organize as an LLC if they think there's a good chance that they'd get sued for more than or for things outside the scope of their
107 weeks ago
Sam Wayne:
insurance coverage. I don't know your business well, and like I said, I'm only giving general information out to the network. Therefore, I'd ...Moreinsurance coverage. I don't know your business well, and like I said, I'm only giving general information out to the network. Therefore, I'd recommend either hiring an attorney to help, or, if you're strapped for cash, trying to think of situations in which your business might have liabilities over and above your insurance coverage and how likely those situations are to come to pass. That should give you a general idea. You can contact me off-list if you like.
I hope that helped!
107 weeks ago
I hope that helped!
107 weeks ago
Z. Kelly Queijo
Great idea for a forum, Sam! At what point does a sole proprietor decide it's time to become a corporation?
Sam Wayne:
Hi Kelly,
Following up, I think I should have mentioned that another option available to sole proprietors (and highly recommended) is the LLC, ...MoreHi Kelly,
Following up, I think I should have mentioned that another option available to sole proprietors (and highly recommended) is the LLC, or limited liability company. The LLC protects your personal assets, but does not require nearly the level of formality that the corporate form does. Generally, a separate bank account and ledger should do. The LLC does not have the tax advantage I mentioned, though. If you like, you can contact me privately to discuss what would work best for you.
107 weeks ago
Following up, I think I should have mentioned that another option available to sole proprietors (and highly recommended) is the LLC, ...MoreHi Kelly,
Following up, I think I should have mentioned that another option available to sole proprietors (and highly recommended) is the LLC, or limited liability company. The LLC protects your personal assets, but does not require nearly the level of formality that the corporate form does. Generally, a separate bank account and ledger should do. The LLC does not have the tax advantage I mentioned, though. If you like, you can contact me privately to discuss what would work best for you.
107 weeks ago
