The document Top Ten Intellectual Property Mistakes of Startup Entrepreneurs is available as a Free Download using the Sign Up button in the sidebar.
Here are the ten mistakes that are discussed:
- Failing to use employee invention agreements
- Assuming that the company owns contractors’ work product
- Using another company’s license agreement
- Thinking that patents are the only IP that matters
- Filing a for provisional patent before the scope of the invention is clear
- Treating the federal government like non-governmental infringers
- Neglecting to identify and protect trade secrets
- Believing that “open source” means “no restrictions”
- Giving the “family jewels” to an overseas supplier
- Registering the wrong entity as the owner of IP
Related post: The Top Ten Legal Mistakes of Startup and Early-stage Companies
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Sometimes California-based entrepreneurs think that they can avoid CA registration fees and taxes by forming their business entities in another state. Usually, that belief is incorrect: If the entity is doing business in CA, then it must register with the CA Secretary of State, even if the entity was formed elsewhere.
So what constitutes “doing business” in CA? The term used in the Corporations Code is to “transact intrastate business”, which is defined as “entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce” (Section 191(a) with respect to corporations, Section 17001(ap) with respect to limited liability companies).
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Some companies are formed as S corporations to avoid “double taxation”: The corporation does not pay federal income tax. Instead, income flows through to the shareholders, who pay income taxes (as in a partnership).
This potential tax benefit is available, however, only if stringent requirements are met. Most notably:
- There must not be more than 100 shareholders.
- Permissible shareholders are limited to individuals (other than non-resident aliens), estates, tax-exempt organizations, and certain qualified trusts.
- Only one class of stock is permitted.
Failure to meet a requirement, even if inadvertent, results in loss of S corporation status.
Entrepreneurs should think carefully about whether S corporation status is appropriate for the long term. Here’s why.
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Claremont Creek Ventures, the preeminent venture capital firm in the East Bay and sponsor of SVASE’s East Bay Series, was profiled today in a Bloomberg / San Francisco Chronicle article (Venture capital firm sets up near UC Berkeley).
The article points out that Claremont Creek is unusual among VCs in that it is a seed and early-stage investor.
By sponsoring the East Bay Series, Claremont Creek helps entrepreneurs in the East Bay and elsewhere in the San Francisco Bay Area gain insights that will make their businesses more successful.
The next East Bay Series event, Raising Money from VCs: The Insider’s Perspective, will take place the evening of Wednesday, May 19.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
On the evening of Wednesday, April 21, the Silicon Valley Association of Startup Entrepreneurs (SVASE) will present Lethal Mistakes Startups Need to Avoid at the beautiful Crow Canyon Country Club in Danville (dinner included).
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Last year, I wrote (Beware Your Alter Ego) about how entrepreneurs sometimes lose the protection against personal liability supposedly offered by their corporations (or, similarly, their LLCs). This post – adapted from Counseling California Corporations by Continuing Education of the Bar (CEB) – provides detailed recommendations about what should be done to avoid “alter ego” problems.
Recommendations:
In an article yesterday, the Wall Street Journal reported that funding for startups is more plentiful than it was a year ago, but still is hard to come by (Start-Ups Chase Cash as Funds Trickle Back).
Among the phenomena discussed:
- Angel investment groups that want to see profitability before they invest
- Reduced availability of funds from home-equity and retirement-account loans because of lower asset values
- Dedication of additional money to protect existing investments rather than to start new investments
- Availability of venture capital only if a company has a product or customers
Related post: Realistic Financing Options for Startup Companies
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Several weeks ago, a first-time entrepreneur called. He had read that venture capitalists prefer investing in Delaware corporations, and he sought my input on the subject.
I replied that, in my experience, incorporation either here in California or in Delaware is fine. Then I started wondering why what the entrepreneur read differed from what I had experienced.
I did some research and conducted an informal survey of a few VCs. Here are my tentative conclusions:
- California-based VCs are comfortable investing in corporations that are formed in either CA or DE (thus my experience, because the vast majority of the VCs whom I know are here in the Bay Area).
- VCs outside California have a preference for investing in Delaware-based corporations, though that preference can be weak or strong, depending on the VC. Even with a strong preference, however, a Delaware-preferring VC will invest in a corporation in another state if it is the right deal
Related posts:
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
SVASE (the Silicon Valley Association of Startup Entrepreneurs) provides a database of venture capital firms and angel groups for use by SVASE members that are seeking funding.
Here is SVASE’s description of the database’s search capabilities:
As an additional benefit, SVASE members can search the bios of over 450 partners and the mission statements of over 140 VC firms and Angel organizations, representing early stage Venture Capital in Silicon Valley, to find the firms and partners that will be interested in taking a look at your business plan. To help with your search for Investors and Funding, we have highlighted several specific search terms below, but just like Google, you can search on any word, or group of words, you like. The search will return the names of firms and partners related to the search words, plus contact information of the firms, and the partners, where available.
SVASE membership costs $99 per year and offers many benefits in addition to the VC / angel group database.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
The evening of Wednesday, March 10, the Silicon Valley Association of Startup Entrepreneurs will present “Demystifying VCs: How to Make the Right Impression” at the beautiful Crow Canyon Country Club. Tasty buffet dinner included!
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
Dana Shultz is a business-savvy lawyer located in Northern California's San Francisco Bay Area (in the East Bay, near Oakland) who has in-depth knowledge of law, business, technology, and the needs of startup and early-stage companies.