What to Ask: Incorporation and Intellectual Property | Michael O'Brien, Esq.
UpCounsel attorney Michael O'Brien explains what every startup should be asking their legal team about incorporation and intellectual property3 min read
Here are my goals, how can you help me accomplish them?
If you start with anything other than your goals, you will probably get a solution that deviates from your goals. Start with what you want, don't worry about how to get there. That's the attorney's job.
What are the costs and benefits of your approach?
Unless the attorney passed the bar exam 15 minutes before the conversation with you, this question can probably be answered with statistical certainty. If not, leave ... quickly.
What is the best way a small business owner can protect personal wealth and assets from business risks?
Insurance. It's really amazing what business risks can be insured and at relatively little cost. If the writer was thinking the answer was form a corporation, it's probably not. Being a corporation does nothing to help you if you commit a tort. Think about it, let's say you accidentally run someone down with your car. Telling the judge, "but I was acting as an agent of my own corporation" is not a defense. However, your car insurance will help protect your individual wealth and assets.
What is the best way a small business can maximize its tax deductions? (Optional)
Have your child do work for your sole proprietorship. You get to deduct the wages to the child, but the child does not have to pay tax on the first $6,500. The child can put that money (well most of it) in a Roth IRA and then have a college savings vehicle that turns into a retirement vehicle if it is not needed. You have to follow some formalities when you do this.
What specifically are small business owners most confused about when you first meet with them?
They typically have an idea and have no idea how to turn it into a million dollars (in most cases, neither do I).
How can quality legal services help a small business grow?
We help you find and manage risk. With risks either accepted to mitigated, you can grow at a rate that is comfortable for you. Of course, revenue is 10,000 times more important than legal services. Focus on that more than on me.
How can quality legal services help small businesses save money?
In general, we can provide statistically strong strategies that, over time, reduce risk and this reduce cost.
How can small businesses maximize the value of their legal team’s services?
Come to us with goals. If you have a thought about the best legal strategy that you read about on the internet, that's fine, but, remember, we do this a lot more than you do. If your goal is not attainable, we can tell you.
Should business partners have the same amount of equity in a company? Why or why not?
The traditional answer was no because if there was a disagreement, a majority owner could assert its will and keep the company from liquidating. However, in California a 10% minority owner can force a buy-out or liquidation, so you still have the same problem. This question is clearer today than it was five years ago.
What are the top three things a small business owner should be aware of when purchasing an existing business?
Accurately determine the value, Review the business's tax returns to determine profitability and if there is outstanding tax liability, Due diligence reviewing customer lists, sale records, advertising materials, and employee contracts, Find out if there are any patents, copyrights, or trademarks associated with the business, Require the current owner to sign a “Not to Compete” contract, Determine why the business is for sale., How long have the employees been there? Are there any key employees who would be hard to replace?, Find out if there are any human resources issues or outstanding lawsuits pending against the company.