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Out-of-State Corporations in California

Corporations that are incorporated in another state and are doing business in California should be mindful of compliance with California law. For example, out-of-state corporations must ensure they are properly registered to do business, that they familiarize themselves with laws regarding company employees working in California, and that they can bring or defend lawsuits in [...]

February 20th, 2017|

Can I Use Electronic Signatures on a Contract?

Whether you can use electronic signatures to bind parties to a legally enforceable contract in California depends on the parties’ agreement and the method of signature. Be careful to fulfill the below requirements, or a court might find that the agreement you thought you signed actually is unenforceable. California’s Uniform Electronic Transactions Act (“UETA”) governs [...]

February 17th, 2017|

Insurance Basics for New Business Owners

The current litigious business climate makes obtaining appropriate insurance a must for new business owners. Insurance can help cover the costs of a burglary, an injury to an employee, or some lawsuits, among other liability situations. Paying the insurance premiums now does not just cut down on future costs – in some industries, some types [...]

February 15th, 2017|

How to Protect Your Rights as a Landlord in a California Commercial Lease

While many may be familiar with residential landlord-tenant law, they may not realize that there is a significant difference between what is permissible in the residential lease compared to what is permissible in the commercial lease. Many of the laws applicable to the residential tenant simply do not apply in the commercial setting. Because many [...]

January 29th, 2017|

What is a “Unilateral Contract”?

Ordinarily a contract is defined as an agreement between two or more parties “which creates an obligation to do or not to do a particular thing. Its essentials are competent parties, subject matter, a legal consideration, mutuality of agreement and mutuality of obligations.” Black’s Law Dictionary 291-292 (5th Ed. West 1979).. The ordinary contract is [...]

January 29th, 2017|

San Diego’s New Minimum Wage Ordinance

On July 28, 2014 the City of San Diego issued a Press Release from the office of the Council President, Todd Gloria, announcing an increase in the City’s minimum wage and providing sick leave for worker’s within the City. Press Release, San Diego Increases Minimum Wage by Veto Proof Majority, dated July 28, 2014. On [...]

January 29th, 2017|

I used crowdfunding for my startup. What happens if my business fails?

So you have a really cool idea for a startup, but you don’t have the money you need to launch it. Your last $5 paid for two slices of pizza last night. You’re certain your product will be a hit though, something that will make money and leave everyone talking for years to come. A [...]

December 15th, 2016|

A competitor is interfering with my business. What can I do?

You have an idea for a tech startup and the software you’re developing is awesome. Founded along with a college buddy, the company grows quickly once you both graduate. You incorporate and secure an investor. You use some of the money to hire smart, ambitious, and talented staffers who are excited to be there and [...]

December 13th, 2016|

When can I revoke an offer in California?

Most people, even the savviest entrepreneurs, second-guess their decisions every now and then. Especially when it involves money. The whole you-have-to-spend-money-to-make-money adage is likely true for startups who incorporate and ultimately put a product out on the market. But an entrepreneur who agrees to buy something for his or her business, for example, may later [...]

December 8th, 2016|

The defense of duress – what is it?

The defense of duress is not unusual in criminal cases. It’s when a defendant says he or she was forced to commit a crime by another person. In criminal law, an offense is sometimes excused if a jury believes the defendant was under duress. Duress also is a claim in business and corporate litigation — [...]

December 6th, 2016|

San Diego’s minimum wage increases – what you need to know

In March, the California Legislature approved a plan to raise the state’s minimum wage to $15 per hour by January 1, 2022. The move made the state the first in the country to significantly boost its pay and encouraged others to follow suit. Under the deal, crafted by lawmakers and labor leaders, California’s $10 minimum [...]

November 29th, 2016|

Better business entity: sole proprietorship or corporation?

Entrepreneurship is an exciting journey. It’s a dream put to action on your own terms. The possibilities feel endless — and they are. That being said, a lot goes into starting your business. Entrepreneurs early on should think about what kind of business entity they want their company to be. There are several options in [...]

November 22nd, 2016|

How long will it take to form my corporation?

Entrepreneurs, including those who have created a tech startup in the state of California, should consider forming a corporation as their business grows. But before you get started, it’s important to understand the timeline and process involved. Let’s say, for example, that two former roommates from UC San Diego have developed software, hired a few [...]

November 14th, 2016|

Why is my Landlord Asking me to Sign an Attornment Agreement?

Before you can understand why you are being asked by your landlord to sign an “attornment agreement,” you must understand what attornment agreement is. Black’s Law Dictionary defines the term “attornment” by reference to “feudal and old English law,” as “the act of a person who holds a leasehold interest in land, or estate for [...]

October 31st, 2016|

Can I Get Punitive Damages for Breach of Contract?

Black’s Law Dictionary defines the terms “[e]xemplary or punitive damages” as “damages on an increased scale, awarded to the plaintiff over and above what will barely compensate him for his property loss, where the wrong done to him was aggravated by circumstances of violence, oppression, malice, fraud, or wanton and wicked conduct on the part [...]

October 26th, 2016|

Can I Assign my Contract in California?

The simple answer is, as it is in response to many questions in the law, it depends. It first depends upon how the term “assign” is used. In McCown v. Spencer (1970) 8 Cal.App.3d 216, 225, 87 Cal.Rptr. 213, the California Courts of Appeal for the Second District, Division Four, defined “‘assign’ ordinarily means to [...]

October 24th, 2016|

What Can I Do if my Vendor Tells Me He Won’t Perform His Obligations?

You entered into a requirements contract (see http://sdcorporatelaw.com/business-newsletter/what-is-a-requirements-contract/) with your vendor to purchase 500 widgets per month for the next 24 months. In month 14 of your contract, your vendor calls and tells you that beginning in month 16(month 26 the contract will be over), the vendor will no longer be able to provide the [...]

October 21st, 2016|

What Kind of “Writing” Satisfies the Statute of Frauds?

California Civil Code Section 1624, commonly referred to as the Statute of Frauds, provides that certain “contracts are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or the party’s agent….” The statute then goes on to describe seven types of contracts which are [...]

October 19th, 2016|

Do I Have to Incorporate my Architecture Firm?

Like most business people, architects start practicing their trade without giving much thought to how they might best take advantage of the many forms of business available to them. They generally hang out a shingle (if they are not working for an established firm) and give little, if any thought, about how they should be [...]

October 17th, 2016|

My Contract has Been Breached – Do I Have to Perform my Promises?

California Civil Code Section 1440 provides “[i]f a party to an obligation gives notice to another, before the latter is in default, that he will not perform the same upon his part, and does not retract such notice before the time at which performance upon his part is due, such other party is entitled to [...]

October 14th, 2016|

What is “Consideration”?

We’ve all signed countless contracts in the past for a variety of reasons and most of them contain, usually in the first few paragraphs, the phrase “for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged.” For the most part, we generally pay no  more attention to this phrase than we [...]

October 6th, 2016|

Do I Need to Register my Business With the California Employment Development Department?

“The Employment Development Department (EDD) administers California’s payroll taxes, including Unemployment Insurance, Employment Training Tax, State Disability Insurance (including Paid Family Leave), and California Personal Income Tax withholding. Employers conducting business in California are required to register with and file reports and pay taxes to EDD.” If You Have People Working for You, California Tax [...]

August 12th, 2016|

I Don’t Want to Pay for Worker’s Comp – Do I Need It?

Frequently those contemplating hiring employees ask whether they must obtain and pay for worker’s compensation insurance (sometimes referred to as “worker’s comp”) for their employees. Those same people sometimes believe that they do not need to obtain worker’s comp, or that they may be able to skate by without it, hoping that they will never [...]

August 10th, 2016|

What is California’s Victims of Corporate Fraud Compensation Fund?

The Victims of Corporate Fraud Compensation Fund (“VCFCF”) is governed by California Corporations Code Sections 2280, et seq. and California Code of Regulations, title 2, division 7, chapter 12, sections 22500 through 22507. The fund was specifically created to provide “limited restitution to victims of corporate fraud who have otherwise been unable to collect on [...]

August 8th, 2016|

Tips for Forming the California Joint Venture

A “joint venture” has been defined “[a] legal entity in the nature of a partnership engaged in the joint prosecution of a particular transaction for mutual profit…” A one-time grouping of two or more persons in a business undertaking. Unlike a partnership, a joint venture does not entail a continuing relationship among the parties.” Black’s [...]

August 5th, 2016|

What is a Registered Agent?

When forming business entities, the term “registered agent” is frequently used, and there are many registered agent services available for hire in each state. So what does a registered agent do? In California, the term generally refers to the “registered agent for service of process.” According to the California Secretary of State, the term “agent [...]

August 3rd, 2016|

Tips for Preparing the Operating Agreement in California

Pursuant to California Corporations Code Section 17701.10(a) the limited liability company’s (“LLC”) operating agreement “governs all of the following: (1) Relations among the members as members and between the members and the limited liability company. (2) The rights and duties under [the California Revised Uniform Limited Liability Company Act] of a person in the capacity of manager. [...]

August 1st, 2016|

What is a Fictitious Business Name Statement?

A “fictitious business name” has been defined as “[a] business name that DOES NOT include the surname of the individual owner, AND EACH of the partners or the nature of the business is not clearly evident by the name.” Fictitious Business Names, Ernst J. Dronenburg, Jr., Assessor/Reorder/County Clerk, County of San Diego. California Business and [...]

July 29th, 2016|

How Can I Ensure my Corporate Name is Available for Use?

After deciding to incorporate your business, one of the first steps of incorporation is to decide upon a legal name for the business. For each prospective name, it is important to determine whether the name you have chosen for your corporation (or, similarly, the name of your limited liability company, or partnership) can be used [...]

July 27th, 2016|

Must I Register my Delaware LLC in California?

The California Uniform Limited Liability Company Act (California Corporations Code Sections 17701.01, et seq.) governs the existence of all foreign and domestic limited liability companies in California. California Corporations Code Section 17701.02(j) defines a foreign limited liability company as: “an unincorporated entity formed under the law of a jurisdiction other than this state and denominated [...]

July 25th, 2016|

What is a Certificate of Limited Partnership?

In California, the Uniform Limited Partnership Act of 2008 (California Corporations Code Sections 15800, et seq.) governs the creation limited partnerships. Pursuant to California Corporations Code Section 15902.01(a), to create a limited partnership, the partners must first enter into a partnership agreement, then prepare, execute, and file with the California Secretary of State a document, [...]

July 22nd, 2016|

When Does the Risk of Loss Pass to a Purchaser of Goods in California?

As with many things in law, the answer to a question like, “When does the risk of loss pass to a purchaser of goods in California?” is “It depends”. When one enters a store and purchases a Keurig coffee maker and pays the cashier for that product, the loss of that product generally passes from [...]

July 20th, 2016|

What is a Requirements Contract?

Many entrepreneurs engaged in the manufacturing of goods for sale must rely on others to provide the raw materials from which those goods are manufactured. When the manufacturing process relies on small quantities of these raw materials, or where these raw materials are common and in abundant supply from a variety of sources, these entrepreneurs [...]

July 18th, 2016|

What is a Contract of Adhesion?

Whether we realize it or not, we have all agreed to a contract of adhesion dozens, if not hundreds of times. Indeed, each time we agree to the terms and conditions attached to the latest update to our iPhone’s operating system, we are agreeing to a contract of adhesion. Why does it matter, one might [...]

July 15th, 2016|

What Should be in an Agreement for the Sale of Goods?

While the California Commercial Code (California’s version of the Uniform Commercial Code) may govern the sale of goods in California, where the prices for the goods exceeds $500.00, an agreement not in writing may not be enforceable. To ensure that any agreement for the purchase of your goods valued in excess of $500.00 is enforceable [...]

July 13th, 2016|

How to Write Your Business Plan

All business owners and potential business owners probably understand that they will need a business plan at some point. Hopefully, they also understand that the earlier a business plan is prepared, the better for the business because, let’s face it, the business plan is the road map for the success of the business and banks [...]

July 11th, 2016|

Why am I Being Asked to Sign a Personal Guarantee?

We’ve all heard that one purpose for incorporating a business is to protect the owner’s personal assets from any debts incurred by the business. Although that reason is completely valid, in some instances, forming a corporation may mean that the business is unable to obtain credit. For individuals, banks and lending institutions rely heavily on [...]

July 8th, 2016|

Buying an Existing Business: What You Need to Know

Many entrepreneurs go into business for themselves by deciding what type of business they wish to start and then starting their business by doing all of the “leg work” for the business on their own. These self-starters generally enjoy not only engaging in the business they choose, but being involved in the process to create [...]

July 6th, 2016|

How do I Sell a Franchise in my Business in California?

The California Franchise Investment Law (California Corporations Code Sections 31000 – 31516) (the “Franchise Investment Law”), along with Chapter 3, Subchapter 2.6, Sections 310.000 through 310.505 of the California Code of Regulations govern how franchises are sold in California. Before beginning, one must understand that a franchise offering in California is considered a “sale of securities” [...]

July 4th, 2016|

What Protections Do I Have as a Franchisee in California?

On October 12, 2015, Governor Jerry Brown signed Assembly Bill 525 amending the California Franchise Relations Law (“CFRL”). The bill gave franchisees additional rights against termination of their franchises, provides significant remedies for terminations and non-renewals imposed improperly by franchisors “’and, most importantly, it acknowledges that franchisees own the equipment and fixtures they purchased for [...]

July 1st, 2016|

What is a 501(c)(3) Corporation?

Many times we hear radio and television advertisements seeking contributions in which a claim is made that an organization is a “501(c)(3) corporation.” These advertisements generally tell the listener to check with his or her tax advisor to determine whether donations are tax deductible, and we wonder, what exactly is a 501(c)(3) corporation? In a [...]

June 30th, 2016|

How to Draft Your Shareholder Agreement for the Professional Law Corporation so You’re Not Left Holding the Bag – The Attorney’s Fee Provision

As California attorneys should already know, California follows the “American Rule” when it comes to awarding attorney’s fees in litigation, meaning that each party in a dispute pays their own attorney’s fees. The rule is embodied in California Code of Civil Procedure Section 1021, which provides: “Except as attorney's fees are specifically provided for by [...]

June 13th, 2016|

How to Protect Your Rights as a Landlord in a California Commercial Lease

While many may be familiar with residential landlord-tenant law, they may not realize that there is a significant difference between what is permissible in the residential lease compared to what is permissible in the commercial lease. Many of the laws applicable to the residential tenant simply do not apply in the commercial setting. Because many [...]

June 10th, 2016|

What Constitutes a Material Misrepresentation in a Securities Offering?

California Corporations Code Section 25401 provides: “It is unlawful for any person to offer or sell a security in this state, or to buy or offer to buy a security in this state, by means of any written or oral communication that includes an untrue statement of a material fact or omits to state a [...]

June 8th, 2016|

Tips for the Product Development Agreement

Imagine you’ve spent thousands of dollars and countless hours researching and designing a better hydrogen cell battery for use in the automotive industry and have been in contact with a manufacturer who has agreed that your battery will revolutionize the industry and, the manufacturer is willing to help you develop your idea. You’ve gone beyond [...]

June 6th, 2016|

The Right to Publicity – What Does it Protect?

Anyone who has watched the news, seen the National Enquirer, or surfed the internet knows that the likenesses, photographs and endorsements of celebrities are used constantly in effort to sell various products to the masses. Usually, the celebrities whose name and images are used for that purpose have agreed to the use and, as a [...]

June 3rd, 2016|

What Securities Exemptions are Available in California?

Under California Corporations Code Sections 25110, 25120 and 25130, as well as federal law, it is unlawful for any person to sell any type of security unless that security has either been registered with the California Secretary of State (or the Securities and Exchange Commission) or is exempt from registration. We all know, however, that [...]

June 1st, 2016|

What is a Subordination Agreement?

If you have ever purchased real property in California using money from a bank or other institutional lender, have obtained a second loan secured by the property, then refinanced the first loan to reduce your payments, you have most likely seen what is known as a “subordination agreement.” Chances are, that document was one of [...]

May 30th, 2016|

Should I Incorporate my Business?

Many people go into business for themselves every day, and many of them have a limited knowledge on the protections a corporation can provide. Typically, until they have some need for additional operating capital or are being sued by an unhappy customer, they seldom incorporate. In business, however, the old adage “an ounce of prevention [...]

May 27th, 2016|

What are The Liabilities of a Limited Partner in California?

In California the Revised Uniform Limited Partnership Act of 2008 codified in California Corporations Code Section 15900, et seq., “which became fully effective January 1, 2010” The Uniform Limited Partnership Act of 2008: Text, Drafters' Comments, and Correlation Tables, Continuing Education of the Bar (“CEB”) 2008, governs all of the rights and liabilities of the [...]

May 25th, 2016|

What is a Patent?

According to stopfakes.gov, “[a] patent for an invention is the grant of a property right to the inventor. Patents are granted for new, useful and non-obvious inventions for a period of 20 years from the filing date of a patent application, and provide the right to exclude others from exploiting the invention during that period.  [...]

May 23rd, 2016|

What is a Private Placement Memorandum?

In order to raise capital, many small businesses seek investors through what are known as private placements. These “private placements” can offer limited partnership interests, common or preferred shares of stock in small corporations, bonds, or even notes. These offerings are generally exempt from registration under both state and federal securities laws and regulations, most [...]

May 20th, 2016|

Does Your Partnership Agreement Need to be Updated in Light of the IRS’ New Audit Regime?

On November 2, 2015 the Bipartisan Budget Act of 2015 (the “Act”) was signed into law by President Barrack Obama, which will significantly affect the audit rules for entities treated as partnerships for federal income tax purposes. The Act completely repealed and replaced the TEFRA audit regime for tax years beginning December 31, 2017. The [...]

May 18th, 2016|

Can Uber Claim its Drivers are Independent Contractors?

That is the question being answered in the action entitled O’Connor, et al. v. Uber Technologies, Inc., currently pending in the United States District Court for the Northern District of California, Case No CV 13-3826-EMC. According to the Second Amended Class Action Complaint, plaintiffs allege, among other things, that Uber Technologies, Inc. (“Uber”), although advertising [...]

May 16th, 2016|

California Court Finds California Law Prohibiting Surcharges Unconstitutional

California Civil Code Section 1748.1 provides: “(a) No retailer in any sales, service, or lease transaction with a consumer may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means. A retailer may, however, offer discounts for the purpose of inducing payment [...]

May 13th, 2016|

SCOTUS Extends the Sarbanes-Oxley Protections

“To safeguard investors in public companies and restore trust in the financial markets following the collapse of Enron Corporation, Congress passed the Sarbanes-Oxley Act of 2002. One of the Act's provisions protects whistleblowers [by providing]. . . ‘[n]o [public] company . . ., or any . . . contractor [or] subcontractor . . . of such company, may discharge, demote, suspend, [...]

May 11th, 2016|

Examining California’s Workers Compensation System

Since 2013, California’s Worker’s Compensation system has utilized a system of Independent Medical Review (“IMR”) to resolve disputes over the treatment of workers injured on the job. Typically, in California’s system, a request by an injured worker for medical treatment must undergo a “utilization review” (“UR”) process to determine whether the requested treatment is medically [...]

May 9th, 2016|

Why Use the California Limited Liability Partnership?

The California Limited Liability Partnership (“LLP”) is governed by California Corporations Code Section 16101 and California Corporations Code §§ 16951-16962. California Corporation Code Section 16951 provides: “. . . the only types of limited liability partnerships that shall be recognized are a registered limited liability partnership and a foreign limited liability partnership, as defined in Section [...]

May 6th, 2016|

Using the California Limited Liability Company to Acquire Real Estate

In California the Limited Liability Company (“LLC”) is a hybrid business; it is an entity that has the attributes of both the general partnership and the corporation. While the members of an LLC enjoy the freedom of management that comes with a general partnership, they are also insulated from many of the attacks that could [...]

May 4th, 2016|

Should I Use an Incentive Stock Option Plan?

As with every aspect of business, there are pros and cons to establishing an incentive stock option plan; but before one can even make the decisions necessary, it is important to understand what an incentive stock option plan is. The incentive stock option plan (“ISO”) is part of a deferred compensation plan which companies offer [...]

May 3rd, 2016|

Quesada v. Herb Thyme Farms, Inc.; Does Federal or State Law Control Advertising a Product as “Organic”?

Whether consumers may bring a state court action against the grower of herbs for fraudulently labeling its products as “organic” was answered by the California Supreme Court on December 3, 2015 in a yet unpublished opinion in Quesada v. Herb Thyme Farms, Inc., No. S216305, Ct. App. No. 2/3 B239602. Dispelling the notion that the Organic Foods [...]

March 18th, 2016|

What Material is Protected by a Trademark?

Many people confuse what is protected as a trademark with copyrights and patents. Each of these terms describes a protection for very specific types of intellectual property. “A trademark is generally a word, phrase, symbol, or design, or a combination thereof, that identifies and distinguishes the source of the goods of one party from those [...]

March 16th, 2016|

An Overview of the Copyright Law

The copyright law of the United States is governed by Title 17 of the United States Code and was enacted as the Copyright Act, Public Law October 19, 1976, as Pub. L. No. 94-553, 90 Stat. 2541 (the “Act”). The Act is the exclusive means by which the material covered by the Act may receive [...]

March 14th, 2016|

Protect Your Most Valuable Asset – The California Uniform Trade Secrets Act

Does your business have trade secrets? Of course it does! Trade secrets in California means any “information, including a formula, pattern, compilation, program, device, method, technique or process” that has actual or potential value that is not known to the public who could obtain economic value from its “disclosure or use” which is the subject [...]

March 11th, 2016|

What Factors Does the IRS Look at to Determine Independent Contractor Status?

There are many definitions for the term “independent contractor.” Black’s Law Dictionary defines the term “[g]enerally, one, who, in exercise of an independent employment, contracts to do a piece of work according to his own methods and is subject to his employer’s control only as to end product or final result of his work. Black’s [...]

March 9th, 2016|

The Personal Services Contract in California

Everyone knows and understands that slavery and involuntary servitude were abolished in the United States in 1865 by the passage of the Thirteenth Amendment to the Constitution. Something of a corollary to the Thirteenth Amendment was enacted in California in 1872, which provided that a contract for personal services for a period of more than [...]

March 7th, 2016|

Should I Form a Professional Corporation for my Medical Practice?

California Business and Professions Code Section 2052 provides “[a]ny person who practices or attempts to practice, or who holds himself or herself out as practicing...[medicine] without having at the time of so doing a valid, unrevoked, or unsuspended certificate...is guilty of a public offense.” California Business and Professions Code Section 2400 further provides “[c]orporations and [...]

March 4th, 2016|

The California Corporate Securities Law of 1968 – What is it Anyway?

The California Corporate Securities Law of 1968 (“Securities Law”) became effective on January 2, 1969 Marc Levin, California Corporate Securities Law of 1968: The Issue of the Nonissuer, 2 Loy. L.A. L. Rev. 87 (1969) and regulates all offers and sales of securities in California. Unlike the Federal Securities Act of 1933 and the Securities [...]

March 2nd, 2016|

Dissecting the Software Licensing Agreement

For those involved in the creation and distribution of software, the software license agreement plays a vital role in protecting the intellectual property rights of the licensor of the software. Failing to have an adequate agreement can, and generally does, lead to infringements into the intellectual property rights of those entitled to those rights, which [...]

February 29th, 2016|

What Should be in my Employee Handbook?

Few small businesses in California have them, but all businesses, from large corporations to the small “mom and pop” pizza joint, would greatly benefit from having a well-considered and well-written employee handbook. The well-written employee handbook is one of the best tools for communicating with your employees and can set the tone for the relationship [...]

February 26th, 2016|

Must I Register my Nevada Corporation in California?

After deciding that they are going to incorporate their business, many California-based founders are persuaded, for a variety of reasons, to incorporate in some jurisdiction other than California. Many decide to incorporate in the states of Nevada or Delaware, usually because they believe that those states offer more favorable tax treatment, or because they believe [...]

February 24th, 2016|

What Contracts Must be in Writing – the Statute of Frauds

Not all contracts are equal. While it is true that many oral contracts (that is, contracts entered into between two parties without a written agreement) are enforceable in California, many are not. In California, the Statute of Frauds contained in California Civil Code Section 1624 requires that to be enforceable in court, certain contracts must [...]

February 22nd, 2016|

How and When to Wind-Up Your California Corporation

Winding-up and dissolving a California corporation is governed by the provisions of California Corporations Code Sections 1900 through 1907. How that process takes place depends largely on whether the corporation has ever done business or issued shares or whether a “voluntary order for relief under Chapter 7 of the federal bankruptcy law has been entered.” [...]

February 19th, 2016|

The Social Purpose Corporations Act and How to Use It

California’s Social Purpose Corporations Act allows entrepreneurs wishing to combine for profit businesses activity with the achievement of a social purpose. The corporation is formed by the traditional filing of Articles of Incorporation which state that the corporation is being formed for one of two special purposes, other than merely a lawful purpose. To be [...]

February 17th, 2016|

Hot Rods, LLC v. Northrop Grumman Systems Corp. – Can Extrinsic Evidence be Used to Alter the Meaning of a Contract?

On November 6, 2015, the California Courts of Appeal for the Fourth District, Division Three filed its decision in the case of Hot Rods, LLC v. Northrop Grumman Systems Corp., Case G049953 (Super.Ct. No. 30-2009-00118853) which arose out of Hot Rods, LLC’s purchase of an Orange County property from Northrop Grumman Systems Corporation, once used [...]

February 15th, 2016|

Some Suggestions for the San Diego Shopping Center Lease

Shopping center leases are as varied as the locations in which malls are located and the type of tenant seeking to lease space within their boundaries. Is the mall an outdoor mall or an indoor mall? Does it currently have an “anchor” tenant, or is the landlord or management company seeking to obtain one? How [...]

February 12th, 2016|

What is a “Biological Material Transfer Agreement” and When to Use It

A biological transfer agreement is a written contract between a provider of biological material to another, generally an entity engaged in biomedical research. The agreement is designed to govern the rights and obligations of the parties in connection with biologic materials such as cells, reagents, and plasmids, although these types of agreements sometimes govern other [...]

February 10th, 2016|

Include an Arbitration Clause in Your Contracts to Save You Money

Arbitration has increasingly been used to resolve disputes over the past twenty years. In fact, some commentators and lawyers believe that alternative dispute resolution (“ADR”) (meaning, among other used methods, mediation, arbitration, and the use of “private judges”) is the “wave of the future.” In support of their laments, these commentators point to the ever-increasing [...]

February 8th, 2016|

The Non-Solicitation Agreement; Why Use It?

California has a strong public policy against restraining the ability of its citizens from engaging in their chosen professions. California Business and Professions Code Section 16600 essentially prohibits almost all forms of agreements between an employer and employee wherein the employee agrees not to compete with the business of the employer. So strong is this [...]

February 5th, 2016|

Should I Require Key Employees to Sign an Arbitration Agreement?

Most employers, as well as other business people, have increasingly turned to arbitration agreements for a variety of reasons. Among the reasons most commonly cited is the avoidance of the cost of employment litigation and the amount of time consumed by that litigation which can take years to reach resolution. One other valid reason for [...]

February 3rd, 2016|

Why Sarbanes-Oxley is Important to Private Companies

For many private companies, Sarbanes-Oxley represents a cumbersome burden that is the province of publicly-traded companies and not relevant to the needs or goals of private enterprise. There are, however, a few provisions of Sarbanes-Oxley that pertain to private companies, including certain requirements regarding retirement plan, employment, and document retention policies and procedures. Of greater [...]

December 24th, 2015|

The Value of Registering Trademarks

You may have heard that federal registration of trademarks is not necessary in the United States because certain rights to use a mark and exclude others from using it in connection with similar products arise automatically. While this is generally true under common law, there are several limitations that come with reliance on a common [...]

December 23rd, 2015|

Preparing For a Private Sale: Bid Letters and Letters of Intent

Letters of intent are an important tool in the process of buying or selling a business. They can benefit both sides of a potential transaction in many ways. They can also serve as a proving ground for the parties to test the probability that a deal can be finalized. Sometimes a buyer will use a [...]

December 21st, 2015|

How an IP Portfolio Attracts Funding and M&A Suitors

Maintaining a complete and current patent portfolio is a great way for a company to improve its chances of a potential acquisition deal. In intellectual property (IP) centric industries like technology and biotechnology, a patent portfolio is also vital to the growth and survival of a company, and can provide leverage for collaborative endeavors with [...]

December 21st, 2015|

Prepare For a Private Sale by Reviewing Key Supplier and Customer Contracts

Even though buy-side due diligence in the sale of a private company forms the bulk of the research during the deal process, sellers should not overlook important diligence steps that will help prepare their company for sale. Taking certain basic steps will help maximize the value of the business and increase the likelihood that the [...]

December 18th, 2015|

Understanding Preferred Instrument Term Sheets in Early Stage Funding

Structuring early stage investments as preferred instruments, such as preferred stock, is significantly more complex than working with convertible notes; understanding preferred instrument term sheets in early stage funding is essential knowledge. This post will introduce some of the commonly encountered terms and provisions in finance deals involving preferred instruments. The top of the term [...]

December 16th, 2015|

Part Two: Positioning Your Startup to Appeal to Angel Investors

A previous article introduced the concept of reviewing and structuring a startup to appeal to angel investors. That article briefly discussed some of the common points of inspection for the due diligence conducted by an interested angel. This article will build further on the idea, presenting two other important areas of corporate housekeeping that can [...]

December 16th, 2015|

Understanding Convertible Note Term Sheets in Early Stage Funding

Once an angel has decided to invest in a startup, they will either seek a convertible note or equity in the form of preferred stock. In either case, a term sheet is often used to communicate the basic details of the transaction. A term sheet is a letter of intent that states the proposed material [...]

December 14th, 2015|

Positioning Your Startup to Appeal to Angel Investors

After initial seed money and the money from friends and family has been exhausted, early stage startups enter a challenging phase in the financial life of the company. For biotech startups in particular, this can be the beginning of a relentless feedback loop: data is needed to get more money, but money is needed to [...]

December 14th, 2015|

Representations and Warranties Form the Bedrock of Private Acquisition Agreements

There are many provisions that are negotiated in almost all private acquisition agreements. Definitions, closing conditions, indemnifications, and representations and warranties are among the essential topics addressed by such agreements. While these topics all bear directly on the nature and value of a deal, the representations and warranties address a deal at its most basic [...]

December 11th, 2015|

Examining Ownership and Assignment of Intellectual Property Rights Produced by Independent Contractors

In the United States, ownership of intellectual property (IP) rights defaults to the inventor. In order for any transfer of rights to be effective, a clear written assignment must be made between the parties. Even the work for hire doctrine will not overcome this requirement in the case of copyrighted works. For this reason, it [...]

November 13th, 2015|

How Freedom to Operate Informs Deal Values in IP-Heavy Industries

In transactions involving research-centric businesses like biotechnology firms or pharmaceutical companies, the intellectual property (IP) assets of the target are the focus of the deal. The terms of a proposed acquisition are directly affected by the relative strength and weakness of any such assets. Similarly, the amount the acquiring company is willing to pay will [...]

November 11th, 2015|

One-Step Mergers

One-step mergers are a traditional method for acquiring public companies. The target, acquiring company, and a subsidiary of the acquiring company execute a merger agreement that contains various listed conditions. Once those conditions are satisfied, the subsidiary will merge with the target company, and the target becomes a wholly owned subsidiary of the acquiring company. [...]

November 11th, 2015|

The Rise of Tender Acquisitions

Two years ago, the Delaware General Corporation Law (DGCL) was amended in a way that has dramatically changed the use of tender offers. Historically, tender offers were the province of hostile takeover bids. Acquirers of public companies could greatly accelerate the takeover timetable and avoid risk-increasing formalities through use of a tender offer followed by [...]

November 9th, 2015|

Choice of Entity for Biotech Startups

A key decision for any startup is which entity type to choose—and choice of entity for biotech startups is no exception. The primary advantage of forming a legal business entity is to shield the personal assets of the owners from the liabilities of the business. Entity selection, whether LLC, partnership, or corporation, has broad implications [...]

November 9th, 2015|

ERISA Fiduciaries Must Monitor Retirement Plan Investments

The United States Supreme Court has issued a reminder to plan fiduciaries responsible for selecting investment options available to participants in employee benefits plans subject to ERISA. Any such fiduciary has an ongoing duty to monitor the total performance of plan investments, and to remove any investments that could reasonably be considered imprudent. The implication [...]

November 6th, 2015|

Private Placements: The Advantages of 506(c)

Companies seeking to raise capital through a private placement have long preferred to proceed under Rule 506 of Regulation D of the Securities Act of 1933. Regulation D provides a safe harbor for private offerings, with three separate registration-exemption schemes governed by Rules 504, 505, and 506. These rules grant issuing companies an exemption from [...]

November 4th, 2015|

A Quick Guide to DOL’s Proposed Changes to FLSA Overtime Regulations

The Department of Labor (DOL) has proposed several changes to the overtime regulations of the Fair Labor Standards Act (FLSA) that are expected to take effect in the middle part of 2016. The changes will raise the minimum salary requirements for exempt employees and introduce a mechanism that makes automatic annual increases to the salary [...]

November 4th, 2015|

CGL Insurance: The Basics

A previous post discussed why Commercial General Liability (CGL) Insurance policies typically do not cover the costs of intellectual property (IP) rights infringement claims. However, CGL Insurance is still an essential component of any ongoing business operation because it protects the assets of the business against claims of injury or damage caused to others by [...]

November 2nd, 2015|

Avoiding Rescission Exposure in a Private Placement

Private placements can be a great vehicle for raising money to infuse a business with much needed capital while avoiding the formalities of a public offering. Many businesses that lack the contacts to secure sufficient attention and investment from a venture capital firm will use an intermediary, such as an investment banker. However, because they [...]

November 2nd, 2015|