Tag: Business

  • Starting a Start-Up

    Starting a Start-Up

    By: Ranja Bose, KSG Contributor

    Before starting your own business venture, what are the potential issues that you may need to consider? Our law firm works with entrepreneurial clients every day to get them started, and to allow them to maintain and flourish their business in today’s fast-paced world. Whether your business will be for profit, non-profit, service-oriented, or something entirely unique, there are a few things that you will need to consider.

    a.         Your product should solve a problem, partially or wholly.

    A new business should offer something unique to the marketplace, ideally a product or a service which offers a solution to an existing problem, or which makes life easier for its users. Firstly, make sure that the problem being “solved” needs solving. For example, many users were disappointed with Apple’s removal of the headphone jack, lamenting that the presence of the headphone jack was not an issue that needed solving in the first place. A way to do this would be to reverse engineer the issue at hand; identify a problem, and then think of a unique product or service that would solve that issue.

    After doing the basic market research for existing products, you need to evaluate your target audience. Who are they, what is their purchasing power like, are they distributed uniformly geographically? Surveys, questionnaires, and networking come in handy during this step. The results found with these can be used to create fictional user personas to test the product or service on. This step requires a lot of manpower and research and will let you know if the product or service is needed. Some startups hire external agencies to do this, then develop their good in accordance with the findings.

    b.         Protect your IP.

    Your market research should make sure that your product is not infringing on anyone else’s intellectual property. Remember, two different products may solve the same problem, but may not do so in the exact same way. Conversely, your product must also be protected from infringement. This can be done through contacting an attorney to assist you with the process of obtaining registration of your patent, copyright, or trademark, or possibly more than one of these. What type(s) of protection your product requires will depend on the product itself and the circumstances surrounding the creation and marketing of the product. A prudent step after obtaining IP protection may be to speak with your attorney regarding transferring the ownership of the IP to your company or business entity, if you have one. This may help to shield the individual creator from certain liabilities, and to shift certain legal obligations to the entity. You may also obtain business license and tax permits at this time.

    c.         Solidify your brand and secure it.

    Solidifying your brand may include assigning an identity to your product. People need to relate to what a company offers. The brand will differ from company to company, and depends on the industry. Solidifying your brand may also include creating and securing incidental IP like websites, any supplementary products, marketing methods, as well as having a pitch ready. These pitches, or descriptors, should be short. This ensures that you do not lose your investor’s attention, while demonstrating that you are providing the best possible product for that particular problem. You should conduct extensive research on and be well-versed in the issue, enough so that you can call yourself a subject matter expert. This will encourage others to value your opinions and ideas and thus help reinforce your brand.

    d.         Define your company.

    You have your product and you know what it does. Now might be the time to formalize the company, i.e., the entity that will have ownership of the product. Choosing the name would be the natural first step. You will then have to register your company as a particular type of organization. This can be done by contacting an attorney to help you register the company as a corporation, limited liability company (LLC), non-profit, sole proprietorship, or limited or general partnership. The way in which you register your company will affect its structuring and tax liability. You also need to choose which state you want your company incorporated, organized, or domiciled in. This step should include consultation with tax and financial professionals, and once the company is formed, will also include obtaining a federal EIN (Employment Identification Number) from the IRS.

    e.         Pick a team.

    Now that you have protected your product and company, it is time to pick a team. This team may consist of many people, or only one other person, but you should make sure they each have a separate skill set from you. Investors are more confident in a company that has diversity of thought and know that the team members will keep each other in check.

    f.          Raise capital.

    This “step” is usually not just a step, but an ongoing process which should be done simultaneously with the steps above, after your IP has been secured. Often times, startups do not have the money to hire people without some seed capital. Thus, you need to know a basic pitch of your product as soon as you have secured your IP. Most of the networking required to raise capital is often done while you are solidifying your brand and creating your company. By the time you reach this step of raising capital for your product, you should preferably have moved your product through your local investment circles.

    g.         Make a business plan.

    For your product to be successful, you need to market it to the right people. Business plans may differ by company and industry. This also helps keep track of the finances, turnovers, and making plans for subsequent growth.

    h.         Pick a workplace.

    Once you have accumulated enough capital that your company can afford a place, get a sufficient workplace, and be sure to set policies and procedures for your expenses, hiring practices, future possible employees, etc.

    The process of starting a new business may seem complex at times, but it can be incredibly rewarding, both personally and professionally. Contact Kloss Stenger & Gormley LLP today at 716-853-1111 for more information, and for help navigating these important legal issues.

  • Trade Secret Protections for Small Businesses

    Trade Secret Protections for Small Businesses

    Business owners seeking to protect their proprietary information or invention have many different options. The most common method that people think of is patent protection. Depending on the complexity of the subject matter, patents can be expensive to draft, prosecute, and defend. Additionally, not all information that a business may find valuable will fall under the umbrella of patentable subject matter. Where can a business turn to protect their valuable information that is not protected by a patent?

    The simple answer is to turn to trade secret for protection. The same protections that have protected the iconic taste of Coca-Cola, Google’s proprietary search algorithm, McDonald’s Big Mac special sauce recipe, as well as WD-40’s secret formula can be put to use by your business to efficiently and effectively protect your business’ information.

    What is a Trade Secret?

    A trade secret can take several forms. For instance, a trade secret could be a formula, pattern, compilation of data, computer program, or device. Practically, with trade secret protections you can protect any information that is valuable to your business that you keep secret. In order to receive common law legal protections for a trade secret, the information must meet a few requirements.

    Trade Secret Requirements

    First, the information must actually be economically valuable. That is, what you are seeking to protect must convey some kind of economic benefit to the holder. For example, a curated client list satisfies this requirement because the list is valuable to a competitor in the field. Think of this as the secret sauce.

    Second, the information must be secret. This requirement is a bit confusing because secret here means not widely known by the public. You do not need to keep the information you wish to protect as a trade secret absolutely secret. Your business’ managers and employees are free to possess and use the secret knowledge for the benefit of the business. The secrecy requirement is closely tied to the economically valuable requirement. If your competitors and the public are generally unaware of the information then it is likely valuable to your business.

    Third, the holder of the information must have taken some kind of precautions to keep the information secret. You can satisfy this requirement, for example, through non-disclosure or confidentiality agreements that prevent employees from sharing your valuable, secret information.

    What is Trade Secret Misappropriation?

    Trade secret misappropriation is legalese that simply means that some bad actor stole your business’ valuable information and either used it or disclosed it in a way that harmed your business. There are a few requirements to meet in order to assert a claim of trade secret misappropriation in state court.

    Information is a Trade Secret

    First, the holder of the trade secret must prove that the information met the requirements for a trade secret. Business-owners often overlook this initial step. You or your business’ conduct prior to the trade secret theft could potentially be detrimental to your ability to recover for the trade secret theft. For example, if your business does not have a confidentiality agreement in place with your employees, vendors, or potential business partners then the courts may find that your business did not do enough to protect your trade secret.

    Trade Secret Acquired Through Confidential Relationship

    Second, trade secret misappropriation requires that the bad actor acquired the trade secret information as a result of a confidential relationship with the holder of the trade secret. For example, if you hired an employee who signed a non-disclosure agreement and then upon leaving your business that employee spread confidential information protected by the non-disclosure agreement, you or your business could potentially pursue that employee for trade secret misappropriation. However, if you disclose the information outside of that confidential relationship, it is likely not actionable (think of an inventor or entrepreneur’s elevator pitch).

    Here, it is important to note what trade secret misappropriation does not cover reverse engineering. Reverse engineering of a trade secret is not trade secret misappropriation. This is the big trade-off associated with trade secret protection. Unlike patent protection, trade secret protection does not prevent use of the secret information. Instead, trade secret protection only prevents a bad actor bound by some kind of agreement from violating that agreement. Trade secret provides another cause of action to help to protect the internal workings of your business that set you apart from your competitors.

    Unauthorized Use or Disclosure

    Third, trade secret misappropriation requires that the bad actor has either made unauthorized use of the trade secret information or has disclosed the secret information. For example, this requirement would be satisfied if a disgruntled ex-employee of Coca-Cola who signed a non-disclosure agreement shared Coca-Cola’s secret formula on the internet.

    Potential Remedies for Trade Secret Misappropriation?

    Remedies for trade secret misappropriation fall generally into the two buckets. First, pursuing trade secret misappropriation as a cause of action allows the court to enter injunctive relief. If a disgruntled ex-employee is sharing your company’s secrets online on social media, a court can order that ex-employee to stop spreading your business’ trade secrets. A judge can enter this order early in litigation before any arguments on the merits of the case have begun. This is a time and cost-effective way to protect your business’ trade secrets.

    Second, juries have been extremely sympathetic to businesses harmed by trade secret misappropriation. Juries have awarded huge awards in the past. For example, in a case recently heard in a Texas state court involving a Quicken Loans company allegedly stealing the trade secrets of a Silicon Valley real estate start-up, a jury awarded the start-up over $706 million dollars to compensate the start-up for the theft of its trade secrets.

    Trade secret protection is a valuable option for businesses seeking to protect the inner workings of their businesses.

    For more information, or to speak with an attorney about protecting your business, please contact our office for a free consultation.

    Disclaimer: This blog is made available by Kloss, Stenger & LoTempio for educational purposes only. It is not intended to provide legal advice nor form any attorney client relationship between the reader and Kloss, Stenger & LoTempio. You should always seek professional advice from a licensed attorney for any legal questions you may have.

     

  • You Will Have to Start Paying Online Sales Tax (in 2018)

    You Will Have to Start Paying Online Sales Tax (in 2018)

    In the near future, you may be paying more for goods that you buy online. On June 21, 2018, the Supreme Court delivered its decision in South Dakota v. Wayfair. The Court’s decision will likely impact the way you shop – both online and in brick-and-mortar shops.

    In a previous blog post, we reported that the Supreme Court agreed to hear a case concerning the validity of state legislation permitting the state to tax an out-of-state retailer’s sales in the state. That blog post can be read here. This post is an update to the previous post and will address the Court’s decision in Wayfair.

    Supreme Court Precedent

    The Supreme Court previously held that a state could tax a retailer’s sales only if the retailer had a physical presence within the state. An out-of-state retailer with no physical presence (e.g., warehouse, brick-and-mortar store) could not be taxed by the state. The Court viewed taxing an out-of-state retailer as a violation of the Dormant Commerce Clause.

    Times have changed since the Court last visited this issue in 1992. The Court in 1992 could not have foreseen the explosive growth of online, out-of-state retailers. Nor could the Court have forseen the impact those retailers would have on the sales tax revenue of the States.

    Lost Tax Revenue in the Age of Online Sales

    With the ever-rising popularity of online retailers, states have lost out on substantial sales tax revenue. It has been estimated that states have been unable to collect between $8 and $33 billion in sales tax revenue every year due to out-of-state retailer’s effective sales tax-free status.

    The South Dakota legislature realized how much tax revenue was being lost by permitting out-of-state online retailers to do business in the state without paying any sales tax. South Dakota passed state legislation which obliged out-of-state retailers to collect the same taxes that brick-and-mortar retailers collected. In short, South Dakota sought to even the playing field for brick-and-mortar retailers and collect additional tax revenue.

    Given the Supreme Court’s previous decisions explicitly preventing legislation like the legislation passed in South Dakota, a constitutional clash was unavoidable.

    Court’s Decision

    At issue in Wayfair is whether or not a state can require an out-of-state seller to collect state sales tax on the goods sold in a particular state. Specifically, the out-of-state sellers in this particular case are popular online retailers Wayfair, Overstock.com, and Newegg.

    The Court held, by a 5-4 majority, that the previously decided Supreme Court cases were incorrect. There was no basis for the Court to require a physical presence in a state in order for a state to collect sales tax on sales made in the state. In overruling previous Supreme Court precedent, the Court has paved the way for the States to pass legislation to collect sales tax on online sales made to customers in the State – much like South Dakota has done.

    In essence, the Court reasoned that the “physical presence rule” did not age well. While the rule may have worked well in the late 1900s when out-of-state sales consisted of mail-ordered crockery from Sears Roebuck catalogs and vacuums bought from door-to-door Kirby salesmen, the rule does more harm than good in the age of the internet. The physical presence rule harmed both brick-and-mortar retailers as well as states that relied on sales tax revenue to carry out their governmental functions.

    Dissent

    Four of the nine Justices of the Supreme Court disagreed with the Court’s holding. The basis for the disagreement stems from the nature of the Commerce Clause. The dissenting Justices believe that the decision as to whether states can tax out-of-state retailers should fall to Congress.

    After all, the Constitution gives Congress the power to regulate interstate commerce. Further, the dissent argues the majority has failed to take account of the impact of the decision on small businesses. Suddenly, small online retailers shipping to customers in different states will be faced with over 10,000 jurisdictions. Each of these jurisdictions levies taxes in different ways.

    What to Expect as a Consumer

    If you shop on Amazon, nothing will change. Amazon has already been voluntarily collecting sales tax on online purchases. However, if you shop at a retailer like Wayfair, Overstock.com, or Newegg expect to pay more for your purchases.

  • What is a Corporation?

    What is a Corporation?

    There are many different ways in which a business can be formed. When forming your own business, though, there are four main types to consider, each with their own pros and cons. For this post, we will answer “What is a Corporation?”

    A corporation is the most easily recognizable

    Advantages of a Corporation:

    • Limited Liability for shareholders. Personal assets are protected (with some rare exceptions, i.e. fraud).
    • Easily raise capital through the sale of stock. (You can also create multiple levels of ownership, as well as non-voting ownership).
    • Transferring ownership is simple.
    • Potential Tax Advantages. (Deductibility of employee health benefits, exception from certain individual taxes).
    • Perpetual duration or unlimited life.

    Disadvantages of a Corporation:

    • Double taxation. (Profits are taxed first at the corporate level, then again at the personal level when that income is distributed to owners).
    • Cannot elect to be treated as an individual for the purposes of taxation.
    • Corporate Formation and Franchise fees required to be paid to the state.
    • Required Corporate Formalities. (Meeting and record keeping requirements are strict).

    A Corporation is an effective tool for business to expand, obtain larger investment, and take the business to the next level . Before forming a corporation, you should consult with a knowledgeable business attorney to go over the rules and requirements that you must follow in order to protect yourself. To speak with one of our business attorneys, please call (716) 853-1111 for a free consultation, or simply leave a comment below!

  • 5 Things to Remember When Selling Your Business

    5 Things to Remember When Selling Your Business

    Today’s strong economy and recent tax overhaul may have you considering selling your business while prices are high. With a less restrictive tax code in place, the asking price for businesses could increase even more. Selling a business can be fraught with challenges, so it is important to have a plan to ensure that your sale goes smoothly and does not leave you with seller’s remorse.

    Here are five things to remember before you sell your business:

    1. Have Your Corporate Documents Ready. Before you will be able to close a deal, the parties will participate in the due diligence process. The due-diligence process is where the purchaser, the purchaser’s attorneys, and the purchaser’s accountants review the company’s assets, liabilities and overall financial health before completing the sale. For the most part, you will be able to anticipate what documents the purchaser will ask to review. If you have those documents organized and ready, it will make the due diligence process proceed faster and more smoothly. Standard due diligence documents to have ready are:
    • Corporate Formation Documents (Certificate of Incorporation, Articles of Organization, Bylaws, Operating Agreement, Certificate of Good Standing)
    • Financial Statements (Bank Statements, Payroll Records, Tax Returns)
    • Customer Records
    • Employee Contracts
    • Third-Party Contracts (Contracts with your Vendors and Customers, Equipment leases, Licensing Agreements)
    • Asset Contracts (Real Estate Purchase Contracts, Property Leases)
    1. Purchasers Want Real Value. Purchasers will not pay for what you believe the company is worth. You must be able to demonstrate to them not only the company’s sales, but also its profits. If that is difficult for you, maybe now is not the right time to sell. Biding your time may allow you to generate a better sales record and, thus, a higher purchase price. Having your corporate documents ready before you begin negotiations will give a better idea if you are financially ready to sell.
    2. Be Patient. Finding the right purchaser for your business may take time. Jumping at the first offer could mean leaving money on the table. For this reason, you may want to consider hiring a broker to help generate more interest and more offers.
    3. Consider Your Role Post-Sale. How will you generate an income after the sale closes? Will the sale proceeds be enough to sustain you? Can the business sustain itself without you? Depending on the nature of the business, you and the purchaser may decide that it is best to keep you involved after the ownership change. The business may be in an industry where the personal relationships you have developed will be critical to its future success. Perhaps you have unique skills and capabilities that the business will need in order to be successful. Often a purchaser will make a sale contingent on locking-up a key member of the organization for several years after the sale. Consider what arrangement works best for you.
    4. Have an Attorney Review the Contract. The final contract is the most important piece of the whole deal. Having the contract reviewed by an attorney is the best way to protect yourself from the dreaded fine print . Your attorney can help you identify any traps, provide you with valuable advice, and help you negotiate the best deal possible. Entrepreneurs tend to believe that they can do it all on their own, mostly because early on they had to. When it comes to selling the business, however, the drafting and review of the contract is best left to the professionals.

    For more information, or to speak with an attorney about how to sell your business, please contact our office for a free consultation.

    Disclaimer: This blog is made available by Kloss, Stenger & LoTempio for educational purposes only. It is not intended to provide legal advice nor form any attorney client relationship between the reader and Kloss, Stenger & LoTempio. You should always seek professional advice from a licensed attorney for any legal questions you may have.

  • 3 Reasons Sole Proprietors Should Avoid DBAs

    3 Reasons Sole Proprietors Should Avoid DBAs

    New York State Business Law Section 130 prohibits anyone from doing business under a name other than his or her own unless an Assumed Name Certificate (more commonly referred to as a DBA) is filed. For example, if John Smith would like to sell seeds under the name “Johnny’s Apple Seeds”, he would have to file a DBA certificate before he could start selling. Sole proprietors, LLCs, and corporations can all use a DBA to conduct business. However, for the purposes of this post, we will focus more on sole proprietors.

    DBA Assumed Name
    Sample DBA (Assumed Name) Certificate

    What information is contained within a DBA?
    In New York, a DBA certificate must contain 1. the name of the business, 2. the address of the business, 3. the name and signature (notarized) of the individual (or partners), and 4. the individual’s (or partners’) personal address. Click left to see a sample certificate.

    What is the cost and where to file a DBA?
    For a sole proprietor filing in a single county, the fee is between $25-35 depending on the county. The fee for filing in Erie County is $35. For corporations filing a DBA certificate with the Secretary of State, the filing fee is $25 plus an additional $25 for each county that the corporation will operate in outside of New York City. If the corporation wishes to operate in a county within New York City, the filing fee is $25 plus an additional $100 for each New York City county(Bronx, Kings, New York, Queens, and Richmond Counties). There are no county fees for LLCs.

    A certificate may be filed either with the Secretary of State or with the Clerk’s Office for the county in which the business will be operating. Now that we know what is needed to file a DBA certificate, we will discuss 3 Reasons Sole Proprietors Should Avoid DBAs.

    3 Reasons Sole Proprietors Should Avoid DBAs:

    #1 – Personal Liability

    Sole proprietors often fail to realize that a DBA certificate does not confer protection from personal liability. Despite doing business under a different name, the proprietor remains personally liable for the debts and conduct of the business. If the proprietor’s business is sued for any reason, whether it be for breach of contract or a personal injury, their house, car, bank account, and other personal property are at risk. This means that the proprietor’s personal assets could be used to satisfy a judgment or claim. Personal liability is by far the greatest danger to sole proprietors using a DBA.

    #2 – No Rights to Business Name

    Filing a DBA certificate does not provide a sole proprietor with exclusive rights to the business name. Even if they have been operating for several years under the DBA name, another business can register their LLC or corporation using that same name, and will be able to conduct business statewide.

    #3 – Geographic Restrictions

    As discussed earlier, sole proprietors utilizing a DBA filed with the county are geographically restricted from doing business outside that county. Having to refile in county after county can be time consuming and expensive. That is why many do not bother to refile. What should be obvious by now is that if a sole proprietor wishes to conduct business under a different name, they are much better off registering as an LLC or corporation. This will provide personal asset protection, confer business name rights, and are free to operate statewide.

    To learn more, or to discuss filing for your own LLC or corporation, please contact us for a free consultation.

    Disclaimer: This blog is made available by Kloss, Stenger & LoTempio for educational purposes only. It is not intended to provide legal advice nor form any attorney client relationship between the reader and Kloss, Stenger & LoTempio. You should always seek professional advice from a licensed attorney for any legal questions you may have.

  • What are the Elements of a Contract?

    What are the Elements of a Contract?

    Many people enter into contracts on a daily basis without realizing that they are in a legally binding agreement. To help the average person understand when they have a valid contract, we have set forth the elements of a contract below.

    There are four elements of a contract, in order to have a valid contract, all four must be present:

    1. Offer

    This is the first step towards a contract. One party makes an offer to perform a service, sell a product, trade, or conduct some other business venture. An offer is valid so long as it is serious (i.e. not said in jest), and has not been revoked by the offeror (i.e. “I hereby withdraw my offer”).

    2.Acceptance

    The party to whom the offer was made must now agree to the terms of the original offer. Any conditional acceptance or inclusion of additional terms is called a counter-offer. A counter-offer is in effect a rejection of the original offer, and it starts the contract formation process all over again. Just like for an offer, an acceptance must also be serious.

    3.Consideration

    Contracts are not binding unless something of value is exchanged. Consideration can be in the form of money, a promise to perform an act or refrain from acting, or it can be for some other item of value. The element of consideration is the whole purpose for entering into a contract. For the element of consideration, both parties must have some obligation under the contract; for example, one party pays and the other party performs.

    4.Capacity

    Each party must reasonably assume that the other party has both the legal right and the ability to fulfill their end of a contract. They must also be able to fully comprehend at the time of agreement what their obligations will be. For example, an intoxicated person (with some exceptions) or a minor (with some exceptions) lack the capacity to enter into an agreement because they do not fully understand the obligations that they are undertaking.

    The elements of a contract set forth above are applicable for both oral and written contracts. However, certain types of contracts are required by law to be in written form.

    Despite the technical legal enforceability of certain oral contracts, for practical purposes, parties should memorialize their contracts in writing. This will help avoid confusion, misunderstanding, and will aid with enforcement in the event of a breach. To determine whether or not your contract needs to be in writing, or if you need to draft a contract, you should consult with a knowledgeable contract attorney.

    Having an experienced contract attorney help prepare your agreement is the best way to protect your interests. For more information, or to have your agreement drafted or reviewed, please contact our office for a free consultation.

    Disclaimer: This blog is made available by Kloss, Stenger & LoTempio for educational purposes only. It is not intended to provide legal advice nor form any attorney client relationship between the reader and Kloss, Stenger & LoTempio. You should always seek professional advice from a licensed attorney for any legal questions you may have.

  • What is a Non Compete Agreement?

    What is a Non Compete Agreement?

    Non Compete or Non Competition Agreements are contracts that contain a restrictive covenant whereby an employee promises to refrain from competing against their employer for some period of time. Such agreements can be beneficial to both the employer and employee. Employers are likely to invest more in the training and development of the employee without fear of the employee leaving to work for a competitor. Employees are also likely to be paid more and receive greater professional skill development.

    However, employees should be very cautious before signing such agreements. Employers often draft the language of the restriction broadly for their own protection. Employers should also tread carefully as Courts will not enforce non compete covenants if they are unconscionable, offend public policy, or otherwise operate as a restraint of trade for the employee.

    A Non Compete Agreement is generally enforceable if it is:

    • Necessary to Protect a Legitimate Business Interest

      Will the employee have access to the employer’s trade secrets, customer lists, or some other form of proprietary information? Would that information be damaging to the employer if used by a rival? The employee must have the ability to harm the business of the employer with the information once the employment ends for it to be necessary.

      • Consider the uniqueness of the employee’s services. The more unique the services, the more likely it is that the covenant will be enforced. If the services are not unique, there is less need for a non compete covenant.
        • Are janitors, gardeners, or day laborers unique in their services? No. They are unlikely to possess company trade secrets through the normal scope of their employment.
        • Are executives, engineers, or software developers unique? Yes. They are likely to have access to company trade secrets and other proprietary information that would be damaging if used by a rival.

    • Reasonable in Scope

      The reasonableness inquiry is where the Court will evaluate the actual terms of the restrictions. They must be no greater than is justifiable to protect the employer. They also cannot impose an undue burden on the employee’s livelihood.

      • Reasonable in time: Does the agreement seek to prohibit the employee from competing forever? If so, the restriction is likely unreasonable absent unique circumstances, and thus unenforceable. So long as the length of time is reasonably related to the length of time that the secret remains valuable, it will likely be enforceable. In most cases, a restriction period of 6 months to 2 years will be upheld as reasonable.
      • Reasonable in distance: Does the employer seek to prohibit the employee from competing within 10, 20, or 30 miles of the employer’s business? Generally, the larger the geographic restriction, the less likely it is to be enforceable.
      • Reasonable in extent of restriction: Does the agreement prohibit the employee from working in his or her trade completely? If so, it is likely an unenforceable restraint of trade. Nonetheless, a temporary restriction from directly competing in a specialized area of the employer’s industry is more likely to be upheld.

    • Supported by Consideration.

      The employee must receive something of value at the time of execution. This is typically money, but may also be equity in the company. The employer should not seek to intimidate or attempt to put undue pressure on the employee to sign. This may lead to the subsequent invalidation of the restrictions, and nullification of the agreement. It is important to note that if the agreement is signed after the employee has been hired, simply continuing the employment does not constitute consideration and another item of value must be provided.

    Before signing a non compete agreement, you should have it reviewed by a knowledgeable contract attorney. For more information, or to have your non compete agreement drafted or reviewed, please contact our office for a free consultation.

    Disclaimer: This blog is made available by Kloss, Stenger & LoTempio for educational purposes only. It is not intended to provide legal advice nor form any attorney client relationship between reader and Kloss, Stenger & LoTempio. You should always seek professional advice from a licensed attorney for any legal questions you may have.

  • What is a Limited Liability Company (LLC)?

    What is a Limited Liability Company (LLC)?

    There are many different ways in which a business can be formed. When forming your own business, though, there are four main types to consider, each with their own pros and cons. For this post, we will answer “What is a Limited Liability Company (LLC)?”

    A limited liability company is a hybrid between a corporation and a partnership. It is a popular business model due to its dual nature.

    Advantages of a Limited Liability Company:

    • Low start up costs.
    • The owners generally are immune from personal liability for the conduct of the business, with some rare exceptions (i.e. fraud).
    • The owners’ personal assets are generally protected from claims against the business.
    • Owners can be added or removed easily.
    • Owners can sell equity in the company to raise money.
    • Some states allow the owners flexibility to decide whether they would like business income taxed personally (“pass through taxation”) or on behalf of the business itself (corporate level).
    • A potential tax benefit of the LLC is the ability to use profits and losses of the business to offset other personal income.
    • Forming or Registering an LLC in New York State is very quick and easy with a knowledgeable business attorney.

    Disadvantages of a Limited Liability Company (LLC):

    • There are certain accounting rules that must be followed, such as not commingling business funds and the owner’s personal funds.
    • There are certain rules that owners or managers of the business must follow when signing contracts.
    • The owners and managers must follow the LLC’s operating agreement when conducting business.
    • Unlike a sole proprietorship, many states do charge a filing fee, and a nominal biannual registration fee.
    • Formal organization papers must be filed with the Secretary of State.

    A Limited Liability Company is a great way for entrepreneurs to get their business started. If you are interested in starting a business, check out our Business Formation page or consult with a knowledgeable business attorney to review the rules and requirements that you must follow in order to protect yourself. To speak with one of our business attorneys, please call (716) 853-1111 for a free consultation, or simply leave a comment below!

  • What is a Sole Proprietorship?

    What is a Sole Proprietorship?

    Businesses are omnipresent in American everyday life. When forming your own business, though, there are four main types to consider, each with their own pros and cons. A sole proprietorship, partnership, corporation, and LLC (limited liability company) all have their own unique aspects that may make them helpful or less helpful to you. For this post, we will answer “What is a Sole Proprietorship?”

    Advantages of a Sole Proprietorship:

    A sole proprietorship is a business owned by a singular owner who has complete control over the whole business. This is useful because:

    • There are generally no costs to set up.
    • The finances of the business are kept as the owner’s finances.
    • It is simple to own and operate, as there are no conflicting interests within the business.
    • There is no double taxation for business income (however, the owner must still pay normal sales and employee-related taxes).
    • The proprietorship is legally indistinguishable from the owner, and thus there is generally no paperwork to set up a proprietorship.
    • If a proprietorship becomes too large for an owner to handle, it can be converted into a partnership, corporation, or LLC, while keeping the same name, staff, and funds.

    Disadvantages of a Sole Proprietorship:

    However, there are disadvantages, especially in case of lawsuits. These include:

    • The owner is personally liable for the actions of the business.
    • There is no personal immunity from lawsuits.
    • Personal assets are at risk in the event of an adverse judgement.
    • If there is a business accident, because business funds are indistinguishable from personal funds, an unlimited amount of personal funds are legally attachable to repair damages.
    • The conversion of a sole proprietorship to a corporation or LLC can be a time consuming process as it requires the separation of business funds from personal funds, which requires meticulous accounting of the owner’s finances.
    • It is impossible to sell parts of the business to make money, as there is legally no separate business entity.

    These are just a few things to consider before operating as a sole proprietor. You should consult with a knowledgeable business attorney before starting your business. To speak with one of our business attorneys, please call (716) 853-1111 for a free consultation, or simply leave a comment below!