Taxes take a big bite out of profits for small business owners.
True story: I pay five times my salary in taxes every year as the business owner. For every dollar I take home to feed my family, I have to earn five just for taxes.
Too bad those tax dollars don’t go to feed other families. I’d rather use that money to take care of orphans.
But I digress.
California is much worse for taxes (business and personal) than all other states in the country.
So it is not surprising that I am asked constantly whether a business operating in my home town of San Diego would be better off incorporating in Nevada.
Nevada takes advantage of this and encourages businesses to incorporate in their state.
But for most small businesses, the answer to where they ought to incorporate is the state in which they are doing business. You can’t get away from California taxes by incorporating in Nevada if you are going to do business in California.
You didn’t really think California would let you get away from taxes that easily?
Can I incorporate in Nevada to avoid California taxes?
You can incorporate in Nevada.
But if you plan to do business in California, you cannot avoid paying taxes in California.
No matter where you’ve incorporated, if you’re running a business in California you must pay taxes on any income earned from California sources.
This is the rule for any combination of states that you mention. California, while tax-greedy, isn’t the only state to have these laws.
But sometimes there are good reasons for incorporating in another state.
For example, you may be able to divert some of the income you earn to the more tax-favorable state.
And there may be other taxes, business laws, and regulations that favor incorporating in one state versus another.
The best way to figure out how to structure your business is to have a great CPA and business lawyer help you along the way.
Do you know how to hire the best professionals for your business? Learn the secrets other lawyers won’t tell you by requesting our free e-course, How to Hire A Lawyer. Call us at 800-449-8992 or email us at [email protected] to find out more.
Many good and generous employers want to share with their employees.
The idea behind giving employees stock is a sound one. Employees who are owners may be more invested in the business’s success. They may feel more appreciated. It could give them a sense of pride, ownership or purpose beyond anything that they would feel from a simple salary.
These are the main reasons I hear from employers who wish to create an employee stock plan.
For a myriad of business reasons, I prefer not to share stocks with employees. I prefer an employee profit-sharing plan that does not involve equity.
But I understand that many business owners may feel like a stock plan is right for their employees.
So you may be wondering, if I tell my employees that they are entitled to stock options in a letter, memo or at a meeting, is that legal? No. Watch to learn more.
I offered stock options to my employees in a memo. Is that OK?
That is not a good idea. Employee stock plans and stock option grants are complicated. First of all, stock grants may create taxable events that impact you as the employer.
Second, stocks and options create duties by the majority stockholders to the minority stockholders under state laws that you may not anticipate.
Third, such a memo may create earned wages and must comply with wage laws.
Fourth, federal securities regulate promises and statements regarding stocks.
In short, employee stock plans create a variety of legal issues that you must understand before you start handing out shares and options.
There are better alternatives if you wish to give your employees a profit-incentive.
For example, you can have a 401(k) set up to include profit sharing or you can set up a bonus program.
Maybe you have a rich friend who is looking to invest in something interesting or fun or worthy. And you have another friend who has just built a better mouse trap, but is living in his mom’s basement.
Together, the two could make millions. So you consider playing business matchmaker. Nothing wrong with that, right?
Even better… maybe you can get a cut in the business or a fee for a successful transaction. That’s just being enterprising. And your inventor friend is enthusiastically willing.
Someone tells me this story casually at least a few times a year.
And every time, I have to be a wet blanket.
Because if you are going to connect an investor with a business, you may be violating the securities laws. If things go wrong, you could be held responsible. Or worse, you could be prosecuted by the SEC and fined or put in jail.
Like many things in law, something with such good and innocent intentions can surprise the people involved by being illegal.
Watch the video to see what I mean.
Say you have a friend who wants you to introduce him to potential investors in your industry in order to raise money for his new start up business.
Can you take a percentage if he successfully raises money from my contacts?
Federal securities law requires a broker’s license for any person who gets paid any fee for obtaining an investor.
This is meant to protect investors from being scammed.
Even if you just make the introduction, you must still comply with this law.
If you are not licensed, the investor can later sue you for a return of his or her money.
You can still make a simple introduction to help out your friend, so long as you aren’t paid for it.
And, of course, you shouldn’t make any representations or guarantees about the wisdom of investing money in your friend’s venture.
Would you like to have a lawyer at your beck and call without it costing you an arm and a leg? Learn about our Peace of Mind Plan or call us at 800-449-8992 to find out how.
Trademark holders have to police their trademarks to keep them.
In mid-2015, the Academy of Motion Picture Arts and Sciences (AMPAS) brought to trial a lawsuit against GoDaddy.com to stopped its “parked pages” program. I blogged previously about this lawsuit and what it means for business owners.
Before this lawsuit, there was no legal findings about whether or not parked pages were even legal. The verdict in GoDaddy’s favor changes that and has important implications for trademark holders nationwide.
The GoDaddy verdict is a stark reminder to all trademark holders that not diligently policing your mark online could cost you thousands. Worse, if you fail to police your mark, you may lose your rights to protect it altogether.
Parked pages usually occur when valuable domains are bought and then “parked” with ads to obtain revenue while the domain waits to be sold. This is abused by cybersquatters who buy domains with names similar to the trademarked names of a business before the business can buy it.
For example, as of this writing, coke.co is a parked page whereas coke.com goes to coca-cola’s website. The individuals who do run these pages create them on the hopes that web surfers will accidentally go to one of these pages and click on an advertisement. Or, they hope that the trademark holder will buy the domain name for a handsome mark-up.
When a page is parked, the domain registar and host (a company like GoDaddy) gets a portion of the advertisement revenue.
In its lawsuit, AMPAS argued that there were 56 Oscar-related domain names at issue. These domain names include the domains 2011Oscars.com, Oscar4re.com and Oscarcam.com. AMPAS also estimated that GoDaddy.com generated revenues of at least 8 million dollars from internet goers clicking on advertising links associated with these domains.
It is important to note that AMPAS did not contend that GoDaddy owned any of the domains mentioned in its lawsuit. Instead, AMPAS argued that the trademark violators were aided and abetted by GoDaddy who profited from the parked pages. AMPAS complained that GoDaddy allowed infringers to purchase the domain names and failed to police the sites to ensure legal compliance.
The judge didn’t agree. He decided that there was not enough evidence that GoDaddy intended to traffic in trademark violations in its parked pages. In other words, the judge decided that GoDaddy did not deliberately violate AMPAS’s trademarks.
GoDaddy really scored big when the court went a step further. The judge said that GoDaddy also provided enough evidence to prove that the domain was use fairly or otherwise lawfully, which is a defense to trademark claims.
GoDaddy proved this by showing that each time AMPAS sent a complaint to GoDaddy, it took the parked page down, usually within hours.
Domain purchasers also swear to legal compliance with trademark laws as part of their purchase of a GoDaddy automated domain registration. So the court decided that the blame lays on the trademark infringers, and not on GoDaddy.
The court said that all trademark holders must diligently police their own trademarks.
“[AMPAS] confuses GoDaddy’s technical capacity to filter for trademarks with AMPAS’s legal duty to police its own trademarks. At its core, AMPAS’s  claim would impose upon GoDaddy (and presumably any other company offering parking, hosting, or other basic internet services) the unprecedented duty to act as the internet’s trademark police. The [law] did not impose such sweeping obligations.”
This lawsuit has an important lesson for trademark holders. Trademark holders who believer that their trademarks are being infringed have limited options. They may complain to the domain holder. They may register the page with an organization that seeks to block parked pages. They may try to purchase all domain names that are similar to their trademark before cybersquatters do. Or, they can try suing the domain owner for trademark violations.
The most important lesson is that the trademark holder has the responsibility to monitor their trademark at all times. Not ensuring that others are misusing your mark can cost you millions! It is a daily requirement of any trademark holder. Failure to do so may cost you rights to your own trademark.
How do you police and protect your trademarks?
Monitor the internet for use of your trademark or similar words and domains
Monitor press sources
Monitor public records for infringing filings in any of the state or local governments (not just the USPTO)
Monitor domain registrars
Monitor search traffic patterns for your domain and similar words, phrases or domains
Send cease and desist letters to any potential infringers, and follow up with legal action
If you want to learn more about trademarks, attend one of our webinars for entrepreneurs. Sign up for our next webinar at http://trademarkswebinar.com.
Marijuana is well on its way to being legalized in the United States.
I’m going to make a prediction right now. In about a decade’s time, marijuana will be legal to use in the United States. I say that because we are nearing a tipping point in legalization.
By the end of the 2016 election cycle, more than half the states will likely have legalized marijuana in some way.
This presents a problem for employers who have a drug-free workplace. Some employers (i.e. defense contractors) are obligated by contract to have a drug-free workplace. And of course there are safety issues.
Still, I think the law on this is going to rapidly change over the next decade. What is an employers’ obligation to accommodate an employee using marijuana as medicine?
An employee of mine uses medical marijuana. Can I fire them for violating my drug-free workplace policy?
When marijuana was illegal, the answer was yes. But rapid changes in the legal status of marijuana as medicine makes the answer less clear.
Normally, you can fire an employee for being under the influence of drugs while at work.
But when the drugs are medications lawfully prescribed to them to treat a true medical condition, then such a firing may constitute disability discrimination.
For example, if someone uses insulin to control diabetes and this makes him or her act spacey, or be unsafe, you cannot fire them.
When marijuana is legally used to treat glaucoma, cancer or seizures, the employer may be required to accommodate the employee.
Employers also do not have the right to inquire about an employee’s health, medications or medical history, including at a hiring interview.
And in most cases, employers may not drug test current employees.
If you must keep a drug-free workplace by contract, you need legal advice to deal with such tricky situations.
Maybe We Can Help. Request Your Consultation Today.
Alicia I. Dearn is the founder of Bellatrix PC, a woman-owned law firm with offices in Missouri and California. Bellatrix PC handles lawsuits and business transactions. We advise in business, employment, real estate, intellectual property, civil litigation, and election law.
The articles published by Bellatrix PC are for informational purposes only and do not constitute legal advice. If you have a legal issue, please get competent advice from a licensed attorney in your jurisdiction. Use of Bellatrix PC's site is subject to our Attorney Advertising Disclaimers.