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ENTREPARTNER STREAMLINES BUSINESS FORMATIONS WITH ITS NEW ENTRE2GO SERVICE

ENTREPARTNER STREAMLINES BUSINESS FORMATIONS WITH ITS NEW ENTRE2GO SERVICE

Starting a business can be overwhelming. It requires you to wear many hats all at the same time and juggle responsibilities that in a larger established company would be delegated to a dozen department heads.  Sometimes lost in the shuffle are the key legal decisions that come with starting a business. These decisions can be confusing, but they ultimately can be some of the most important decisions you will make.

To help bridge that gap, EntrePartner has launched its Entre2Go website. Entre2Go’s focus is helping entrepreneurs and business owners easily navigate the process of starting a Minnesota limited liability company or corporation. Using a proprietary formulated process, our attorneys help business owners make key decisions about the management, operation and owners’ rights in the entity.  The service is especially useful for business ventures with multiple owners who want to protect themselves legally and establish a solid foundation for ownership and operation of the business going forward.

To keep the business formation process simple and predictable, through our Formation Package we offer these services on a flat-fee basis.   When you are Ready To Go with your new business venture, our business lawyers will form and structure your limited liability company or corporation in 3 easy steps.

HOW DO I FORM A PROFESSIONAL ENTITY IN MINNESOTA?

One of the primary motivators for operating a business through a separate entity is to insulate the owners of the entity from the liabilities of the business. Typically, a corporation shareholder (or a member of a limited liability or a partner of a limited liability partnership) is not personally liable for the debts of the business. In most instances, the most that a shareholder (or LLC member or LLP partner) will lose in an unsuccessful business venture is their initial capital contribution and time.

Practitioners of some professions, however, are prohibited by the ethics rules of their respective licensing boards from organizing their businesses in such a way to limit their professional liability towards clients.  A dentist, for example, cannot simply organize his or her practice as a limited liability company as a means of preventing patients from recovering damages for malpractice claims.

Are practitioners able to organize their practices in such a way, however, to limit liability for otherpotential claims against their business unrelated to the actual providing of services to clients?  Fortunately for practitioners in Minnesota, the answer to this question is yes. Under the Minnesota Professional Firms Act, Minnesota Statutes, Chapter 319B, practitioners of certain licensed professions may elect to be professional firms under any one of three different forms of organization: corporations, limited liability companies, and limited liability partnerships. Organizing an entity under the Professional Firms Act does not affect a practitioner’s liability for her or his own malpractice or other wrongful conduct directly arising from the provision of professional services, but it does permit the professional to limit their liability for other debts or obligations of the business itself to the extent permitted by the law governing the chosen form of organization.

The Professional Firms Act provides that members of the following professions may elect to be professional firms: medicine and surgery, physician assistant, chiropractic, registered nursing, optometry, psychology, social work, marriage and family therapy, professional counseling, dentistry and dental hygiene, pharmacy, podiatric medicine, veterinary medicine, architecture, engineering, surveying, landscape architecture, geoscience, certified interior design, accountancy, and law

To operate as a professional firm, a Minnesota entity must be formed under the chosen statute: the Minnesota Business Corporation Act (Minnesota Statutes Chapter 302A), the Minnesota Nonprofit Corporation Act (Minnesota Statutes Chapter 317A), the Minnesota Revised Uniform Limited Liability Company Act (Minnesota Statutes Chapter 322C), or the Minnesota Limited Liability Partnership Act (Minnesota Statutes Chapter 323A). Then, either as part of the original formation documents or as an amendment to those documents, the firm must include language stating that it (1) elects  to be covered by the Minnesota Professional Firms Act, and (2) acknowledges that it is subject to the provisions of the Act.  The documentation must also specify the profession(s) to be practiced by the firm.

Finally, the Professional Firms Act requires that the professional firm’s name reflect the nature of its limited liability structure. If it is a corporation, the firm’s name must include one of the following designations or abbreviations: Professional Corporation, Professional Service Corporation, Service Corporation, Professional Association, Chartered, Limited, P.C., P.S.C., S.C., P.A., or Ltd.  If the firm is a limited liability company, the name must include one of the following: Professional Limited Liability Company, Limited Liability Company, P.L.L.C., P.L.C., or L.L.C. If it is a limited liability partnership, the name must include one of the following: Professional Limited Liability Partnership, Limited Liability Partnership, P.L.L.P., or L.L.P.

CAN I APPLY FOR A FEDERAL TRADEMARK REGISTRATION BEFORE I’M USING THE MARK?

When we are preparing a federal trademark application, one of the most important things we need to know is whether you are – at the time of the application – actively using the trademark in the marketplace.  If you are, we will file a use-based trademark application, also known as a section 1(a) application (corresponding to the section of the law that authorizes this type of application).  But in many cases, an entrepreneur wishes to register a mark before he or she has introduced the product or service that the mark represents. As explained below, it is possible to apply to register a mark that is not yet being used.  This type of application is known as an intent-to-use (“ITU”) application or a section 1(b) application.

Use-Based (Section 1(a))

We file a use-based application when you are already using the trademark “in commerce.”  Using a mark “in commerce” means a bona fide use of the mark in the ordinary course of trade. If the mark is used with goods, it will be deemed to be used in commerce when, for example, it is placed on the goods, on the containers of the goods, displays associated with the goods, or on the tags or labels. Use in commerce also requires that the goods be sold or transported in commerce of a type that can be regulated by Congress, which generally means in interstate commerce or affecting interstate commerce. (Strictly intrastate commerce will not provide a basis for federal registration.) For a mark associated with services, rather than goods, the mark must be used in connection with the sale or advertising of the services and the services must be rendered in commerce.  Determining whether a mark has been used in commerce can sometimes be a complicated analysis, we can help you sort it out.

Intent-to-Use-Based (Section 1(b))

If, on the other hand, you have sincere plans to use the mark in commerce but are not yet doing so, an ITU application essentially permits you to reserve the trademark for your exclusive use in your field.  You must actually use the mark in commerce, however, before a registration ultimately will be issued.  Reserving a mark with an ITU application can be a good option since developing an brand can take time. If you are creating a brand from scratch, you may need time to design logos and packaging, order raw goods and supplies, produce the product to be sold, create a website and the like.  An ITU application provides the comfort that some other party will not be granted the rights to your mark while you are hard at work launching your business.

With an ITU application, once the trademark office “allows” your mark, we will have six months to file a Statement of Use, which is a declaration by a trademark applicant that the mark is currently being used in commerce. A governmental filing fee will also be required.  Should your mark not be used in commerce by the due date to file a Statement of Use, we can file various requests for six-month extensions of time to file the Statement of Use; a request for a six-month extension can be filed every six months, for up to three years.

For more information about trademark registration, visit our EntreTrademark site.

DO I NEED AN ATTORNEY TO FORM A COMPANY IN MINNESOTA?

One of the most common questions that we get from our clients, contacts, family, and friends, is whether they should engage an attorney to help them start their company. There are some firms that tell their clients, no matter what, that they should engage an attorney to form their limited liability company or their corporation, and often at a high price.

At EntrePartner, we always strive to help our clients find ways to save on legal fees when the situation warrants it and the risk is low.  So, here’s the honest answer we would tell our dearest relative to steer them in the right direction.

If you are a solo entrepreneur, starting an entity primarily for local operation (within the State of Minnesota, for example), and don’t plan to conduct any external fundraising, you can file an application for your entity yourself through an online process.  The Minnesota Secretary of State provides a relatively simple to use online process that will guide you through the process.  To do so, you will need to determine whether to form a limited liability company (LLC) or a corporation (or s-corp). In this scenario, 90% of our clients form an LLC, but this can be quickly confirmed through a quick call to your accountant.  You will also need a business address within the State of Minnesota to receive notices and where third parties may serve you with documents, if the need arises.

If you go this route, you will need to visit the Minnesota Secretary of State’s website and do a quick search with the intended name of your entity, to make sure there isn’t anything confusingly similar that exists already.  It is a good idea to search different variations of your proposed entity name, including specifically searching each word that is part of it, and variations on spelling, to make sure that you find all existing options.  Once you come up with the appropriate name, you can answer the online questions and pay the initial entity filing fee right on the website.

All of that said, if your entity has more than one owner, we do recommend that you utilize the services of an attorney.  You will want to ensure that ownership is properly issued to each party, and that an operating agreement is put into place that outlines the rights and responsibilities of each owner as to one another and to the company.  For example, many typical scenarios involve a financial partner and a sweat equity partner – and the organizational documents of the entity should outline the rights and responsibilities of each role to ensure that the company has the proper capital promised and that the sweat equity partner delivers on their obligations in exchange for ownership.  We have helped many clients who did not have a proper agreement in place with their partner from the start, and who later found that there were significant miscommunications or lack of follow-through on the obligations of each partner causing significant stress to the company and to the partnership.

In addition to the above, an operating agreement covers the following:

– How will decisions for the entity be made?

– How are majority, or minority, owners protected?

– How are monetary and capital requirements of the company handled?

– How will distributions be made?

– How and when can an owner transfer their interest to a third party?

– What happens if an owner dies or becomes disabled?

– Is insurance appropriate for future business planning?

– Should owners be subject to a non-compete?

None of the answers to these questions are standard for all parties, and as such, an attorney should help you ensure your particular needs are considered and addressed.  EntrePartner offers a complete formation package for entrepreneurs who need help with setting up their entity properly, and you can learn more about that package here. We’d love to hear from you!

IS A FEDERALLY REGISTERED TRADEMARK WORTH IT?

Starting a new business can seem like an overwhelming and never-ending series of decisions and expenditures.  So any savvy business owner will, of course, look to prioritize the “needs” from the “wants.”  One of the most common questions we hear from clients – especially those at the start-up stage – is whether federal trademark registration is worth pursuing.

New business owners often spend a great deal of time finding the perfect name for their business, not to mention making a monetary investment in a good design for their brand.  Entrepreneurs often have a vague sense that a registered trademark can be important, but are not always familiar with the underlying reasons.

It is worth noting that certain trademark rights arise just from using a trademark “in commerce” – which essentially means you are legitimately doing business under your name and logo. These automatic rights are known as common law trademark rights, and they result from your use of a name and not from any statute, rule, or registration. Common law trademark rights have been developed under the judicial system (rather than by a legislative body) and are governed by state law.  The great thing about common law rights is that they are automatic and you gain them simply from using your mark in commerce. The drawback is that common law rights are limited to the market where you actually do business. So, someone in another state could use your business name and you may have no recourse.  This can get to be sticky when you are marketing your goods or services through the Internet.  To claim rights in a certain location, you may need to prove actual ongoing sales to customers in that area or otherwise show penetration of that market.

Because of this limitation of common law trademark rights, we often recommend that our clients federally register their trademarks.  One of the most important advantages to a federally registered mark is that it gives the owner an exclusive nationwide right to use that mark.  Other advantages of owning a federal trademark registration are:

– the right to use the federal registration symbol ®

– public notice of your claim of ownership of the mark, so others can learn about your rights before they use your name in a way that would violate your rights

– the ability to bring an action concerning the mark in federal court, and the ability to recover damages, lost profits, attorney fees and costs that result from the trademark infringement

– the use of the U.S. registration as a basis to obtain registration in foreign countries

– the ability to record the U.S. registration with the U.S. Customs and Border Protection (CBP) Service to prevent importation of infringing foreign goods

The bottom line is that trademark registration is an investment.  The initial cost (and hassle) is relatively minor, but the protections that come with registration can be invaluable down the road as your brand accumulates goodwill.  If you are an entrepreneur considering registering a trademark and you have questions or want further information, we’d love to hear from you. You can contact us here or tell us more about your mark through our EntreTrademark service.