Until now, the general prohibition against the sale of unregistered securities to the public limited the options for startups and emerging companies to raise capital.

Now, after years of discussion and analysis, the Title III of the JOBS Act (“Act”) is about to take effect. Title III of the Act addresses equity crowdfunding. Under Title III, registered broker-dealers or registered funding portals can solicit investments of up to $1 million from the general public.  A funding portal is any person acting as an intermediary   in a transaction involving the offer or sale of securities for the account of others, solely pursuant to the “crowdfunding exemption” that does not:

(a) offer investment advice or recommendations; (b) solicit purchases, sales, or offers to buy the securities offered or displayed on its website or portal; (c) compensate employees, agents, or other persons for such solicitation or based on the sale of securities displayed or referenced on its website or portal; (d) hold, manage, possess, or otherwise handle investor funds or securities; or (e) engage in such other activities as the SEC, by rule, determines appropriate. [1]

If you are interested in learning more about Title III and opportunities under the JOBS Act, feel free to contact our firm to speak to an attorney.

*Nothing herein shall constitute legal advice and the information provided should not be construed as such.

 

by Pankaj S. Raval

So you have decided to quit your job and pursue your dream of starting a new business with a friend. First of all, congratulations. You are among the few who are willing to take the risk to follow their dreams of being their own business owner. However, before you get carried away with finding office space and forming your company, as an attorney and counselor for numerous small businesses, I can tell you with a good amount of confidence, that it would be wise to hit pause and really look at the person (or people) you are going into business with before you take the plunge.

The saying that a “partnership is like a marriage” is about 95% accurate. Remember, the person who you choose as your business partner (or who chooses you) should be by your side through thick and thin over the next several years (if you manage to beat the odds of entrepreneurship and create a viable business). And, undoubtedly, those first few years are going to be bumpy.  You and your partner are going to be dealing with fire after fire as you build and scale your business. Whether it is a shortage of capital, a hiring decision, or deciding on product-market fit, these are all questions you are both going to have your own ideas about. Invariably, both founders will have to compromise on certain facets of the business. That means you are both going to have to learn to keep your egos in check and figure out how to put your personal issues aside to take on the competition.

One of the most prevalent issues that all new ventures face is dealing with the expectations of your fellow co-founders.

At some point, no matter how close you are with your co-founder, there will be a moment where one founder is up working at 3 am and the other is on vacation with family, and the question will enter that midnight-oil-burning partner’s mind: “why am I busting my butt on this while Andre is posting to Instagram from a beach in Thailand?”

Now, we don’t know the Andre’s backstory–maybe he just closed a round of funding and needed a break. Maybe he had to go to a family wedding. Nonetheless, the time will come where one partner feels like they are putting in more of the work, and preparing for those moments can be the difference between the success of failure of a business.

So how does one prepare for such scenarios? Luckily, the problem is not new, therefore, we have the benefit of looking at how other’s have dealt with it. Here are a two options:

1. The Pre-Formation Agreement

Before you start a partnership, you should sit down and answer the following questions:

  1. What is our mission?
  2. Who is our market?
  3. Why are we doing this?
  4. What do we hope to get out of it?
  5. What is each founder bringing to the business?
  6. How much time are we each expected to devote to the venture?
  7. What is the vacation policy?
  8. What if one partner needs to leave? Is there a buyout? Can they compete if they leave?
  9. What if one partner is not performing?
  10. Who is a neutral third party we can trust to help resolve split decisions?
  11. How much money are we each putting in?
  12. Will the intellectual property be shared equally?

These are all questions that will form the basis of a formal partnership agreement but not weigh you down with details can be discussed later once you decide you have a viable business.

2. The Slicing Pie Model

An alternative model that has gained a good amount of popularity over the last few years is the Slicing Pie model, developed by entrepreneur Mike Moyer. The model proposes a dynamic equity transfer where partners get equity in a company based on what they put in, whether it be time, money, connections, etc.

Mike is a seasoned entrepreneur who speaks from experience, so the model is tested and it works. I actually purchased several of his books and give them out to my clients.  The model does require a bit of work and monitoring, so some entrepreneurs have been hesitant to adopt it. However, based on the tools he provides, it can be a great way to track the value founders are contributing to a venture to avoid the conversation where you question someone’s commitment because it isn’t clear that they are dedicated to seeing the company succeed. The Slicing Pie model prevents this by tracking the time and effort each person is contributing so you have concrete data from which you can make informed decisions on how to move forward.

Conclusion

While there is no right way to plan a partnership, not doing any planning is a good way to increase your chances of failure. With a little work before you dive in and understanding of the risks ahead, you can put yourself in a position to deal with the trials and tribulations of starting a new business with a roadmap that will prevent you from getting sidetracked by the inherent difficulties of a partnership.

The Law Offices of Pankaj S. Raval focus on serving startups, new ventures, and scaling businesses. We help companies draft their founding documents but also put them with financing agreements to help them grow. Based on years of experience, we pride ourselves on looking at both the legal and practical aspects of starting and growing a business. You can reach us a 323.413.7958 or [email protected]

 

 

By Vikas Srinath, Associate

The internet has opened up a world of opportunity for the average consumer to find the exact product or service they’re looking for.  As a result, retailers are placing a prime emphasis on building a brand and establishing a reputation so as to separate themselves from the rest of the vendor ecosystem.  Accordingly, businesses are relying on trademark law to grow their brands and protect their reputation.

Trademark law generally serves two functions: (1) to protect consumers from being confused or deceived about goods or services in the marketplace, and (2) to encourage merchants to stand behind their goods or services by protecting the goodwill they have developed in their marks. To put these functions in context, consider the following scenario:

An electronics manufacturer designs and sells a smartphone that features, prominently, a pear engraved on its backside.  When the manufacturer sees sales begin to increase, it spends money on an advertising campaign that shows customers of all ages using the product while featuring the pear logo.  However, within three weeks of reaching new heights in sales and market presence, the manufacturer sees smartphones made with its exact same pear imprint on its backside listed at a fraction of the cost of the original pear-branded smartphones, but listed by another seller.  Unsurprisingly, the quality control of these newly sold, but similar-looking products is poor, and the original pear-brand manufacturer finds its sales dropping significantly as consumers who purchase the knockoff phone begin to confuse the lower-quality products with those of the original.

Unfortunately, the scenario above (and many more like it) is common, especially in the online marketplace. Combined with the need to keep operations lean, many original product manufacturers and service providers find themselves undercut significantly because they didn’t have the tools to protect their trademark, or they risk having to litigate in order to enforce their rights.

Trademark registration with the USPTO confers a number of benefits to the registering party in addition to avoiding unpredictable litigation outcomes, including: (1) giving a party the right to use the mark nationwide, subject to certain limitations[1], and (2) providing nationwide constructive notice to others that the trademark is owned by the party, thereby enabling that party to bring an infringement suit in federal court[2].  Practically, registration allows the party to potentially recover treble damages, attorneys fees, and other non-monetary remedies; after five years of active use of a mark, registered trademarks can provide an exclusive right that is considered conclusively established[3].

The old adage rings true: an ounce of prevention can lead to a pound of cure.

For more information on the next steps you and your business can take, or any other information related to trademarks, intellectual property, and related disputes, please feel free to contact our firm.

The Law Offices of Pankaj S. Raval has been one of the top registrants of trademarks for retailers and entrepreneurs. For information on starting the process, please call 323.543.4453, or email [email protected] to learn more about protecting your brand today.

 

[1] 15 U.S.C. §1072

[2] 15 U.S.C. §1121

[3] 15 U.S.C. §1065

2015-0930-Trademark-Flyer

 

It is a question that comes up frequently—and rightfully so.

If you’re reading this, you have most likely read about trademarks somewhere or perhaps received some (likely unsolicited) advice about their importance (when you are an entrepreneur, it is amazing how many people are ready to throw in their proverbial “two cents” (less frequently the real money)).

Fundamentally, trademarks are “source identifiers.” A trademark can be a word, shape, symbol, color, sound, scent, or combination thereof, used by a business to distinguish their goods or services.  A trademark owner has a limited property right to the exclusive use of that mark with relation to their goods or services.

Trademark rights are created through use.  Use establishes common law rights in a trademark.  Common law rights grant owners limited rights to the mark based on geographic locations, trade channels, or demographics.  Owners of common law trademarks may use the ™ symbol next to the mark.

Federal registration of a trademark provides several additional benefits depending on how your trademark is registered.  Trademarks can be registered on one of two Federal Registers: (1) the Principal Register, and (2) the Supplemental Register.  Registration on either register provides the following benefits:

  • right to use the ® symbol;
  • right to file a trademark infringement lawsuit in federal court;
  • bar the registration of another confusingly similar trademark; and
  • allow for international registration in certain instances.

Registration on the Principal Register, however, provides distinct advantages to the Supplemental Register, such as:

  1. a presumption that
    1. the mark is valid,
    2. the registrant is the owner of the mark, and
    3. the registrant has the exclusive right to use the registered mark;
  2. proof that the mark has acquired secondary meaning;
  3. constructive notice of a claim of ownership, eliminating any justification or defense of good faith adoption and use made by a third party after the registration date;
  4. the registrant is entitled to nationwide priority based on the filing date; and
  5. the registration becomes incontestable after five years on the Principal Register, creating conclusive evidence of the registrant’s exclusive right to use the mark, subject to certain statutory defenses.

In order to obtain a federal trademark registration, your mark must meet two fundamental criteria: (1) the mark must be distinctive, and (2) it must be used in commerce.

To learn more about the trademarking process and how to increase your chances of obtaining a successful registration, contact us today.

Coaching is a hot career choice today.  In LA, it seems like people have “coaches” for everything. There are financial coaches, health coaches, business coaches, life coaches, and more.

In discussing the value of coaching, I like to pose the question: how many championships do you think Michael Jordan would have won without Phil Jackson? Hiring a coach illustrates the importance one puts on self-improvement. Successful people know that learning does not stop with school and hiring a coach is a great way to push yourself to be better than you were yesterday–no matter the playing field.

As you can tell, I am a big proponent of coaching. I will confess, I have hired a few coaches for myself since I moved to Los Angeles and my experience has been nothing short of exceptional. I also have several clients that are excellent coaches. Many have left lucrative careers in finance or real estate to become coaches. These clients came to me with a desire to pursue a career where they could give back and help individuals on a one-on-one basis.  In doing so, they realized there are a few important legal issues to consider. I have done my best to synthesize the key elements of a coaching agreement into five main points. I hope you find them helpful.

  1. Define the relationship (“DTR”). Similar to the conversation we have all had a some point with a significant other, the DTR talk with a prospective client should happen at the outset.  Before any coach agrees to work with a client, they should have a clear understanding of the wants and needs of the client.  Is the client committed? Are they going to be talking to other coaches at the same time? Do they have a checkered past with other coaches? Wait…I think I have lost track of what we are talking about.  Right, coaching, yes, similar to starting a relationship you want to know your client and you want them to know you.  Once, you figure out why you are working together, make sure to put it in an agreement you both sign.
  2. The exchange. All valid contracts require an exchange of some sort. In law, we call it “consideration”. It is important the agreement contains, in detail, the services you are providing (and some of those you are not providing) and what the client is expected to provide in return, e.g., payment.
  3. Rendering services. How are you going to provide your services? In-person? Phone calls? Texts? Snapchat? (I hope you use discretion with that last one).  Each type of communication medium has its pros and cons. Figure out what works best for you and do that.  Don’t feel pressured to migrate to a medium that doesn’t fit your personality or skill set. Plus, remember, newer technologies can pose complex privacy risks. Walk before you run.  Take time to hone your skills before trying the latest technology just to seem like you are “cutting edge”. Technology is a tool, don’t try to do too much with it.
  4. Termination. Every contract needs an out. Decide when the agreement terminates. It can be recurring monthly, but that needs to be clear.  If it is a year from now, say that as well. Further, what are grounds for termination? If the client misses three meetings? How about if they do not listen to your advice? The clearer you can be here the better so you protect yourself if the relationship is not working out.
  5. Guarantee. In a services profession, you need to be very careful making guarantees about anything. We hear shady sales people make them all the time and the truth is it can sound desperate and you may catch yourself in a bad spot. Clients may want guarantees if they are going to be paying a high dollar amount for your services, but let your reputation speak for itself and don’t make any promises you cannot keep.  More importantly, make sure you state explicitly in your agreement that you do not guarantee any particular outcome from the coaching services. The clients need to clearly understand this fact.

Depending on the types of coaching services you offer, there are likely specific issues to address in your contract. Nonetheless, the above five points give you a great foundation to any coaching agreement you are thinking about drafting.  If you have specific questions about starting your own coaching service, please don’t hesitate to reach out to our office for more information or help with drafting your own personalized coaching agreement.

Thank you for visiting the new and improved website for the Law Offices of Pankaj S. Raval. The site was just launched and we realize it has some kinks to be worked out. Please excuse our dust as we clean things up and turn it into the streamlined site that you deserve.

Until then, please let us know if there is anything we can do to improve the website or services. We are here for you.  Our main interest is to provide you with the best service possible.

Sincerely,

Pankaj

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