Source: https://www.gonzalolaw.com/category/practice-areas/
Timestamp: 2020-06-01 12:43:37
Document Index: 645230045

Matched Legal Cases: ['§ 2', '§ 2', '§ 17', '§ 605', '§ 17', '§ 605', '§ 35', '§ 605', '§ 605', '§605', '§ 1051', '§ 1091', '§ 1111', '§ 1092', '§ 1095', '§ 1094']

Practice Areas | Gonzalo Law
By Gonzalo Law LLC No comments yet CCPA, Cybersecurity, GDPR, Illinois Privacy Act, Information, Privacy, Protection, Security, Sold
The existing privacy laws established throughout the globe are creating challenges for companies to sell information collected to 3rd parties, but how do they affect sales for direct sales companies? The main challenges in these situations would be to figure out what is considered compliant with the new regulations and how the client can find new prospects without obstructing the law.
Most people are unaware what information companies can collect or might even be unaware that companies are collecting their information. Different places in the world have different laws associated to how, when, and who is allowed to collect this information. In this article, we will discuss the three main laws related to this issue are The California Consumer Privacy Act, General Data Protection Regulation and The Illinois Privacy Act.
The California Consumer Privacy Act, “CCPA”, is being used in California, United States. This law regulates determines how data is allowed to be collected, managed, shared and sold by companies and/ or entities doing business with/or compiling information about California residents. Companies must disclose whatever information they collect and the purpose of the information. Additionally, these companies must allow the consumer to opt-out of having their information sold to any third party, to view their information, to delete their information that has been collected. According to the CCPA, the company must notify consumers of their rights under the CCPA and what type of information they have obtained or shared/sold.
The General Data Protection Regulations, “GDPR”, is currently being used in Europe for the protection of its citizens. It is similar to the CCPA in that it aims to be able to give consumers greater control over their data. That said, these two are not identical and do have differences. The GDPR is stricter than any law related to what is legally allowed. It requires affirmative consent for any data processing; not just reselling data, but collecting it in the first place. The GDPR also makes companies notify the individual that they have obtained their information and must obtain their consent within 30 days of obtaining the data.
The Illinois Privacy Act requires companies or organizations with any personal information from Illinois residents to proceed with security measures to protect any data from unauthorized access, acquisition, destruction, use, modification, or disclosure. In addition, the Act states that any contract where personal information is transmitted must include a provision requiring the recipient of the information to implement and maintain reasonable security measures.
Are You Covered Under These Laws?
The scope of these laws isn’t as big as you would expect; they all cover distinct groups of individuals. The CCPA covers any California Resident. A resident is anyone who has lived in California for a long period of time. For this law to apply to you, you must be an individual and not a company. Illinois Privacy Act covers any Illinois resident; just like in California, a resident must be an individual living in Illinois for a length of a period. As for the GDPR, this covers any European company or individual in the European Union.
Some observers have come to the conclusion that since no one really wants to exclude selling to Californians, the CCPA is acting as a national law on data privacy in absent to federal regulation. These laws do not affect the cold calling business though.
What Happens If A Company Doesn’t Obey?
As for the potential risk of non-compliance, every law has different type of punishments.
The CCPA penalty for each individual violation is $2500 if unintentional and $7500 if intentional. Businesses have 30 days to fix alleged violations after they have been notified of their non-compliance.
The GDPR has the penalty of up to €20M or up to 4% of the total global revenue of the preceding year, whichever is greater.
The Illinois Data Privacy Act penalty can be up to $5,000 or actual damages for the violation.
Is There Anything You Can Do to Protect Yourself?
The sad reality is that there isn’t much that an individual can do, especially if you are not covered by the CCPA, GDPR, or the Illinois Data Privacy Act. Once a company has your information, they have the ability to sell it to a 3rd party at their own discretion. This said, there are a few ways that you can personally follow up with your personal information for security purposes.
Best practices for cybersecurity:
Using complex passwords: Some professions believe that a complex password must meet or exceed certain criteria of changing it every 180 days, must be between 8 and 128 characters long, be unique, and utilize uppercase letter, numbers, lower case letter and/or special characters
Don’t use public internet
Don’t give out personal information through the phone or email
Make sure you don’t voluntarily allow for your information to be sold
How Can A Company Protect Individual’s Information?
If a company is keeping any sensitive information for customers or employees, they must follow a few guidelines proposed by the Federal Trade Commission, FTC. Many companies have personal information from customers or employees for various reasons, however, companies need to be aware that if this information falls into the wrong hands, it can have severe consequences. The FTC created a guide for businesses to secure this information.
The 5 key takeaways are:
Know what information is in the company’s databases
Try to keep only essential information
Make sure that any information kept is safe and secure
If you do discard any information, make sure it is properly disposed
Have a backup plan if any information is compromised
Article By Nouvelle L. Gonzalo Esq. and Sofia Orrantia
Sofia Orrantia Mc Pherson is a Student Associate and Executive Administrative Assistant at Gonzalo Law LLC. Previously, she worked as a Language Assistant for the English Language Institution at the University of Florida. She graduated from University of Florida with a bachelor’s in arts in Foreign Languages with a concentration in Film & Visual Art. She is a native speaker in Spanish and English and is fluent in Dutch and French.
Whether you are starting a new company or expanding an existing one, knowing the key differences is important.
Mike is running a successful business, yet now has a chance to diversify his assets and add to what he already has. It has been a long-time goal of his to create multiple streams of income. The question before him is what is the best way to do so for his additional businesses? He knew what made sense for his main business, yet he is not sure how to structure the new company.
This is a common challenge a lot of companies face as they look to expand. Whether it is how they manage their real estate portfolio, how to add different lines of business, how to start a nonprofit, or anything else, there are a lot of options. The most common are LLCs and Corporations. However, what is the difference between these two? Understanding the differences among corporations and LLCs will enable you to decide which structure best fits your situation. The biggest differences between them are: 1. How the Business is Formed, 2. Ownership, 3. Profits and Losses, 4. Management, and 5. Some Additional Key Areas.
How the Business is Formed
A limited liability company (LLC) is formed by one or more business people, as owners of the company. The owners are called “Members,” and the Members file Articles of Organization and create an Operating Agreement for how the company will operate. See our prior post on the importance of the Operating Agreement. An LLC is considered a pass-through business structure because the profits and losses are passed on to the individual Members depending on each Members individual share of the company. The tax rate that each member pays for an LLC is based on the individual tax bracket of that member.
Whereas, a corporation is formed, i.e. incorporated, by filing corporate organization documents in the state where the corporation is located, and by designating shareholders, each with a specific number of shares. The corporation also creates a Board of Directors to oversee the corporate business and make important business decisions. This is a much more formal option, in which corporate formalities must be maintained. Please note, depending on your state, an LLC can be converted to a corporation, yet the reverse is generally not true. A corporation cannot convert to an LLC. If the goal is to go public within a short period of time, the intention is to enter into formal ownership of a company that you plan to have a long-term commitment, or if there is not an overwhelming need for flexibility, and maintaining corporate formalities is not a problem, then a corporation could be a great option.
A main difference between LLCs and corporations is the ownership of the business. A corporation is owned by the individuals who purchase shares of the company, whereas the LLC is owned by the Members. Instead of shares, each Member of an LLC owns a designated percentage of the company, often referred to as the “membership interest”. Membership interest in an LLC may be more difficult to transfer than shares in a corporation. This is often why companies with a goal going public fairly soon, should keep an eye towards having a corporation.
Additionally, the profits and losses of an LLC are handled in a different way than a corporation. Because an LLC is a pass-through entity the profits and losses are passed through to individuals, while corporate profits and losses are held by the corporation. Pass-through businesses are those in which the profits and losses of the business pass through to the owners or shareholders. In other words, the business income is considered as the owner’s or shareholder’s income, and the owner/shareholder pays the tax on his or her personal tax return.
Corporations are separate businesses entities where the profits and losses of the corporation are held by the corporation and are not passed through to the owners directly. Corporations are taxed at the shareholder level and the entity level.
Furthermore, both corporations and LLCs have a different management structure. Corporations must have a board of directors that set policies and oversee the business. These day-to-day affairs of a corporation are managed by its officers. The rights and responsibilities of the directors, officers, and shareholders are spelled out in the corporation’s bylaws. LLCs are a newer concept than corporations, and they are designed to be more flexible in the way they are managed. An LLC can be managed by its members or by a group of managers. Typically, in a member-managed LLC, the owners are heavily involved in running the business, while a manager-managed LLC usually has investors who don’t have an active role.
Another important consideration when deciding between an LLC and corporation is the tax implication. With the enactment of the Tax Cuts and Jobs Act, corporations now have a top corporate income tax rate of twenty-one percent (21%) as opposed to the old top rate of thirty-five percent (35%),and the corporate alternative minimum tax has been repealed. The corporation must pay an estimated income tax, applicable employment and excise taxes, and taxes on gains of appreciated assets, though shareholders, who are responsible for paying taxes on dividends. Thus, corporations are subject to double taxation in the form of taxation at the corporate level, and again when dividends are distributed to shareholders. Despite these mandatory taxes, corporations may deduct employee fringe benefits and reasonable compensation for officer and shareholder-employees; certain gains may be excluded or deferred, and certain losses may be carried. Unlike corporations, LLCs do not have a distinct federal taxation scheme, so each LLC is treated like another form of business. Single member LLCs are taxed as sole-proprietorship, whereas multi-member LLCs are taxed as partnerships; however, any LLC may elect for corporation taxation. Also unlike corporations, LLCs allow for the creation of a series LLC. A series LLC is created when one divides membership interests into separate classes.27 Though this is a statutory construction where specifics are dependent upon the state in which the LLC is formed, series LLCs statutes generally determine the rights of the holders of each series and protect assets of a particular series from the liabilities of the LLC as a whole, or another series within the LLC. In general, obtaining a “registered series LLC” status only requires on additional step beyond the initial LLC setup: the filing of a certificate of registered series such that each series has the attributes required to be classified as a “registered organization” under the Uniform Commercial Code.
Finally, LLCs are often the best option when dealing with real estate. LLCs offer limitations on personal liability in lawsuits related to the property at issue in such a way that the risk exposure for any claims is limited to only the assets owned by the LLC, rather than the assets owned by the member(s) of the LLC. Further, because LLCs are subject to partnership taxation as referenced above, LLC owners are able to enjoy the benefits of pass-through business taxation instead of the double taxation that would result if a corporation were used. Indeed, regardless of whether there is an individually owned or multi-member LLC, default IRS taxation law would allow all income and capital gains from a real estate transaction to pass through directly to the owner(s), who would then only be responsible for taxes at their respective individual tax rates. LLCs also offer more flexibility in delegating management responsibilities, lower registration and maintenance fees, and flexibility in distributing profits. Unlike LLCs, corporations are statutorily required to have officers and directors, which limits flexibility in management, and require increased fees based on the number of shares, while still requiring pro rate profit distribution. So long as the laws and regulations are complied with, and the Articles of Organization and Operating Agreement clearly detail the roles of all members, LLCs offer much more flexibility and limits on liability than corporations when real estate is at issue.
Please note that the above is general legal information. Please contact us at ngonzalo@gonzalolaw.com directly for a complimentary consult that centers on specific legal advice for your legal matter. We look forward to working with you.
Jean Murray, LLC or Corporation- Which Should I Select for My Business, The Balance Small Business, (Oct. 6, 2018), https://www.thebalancesmb.com/what-is-the-difference-between-an-llc-and-a-corporation-397526.
Jane Haskins, Difference Between LLC and Inc., (Dec. 2014).
William G. Gale, Hilary Gelfond, Aaron Krupkin, Mark J. Mazur, and Eric Toder, Effects of the Tax Cuts and Jobs Act: A Preliminary Analysis,Urban-Brookings Tax Policy Center (Jun. 13, 2018), https://www.taxpolicycenter.org/publications/effects-tax-cuts-and-jobs-act-preliminary-analysis/full.
Leslie D. Corwin & Arthur J. Ciampi, Law Firm Partnership Agreements § 2.03, Law Journal Press (2019).
Jeff Weaver, Forming an LLC for Real Estate Investments: Pros & Cons, (Jan. 2014).
Thomas A. Humphreys, Limited Liability Companies and Limited Liability Partnerships § 2.02(5)(h)(i), Law Journal Press (2019).
Company owners often get along well in the beginning, yet have you discussed what will happen when you don’t?
In the beginning of a company, the founders often start out well. The team gets along and there is often no discussion about what the company will do if the team stops working well together, reaches a point of impasse, or if it needs to remove a partner. However, this should be one of the key conversations that owners have from the outset and at regular intervals during the life of the company. No matter the industry, it is important to discuss key business issues that could arise later. This is truly why an LLC operating agreement is necessary. An LLC operating agreement is the business operating agreement that helps limited liability companies, single or multi-member, to determine how their company will operate in key situations. This is similar to a shareholder agreement in a corporation, yet has a very strong focus on the operation of the company.
LLC Operating Agreement vs. State Default Corporate Rules
Often members of a limited liability company (LLC) do not consider the consequences of not having a fully developed operating agreement. When creating an operating agreement, a key provision to include is how the LLC will remove members. In the U.S., if an operating agreement is silent as to how a member will be removed, then the state default corporate rules will apply. For example, the Florida default rules for LLC law can be found in the Florida Revised Limited Liability Act.
Generally, any change to the members of an LLC are done pursuant to the terms of the LLC operating agreement. The operating agreement should set forth the how, why and when a member of the LLC could be removed. When drafting the operating agreement, the members should decide the circumstances and terms when a member can be removed. It need not be, only when the LLC is dissolved, rather multiple sets of circumstances can be elaborated. Ultimately, it gives the members the power to decide how they would like to exit or to remove a troublesome member. However, not all companies include such language in their operating agreement. Any language that is later disputed, yet not included in the operating agreement, is decided by default state law.
Removal of a Member in Florida
If not decided in the operating agreement, removal of a partner is decided by Florida law. Some options include the following.
Member Voting on Organizational Changes
Assuming the Articles of Incorporation or Operating Agreement have voting procedures set forth for member removal, members may vote for removal with respect to their proportion of
the then-current percentage or other interest in profits of the LLC owned by all members. 2 Florida Corporations Manual § 17.29 (2019). The affirmative vote or consent of the majority-in-interest of members is required to undertake an act, which would include member removal. Fla. Stat. § 605.04073 (2019). If voting is successful and in accordance with the Articles of Incorporation or Operating Agreement, the member can be compelled to submit the written resignation form. 2 Florida Corporations Manual § 17.29 (2019).
Unanimous and Involuntary Expulsion
Another way to remove a member from an LLC could be through involuntary expulsion, also known as involuntary dissociation. Involuntary expulsion is typically used when members are trying to remove a troublesome member that will not voluntarily leave. Involuntary dissociation, or dissociation by expulsion, can occur under one of two circumstances.i First, the operating agreement can prescribe a method by which a member may be involuntarily expelled.7 However, absent a method for expulsion in the operating agreement, the members may unanimously vote to expel a member.ii Expulsion by unanimous consent is only available if the LLC cannot lawfully carry on its activities with the expelled member; the expelled member has transferred his or her entire transferrable interest in the LLC; or the expelled member is a corporation or other entity that is dissolved.iii Thus, expulsion by unanimous consent under the revised act arguably only applies to unruly members to the extent the lawful activities of the LLC can no longer be carried on.iv If a company can argue that the acts of the member to be expelled rise to the level of resulting in illegal operation, then this may be an option available.
If these provisions are not included in the Articles of Incorporation or Operating Agreement, the other members of the LLC can unanimously consent to the member’s expulsion if certain conditions are met under the Florida Revised Limited Liability Company Act. Fla. Stat. § 605.0602 (2019). However, expulsion by unanimous consent is only available to the members if: (1) it is unlawful to carry on the LLC’s activities with that person as a member; (2) the member’s entire transferable interest in the LLC has been transferred, unless it was a transfer for security purposes or pursuant to a charging order; or (3) the member is an entity that has been dissolved. Id
Member Buyout
The most amicable solution to removing a member is likely conducting a buyout, which could potentially allow for business relations in the future, even if those relations are not in the same LLC. Further, this could prevent long-term litigation and judicial intervention, which may be more financially conservative even if a higher purchase price is paid. As with many other member guidelines, provisions governing buyout procedures are generally required to be listed in an Operating Agreement or Articles of Incorporation. 3 Florida Corporations Manual § 35.40 (2019).
The members wishing to remove a single member may seek a judicial order calling for removal due to wrongful conduct. Fla. Stat. § 605.0602(6) (2019). Expulsion by judicial order is proper when the member has: (1) engaged in wrongful conduct that adversely and materially affects the LLC’s activities and affairs; (2) willfully or persistently committed a material breach of the LLC’s operating agreement or breached the fiduciary duties of loyalty or care; or (3) engaged in conduct relating to the LLC’s activities and affairs making it not reasonably practicable to allow the member to continue as a member. Id. As with the unanimous expulsion option, successful enforcement would be contingent upon demonstrating wrongful conduct. A review of the member’s conduct and the LLC’s operating agreement may be enough to satisfy the requirements for a judicial order.
As a last resort, if managing the LLC has become an unattainable goal due to a member conflict, and the member isn’t willing to withdraw, petitioning the court for a judicial dissolution of the LLC is an option. Fla. Stat. § 605.0701 (2019). This option is typically only desirable when the LLC is no longer able to operate as a business due to conflicts among members.
When drafting an operating agreement for an LLC it is important to make sure the agreement establishes how the LLC can remove a member. If LLC is silent as to how to remove a member then the state law will apply. In Florida, the Florida Revised Limited Liability Act default rules will govern the process for removing a member from the LLC. The Florida Revised Limited Liability Act covers the process of removing troublesome members and how members can remove them. Florida allows for members to be removed in a variety of ways if an LLC does not establish the process in the operating agreement. If you have more questions, or would like a complimentary consult, contact our managing attorney today at ngonzalo@gonzalolaw.com or via phone at 352.389.5577. We would love to meet you and learn how we can best be of service!
i. Dennis A. Nowak & Caitlin M. Trowbridge, Involuntary Expulsion of Troublesome Members Under Florida’s Revised LLC Act, Fla. B.J., January 2017, at 8
ii. Id.
iii. Id.
iv. Id.
v. Fla. Stat. §605.0602(6)
Whether one is a nonprofit or for profit organization, it is important to recognize key changes that are happening in your field. This month we highlight four important cases that can effect your nonprofit.
Case #1: Transparent GMU v. George Mason University
This case is important because it affects whether a nonprofit has to disclose agreements between the nonprofit and its donors.[1] This lawsuit was filed by a George Mason University student group in response to the university receiving sizable donations to its foundation by the Charles Koch Foundation.[2] The Charles Koch Foundation had issued gifts up to 15 million USD to George Mason so that the university may rename the law school for Supreme Court Justice Scalia and allow the Charles Koch Foundation to have input on faculty staffing.[3] Transparent GMU sued George Mason University to publicize the rest of the agreement between the donors and the university with the argument that the agreements are covered by Virginia’s open record laws.[4] The Virginia Fairfax County Circuit Court held that the George Mason University Foundation was not a public body however and therefore not compelled to publicize the donation agreement due to the open record laws.[5] This case is important for nonprofits to know because after this ruling, it is unlikely that a nonprofit will have to disclose the details surrounding it’s donations even if the public demands it. This is significant in light of the typical public filings and public reporting that a nonprofit must normally do.
Case #2: Underwood v. The Donald J. Trump Foundation
This case is important because it concerns a 501(c)(4) nonprofit organization misspending funds.[6] Attorney General Underwood of New York alleged the Foundation had an unlawful political coordination with the Trump presidential campaign and had several transactions to benefit the Trumps.[7] Eventually the Trump Foundation agreed to be dissolved and have its assets distributed to other charitable organizations under judicial supervision after the Foundation failed to have the case dismissed.[8] This case is important for nonprofits to consider because it shows if that nonprofits can be sued for illegal practices. As such, nonprofits must take all necessary precautions to follow the rules or face charges.
This case concerns how nonprofits obtain donations. Recently, there was an ongoing investigation by the California Attorney General Xavier Becerra. He issued three cease and desist orders against Food For the Poor, MAP International, and Catholic Medical Mission Board.[9] These cease and desist orders stem from the three nonprofit organizations allegedly using deceptive practices in fundraising solicitations.[10] Allegedly the organizations represented program spending percentages as inaccurately high as a result of including noncash contributions.[11] The three charitable organizations are appealing the order. The group faces the possibility of having their charitable registrations revoked and fines over $1.65 million.[12] This case is important for nonprofits to note because none of the three nonprofits are based in California but simply have solicited California residents. As a result, nonprofits are on notice that the response will be swift and aggressive should it mislead the public. This is a cautionary tale to nonprofit organizations on the importance of being transparent and using honest means to solicit donations.
Case #4: Gogtay et al v. Second Chance, Inc.
This case demonstrates the importance of accurately disclosing to donors the tax deductibility of their donations. It is a class action lawsuit out of Maryland that alleged the nonprofit Second Chance mislead donors into believing they would receive significant tax refunds for donations.[13] The plaintiffs alleged hundreds of donors were deceived into donating with promises of tax refunds and were audited by the IRS that disallowed the deduction.[14] The plaintiffs allege Second Chance knew the IRS did not approve of the benefits they were promoting and that Second Chance made false representations.[15] Nonprofit organizations should be aware of this case because it demonstrates the need to make accurate disclosures or face serious ramifications.
[1] Big Donors Sometimes Mean Big Headaches: George Mason University, University of Chicago, and More, Nonprofit Law Prof Blog, (May 3, 2018) https://lawprofessors.typepad.com/nonprofit/2018/05/big-donors-sometimes-mean-big-headaches-george-mason-university-university-of-chicago-and-more.html.
[5] Sarah Larimer, George Mason University Foundation is not subject to public records laws, judge rules, Wash. Post, (July 6, 2018) https://www.washingtonpost.com/news/grade-point/wp/2018/07/06/george-mason-university-foundation-is-not-a-public-body-judge-rules-in-records-case/?utm_term=.7513c0cb2a4f.
[6] Attorney General Underwood Announces Lawsuit Against Donald J. Trump Foundation And Its Board of Directors For Extensive And Persistent Violations of State And Federal Law, N.Y. State Office of the Attorney General, https://ag.ny.gov/press-release/attorney-general-underwood-announces-lawsuit-against-donald-j-trump-foundation-and-its (last visited at Feb. 13, 2019).
[9] Mark Hrywna, Charities Get Cease And Desist From California AG, The Nonprofit Times, (Mar. 22, 2018), http://www.thenonprofittimes.com/news-articles/charities-get-cease-desist-california-ag/.
[13] Lorraine Mirabella, Lawsuit says nonprofit Second Chance misled consumers, Baltimore Sun, (Oct. 12, 2017), https://www.baltimoresun.com/business/bs-bz-second-chance-lawsuit-20171012-story.html.
Incorporating your business is an exciting transition. Whether you are changing your business from an LLC to a corporation or setting up your business for the very first time, the decisions you make in the early stages can protect your business interests for years to come. It is crucial to invest time at this stage and evaluate whether you are making the best decisions for your commercial and personal goals. Read below to review five key decisions you will need to make when incorporating your business.
Choose your incorporating state: Businesses can incorporate in one state while operating in another. Each state has its own business environment, with varying annual filing fees and requirements, income taxes, and legal proceedings. The state in which you reside and operate may not be the most favorable environment for your business goals. Consult with legal counsel to determine the optimal state of incorporation.[1]
Determine how many shares you will authorize: Whether you intend for your company to be publicly traded or not, you will need to determine the number of shares you authorize when you first incorporate the company. You can authorize one share or one hundred million shares; financial implications of a higher number of shares could include a larger initial filing fee, depending on the state of incorporation.[2] Still, it could be more advantageous to authorize a larger number of shares, in the tens of thousands or even millions. This will allow you to issue more shares to employees and investors, even if each share begins at a low valuation.
Issue shares among co-founders: While you must determine the total number of available shares at incorporation, you will be able to issue those shares throughout the life of the company. It is typical to issue some of these shares to the company founders at incorporation. Keep in mind that whoever has the majority stake will have control over major business decisions that require a vote by stock owners. If you and a single co-founder will be receiving stock, yet you want to retain full decision-making abilities, ensure that you have at least 51% of the company stock issued to yourself.
Secure a domain name: Advertising, networking, and selling your business all require a solid online presence. This is only possible with a domain name, where you will host your company website. You will need to purchase a domain name through a web hosting service. The domain name you choose will affect your visibility on the internet. If possible, include your company’s name and location in the domain, yet be cautious of the possibility of trademark infringement! Consulting with an intellectual property attorney before selecting your domain can prevent thousands of dollars spent down the road on an infringement lawsuit.[3]
Create clearly defined bylaws: The corporate bylaws will determine company procedures and responsibilities of each company officer. This will set your rules, meeting procedures, and record-keeping standards. Clear and detailed bylaws will give your corporation a structured path to begin business operations. Additionally, setting these rules and standards down in writing at the beginning of business can prevent conflicts down the road. They can be used to protect the company if any member should infringe on these rules.
Seeking qualified legal counsel as you make these decisions can greatly reduce your exposure to legal risk down the road. If you would you like additional information, contact our legal counsel for a complimentary consultation at ngonzalo@gonzalolaw.com.
[1] https://www.entrepreneur.com/article/241528
[2] https://smallbusiness.chron.com/many-shares-should-authorized-incorporation-36282.html
[3] https://www.entrepreneur.com/article/219410
Did you know that there is a principal and supplemental registry where you can register your trademark? Registration on the Principal Register affords all rights and responsibilities available to trademark owners. However, there may be a time when an applicant may not be able to register on the Principal Register and the only option is registering on the Supplemental Register[1].
The question then becomes, what are the benefits and disadvantages of registering a trademark on the Supplemental Register with the U.S. Patent and Trademark Office (USPTO)? Some benefits of registering on the Supplemental Register include the ability to use indicia of registration including “Registered in U.S. Patent and Trademark Office”, “Reg. U.S. Pat. & TM. Off.”, and the “®” symbol[2]. However, in a lawsuit, it is important to note, that no profits or damages will be recovered unless the other party attempting to use the mark (the defendant) had actual notice of the registration[3]. A mark registered on the Supplemental Register will also provide notice to people conducting trademark searches and can serve as a bar to registration of subsequent marks which may be confusingly similar[4]. If the mark has the potential to become distinctive through use in commerce, a mark registered on the Supplemental Register may apply once more for the Principal Register[5].
In the alternative, there are some disadvantages of registering a trademark on the Supplemental Register. Marks registered on the Supplemental Register do not receive the advantages of §§ 1051(b), 1052(e), 1052(f), 1057(b), 1057(c), 1062(a), 1063-1068, 1072, 1115, and 1124 of the Trademark Act[6]. This means a mark registered on the Supplemental Register may not have the power to achieve incontestability of the mark, the mark does not have the right to exclusive use of the mark, may not have the ability to cancel the registration of another mark that may be similar to it, does not have the presumption of Federal ownership, and supplemental registration provides protection for only nondistinctive trademarks.
Once you decide to use the supplemental registry, what is the process of registering a trademark on the Supplemental Register? If the initial application to the Principal Register was denied with a “nonfinal Office action”, a trademark registration application can be amended to the Supplemental Register by filling out a “Response to Office Action” online form[7]. If the initial rejection was denied with a “final Office action”, then the “Request for Reconsideration after Final Action” online form must be used[8]. Unlike an application for the Principal Register, the mark must be in use by the time of application on the Supplemental Register.
If you would like additional information, contact our legal counsel for a complimentary consultation at ngonzalo@gonzalolaw.com.
[1]15 U.S.C.A. § 1091(a).
[2]15 U.S.C.A. § 1111.
[4]15 U.S.C.A. § 1092.
[5]15 U.S.C.A. § 1095.
[6]15 U.S.C.A. § 1094.
[7]How to Amend from the Principal to the Supplemental Register, U.S. Patent and Trademark Office, https://www.uspto.gov/trademark/laws-regulations/how-amend-principal-supplemental-register-1 (last visited Jan. 25, 2019).
It’s back to school for so many! For those of us no longer in the classroom, every day is an opportunity to learn and improve ourselves. In honor of national Book Lover’s Day, check out our team’s favorite business books and why they are worth a read.
"I took my helmet off and laid the batons down." <