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Why Consider A Benefit Corporation?

Forbes published the article we wrote below on factors to consider when deciding whether to form a Benefit Corporation. By Doug Bend and Alex King We have advised hundreds of companies and have found that certain preconceptions about business affect the way they are set up and run. The historical belief that corporations exist solely… Read More

Forbes published the article we wrote below on factors to consider when deciding whether to form a Benefit Corporation.

By Doug Bend and Alex King

We have advised hundreds of companies and have found that certain preconceptions about business affect the way they are set up and run. The historical belief that corporations exist solely to maximize profit for shareholders has had a profound impact on how companies operate. However, when analyzed closely, profit mandates give those in charge much less choice than they might prefer, and the sustainable business movement has felt the constraints of this legal model.

This has caused many to ask: what if a corporation was able to seek profits while also considering potential benefits to society? The answer in 24 states is the addition of the “benefit corporation.” A benefit corporation is the term used when a company is created under corporate law and should not be confused with a “B Corp,” which refers to a company that is certified by B Lab to meet specific standards for social and environmental performance.

What Are the Benefits of Being a Benefit Corporation?

Incorporating as a benefit corporation legally protects an entrepreneur’s social goals by mandating considerations other than just profit. By giving directors the secured legal protection necessary to consider the interest of all stakeholders, rather than just the shareholders who elected them, benefit corporations can help meet the needs of those interested in having their business help solve social and environmental challenges.

Additionally, the demand for corporate accountability is at an all-time high, with many consumers already aligning their purchases with their values. The benefit corporation status is a great way to differentiate your company from the competition and capitalize on these customers.

What Are the Drawbacks of Being a Benefit Corporation?

One of the major drawbacks is expanded reporting requirements. This is to provide shareholders with adequate information to determine if your business is achieving its stated purpose. Each year a benefit corporation must give each shareholder an annual report.

Key to this report is the requirement of a “third party standard” for assessing overall performance, and the process for selecting this third party standard must be explained within the report. The report must also indicate the efforts made to achieve a general public benefit or the circumstances that hindered that achievement. Finally, if the benefit corporation has a website, it must post this annual report on its site.

Another potential drawback is uncertainty. benefit corporations are fairly new legal entities. It is unclear how courts will interpret their mandates to not only seek profits, but also to consider potential benefits to society. Furthermore, the impact on raising capital and how angel investors and venture capitalists will react remains uncertain.

How Do You Form a Benefit Corporation?

There are a few legal requirements to consider when forming a benefit corporation. The benefit corporation legal requirements vary between states, and this discussion is limited to California law.

Firstly, your company name. A benefit corporation does not need to make any reference to its benefit status within its corporate name. Therefore, those considering a benefit corporation don’t need to alter the name they’ve chosen, nor tailor their brainstorming any differently than if they were considering a standard C Corporation.

However, a benefit corporation must state that it is a benefit corporation within its articles of incorporation. Additionally, the benefit corporation may contain within its articles a specific purpose (such as to further the arts, improve public health, etc.), but it is not required to do so.

Finally, the share certificates of a benefit corporation must specifically state the benefit nature of the corporation. Generally, all other provisions relating to the shares and their transfer are provided within the state’s general corporate law.

Conclusion

For entrepreneurs, business owners, workers and consumers, the introduction of the benefit corporation is an exciting development. Community and environmentally minded business owners can preserve their social goals without sacrificing the ability to make a profit.

For all inquiries about benefit corporations please call (415) 633-6841, or email us at info@bendlawoffice.com

*Disclaimer: This article discusses general legal issues, but it does not constitute legal advice. The general legal principles are based on California law and may not apply to corporate laws in other jurisdiction. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

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The Top Four Pitfalls Of Buying Into A Franchise

Forbes published the article we wrote below on the top pitfalls of buying into a franchise and good questions to ask before you take the leap. By Doug Bend and Tucker Cottingham. Buying into a franchise can be an incredible opportunity for the right kind of entrepreneur — but if you are not careful, you could fall… Read More

Forbes published the article we wrote below on the top pitfalls of buying into a franchise and good questions to ask before you take the leap.

By Doug Bend and Tucker Cottingham.

Buying into a franchise can be an incredible opportunity for the right kind of entrepreneur — but if you are not careful, you could fall into one of the following traps. Below are four common pitfalls and some steps you can take to avoid each:

1. Hidden Fees: In addition to receiving a percentage of the revenue, a franchise may have additional costs, such as fees for entry, training and marketing. You should carefully review the franchise disclosure documents to make sure you understand all of the fees you will be expected to pay as a franchisee.

2. Lofty Average Income and Revenue Figures: You should be careful when relying on average figures. For example, a few very successful franchisees can make average income figures misleading. Some franchisees have much better skill sets, relevant backgrounds and quality locations. In addition, earnings may vary significantly with geography. Instead, calculate the median income of the franchise owners from your geographic region.

Similarly, gross sales figures may only tell part of the story. Even if the gross sales are high, if costs are also high, the actual profits could be disappointing. A better measure of profitability is net profits. Even then, be sure to ask whether the net profits include company owned locations as those often have lower costs.

3. A Strict Boss: One of the advantages of having your own business is the independence you have in running it. However, some franchises have strict rules on how you run your franchise, such as the prices you charge and how you can decorate your location. An advantage to buying into a franchise is they give you a playbook that is more likely to be successful than if you start an independent business, but the playbook can include restrictions as well.

4. Difficulty Leaving: It can be difficult to leave a franchise, as many franchise agreements include a non-compete provision prohibiting you from conducting similar business for a certain period of time and within a certain number of miles from your franchise location. The franchise agreement may also contain very stringent confidentiality provisions and restrictions on contacting clients of the franchise. You should ask if there is anything in the franchise agreement that would prohibit you from setting up a similar business if the franchise does not work out.

How can you avoid these franchise pitfalls and others?

The best thing to do is to reach out to at least 10 current and former franchise owners to learn about their experience. Their contact information should be disclosed in the franchise agreement. Some good questions to ask include:

  1. In hindsight, would they still make the investment?
  2. How much management and industry experience did they have prior to opening the franchise?
  3. How much working capital do they recommend you keep in reserve to make sure you have enough financial cushion for the franchise location?
  4. Have they been subject to any litigation or bankruptcy as a result of the franchise?
  5. What is the unique value proposition of the franchise for the customer?
  6. Are there similar, successful businesses in the area?
  7. How long did it take them to earn a reasonable income?
  8. What was their total investment, including unexpected costs?
  9. Was the franchise training adequate?
  10. Has the franchisor provided adequate ongoing support?

The answers to these questions can help you develop your own best- and worst-case scenarios for entering into the franchise. Also, review franchisee message boards, such as unhappyfranchisee.com, to see complaints and positive feedback posted by other franchisees.

This article was co-written by Doug Bend and Tucker Cottingham. Doug Bend is the principal of Bend Law Group, PC, a law firm focused on small businesses and startups. He is also the General Counsel for Modify Industries, Inc. and tIFc LLC and a Legal Mentor in The Hub Ventures Program. If you have any questions about investing in a franchise, you can contact the authors at (415) 633-6841 or info@bendlawoffice.com.

Disclaimer: This article discusses general legal issues, but it does not constitute legal advice.  No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

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We Now Accept Bitcoin!

This month we accepted our first retainer paid for entirely with Bitcoin. As a law firm that is passionate about providing exceptional legal services to small businesses and startups, we are thrilled to expand our accepted payment methods to include Bitcoin. We hope that doing so further demonstrates our commitment to technology and innovation, and… Read More

This month we accepted our first retainer paid for entirely with Bitcoin. As a law firm that is passionate about providing exceptional legal services to small businesses and startups, we are thrilled to expand our accepted payment methods to include Bitcoin. We hope that doing so further demonstrates our commitment to technology and innovation, and most importantly, to meeting the changing needs of our clients.

We represent a wide range of businesses around the Bay Area including tech startups, food trucks, breweries, hair salons, film production companies, artists, consultants, and international clients.  We take time to understand each of our clients’ legal needs and tailor our services to meet those needs in an efficient and cost effective manner.

One of our core principles is to provide the greatest value possible to each of our clients.  In practice that means that we only accept clients and projects for which we feel we are the very best fit.  We also embrace change and use technology to reduce overhead costs to keep our billable rates reasonable.

We are excited to join the Bitcoin community and would especially like to thank the kind folks at Coinbase who patiently answered all of our questions and were able to get us up and running in a flash.

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Resources

Our list of the essential legal resources every small business and startup in California should have. Great information to start and grow your business. California Requirements For Forming Your Business California Secretary of State’s Guide to Starting a Business in California. A step-by-step guide to starting a new business in California. California Secretary of State’s… Read More

Our list of the essential legal resources every small business and startup in California should have. Great information to start and grow your business.

California Requirements For Forming Your Business

California Permits for Your Business

  • CalGOLD. Helps you determine what business permits, licenses and registration requirements are required for your business.
  • California Seller’s Permit. You can read more here, but you need a California seller’s permit if you “[i]ntend to sell or lease tangible personal property that would ordinarily be subject to sales tax if sold at retail.” If you do need a California seller’s permit, you can obtain a permit here.
  • California Resale Certificate. Information on why a business might need a California resale certificate can be found here. A form resale certificate can be found here.

SF Requirements For Registering Your Business

  • San Francisco Business Registration Certificate. If you are doing business in San Francisco for more than 7 days a year, you are required to complete an application to obtain a San Francisco Business Registration Certificate within 15 days.
  • San Francisco Fictitious Business Name Statement. If you will conduct business in San Francisco under a name other than your full legal name, the full legal name of a legal entity (such as a corporation), or any name that suggests additional owners, you must file a Fictitious Business Name Statement with the San Francisco County Clerk’s Office. Frequently asked questions about San Francisco Fictitious Business Name Statements can be found here.
  • License 123. License 123 is a free online tool that helps businesses navigate San Francisco’s permitting and licensing requirements.

California Tax Obligations For Your Business.

Federal Tax Obligations For Your Business.

  • EIN. The online application to obtain an Employer Identification Number (EIN) can be accessed here.

Planning Your Business

ADA Compliance.

  • The San Francisco Office Of Small Business has some resources available here on ways to bring your business into compliance and to mitigate your risk of a lawsuit.

Financing Resources.

Converting Your California Company.

  • The California Secretary of State Office’s guide to convert from one type of entity to a different type of entity.

Obligations for Dissolving Your California Businesses.

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Five Ways To Value A Small Business You Are Buying Or Selling

When buying or selling a small business, there are five ways to determine a fair purchase price: 1.  Look At Similar Businesses. The least accurate option is to look at similar businesses that are for sale on the Internet. The advantage to this option is you can look at similar listings from the convenience of… Read More

When buying or selling a small business, there are five ways to determine a fair purchase price:

1.  Look At Similar Businesses.

The least accurate option is to look at similar businesses that are for sale on the Internet. The advantage to this option is you can look at similar listings from the convenience of your home whenever you would like.

However, this is the least accurate option as there can be a wide variety of factors that might make the fair market value of the business you are buying or selling more or less than the business listings you review on the Internet.

In addition, the asking price of an Internet listing is often not the ultimate selling price. If you work with a business broker or appraiser, they will have access to comps of the sale of similar businesses both in California and across the country.

2.  Back Of The Napkin Calculation.

You can also use a multiplier times the revenue of the business. While this option is also free, it is often not accurate as it does not take in account a variety of factors, such as the projection that the future revenues of the business are moving in or net profits. For example, two businesses in the same industry could have the same sales but one business could net $200,000 a year whereas another business could net $59,000 a year because it has more expenses.

3.  Hire A Business Appraiser.

You can have a certified business appraiser do a very extensive valuation. This is often the most accurate valuation of the business because the business appraiser digs deep on your particular industry, market forces, anticipated future returns and other factors. The drawback is it is also the most expensive option and takes several weeks for the business appraiser to complete, but at the end of the process you would have a detailed report of the fair market value of the business.

4.  Hire A CPA.

You can also hire a CPA who specializes in valuation work to review the financials of the business and provide a valuation. This is a less expensive and intrusive option than hiring a business appraiser, but the valuation is also not as detailed. You should ask the CPA how much experience they have doing valuation work and whether they have been certified by the AICPA or the CBV as most have no formal business valuation experience and are not certified to provide valuations.

5.  Work With A Business Broker. 

If you are selling a business, you can have a business broker to review your business and provide you with a suggested listing price.

If you are buying a business, a business broker can advise you on whether a listing price of a business is fair or if there are better opportunities on the market.

The advantage of working with a business broker is initially it is often free because business brokers are typically only compensated if the sale of the business is completed.

The drawback is if you do not work with a trustworthy business broker who keeps your best interests in mind, they might suggest a listing price that is less than the full fair market value to encourage a quick sale and therefore a quick commission payment.

It is fair to ask the business broker how many sales they have completed and hire one who has completed at least fifty transactions as they are more likely to have the necessary experience and competency.

If the broker provides you with a suggested valuation, you should request that they provide you with comparable sales to make sure it is a logical sales price.

Some business brokers are willing to credit the cost of a business valuation by a certified appraiser from their commission if the seller agrees to list the business at the valuation price. For many business owners, this is the best of both worlds as you get a detailed, accurate valuation by a certified business appraiser, but the cost is paid by your business broker.

If you have any questions about buying or selling a small business or would like an introduction to a great CPA or business broker to help you value a business, please contact us at (415) 633-6841 or info@bendlawoffice.com.

Disclaimer: This article discusses general legal issues, but it does not constitute legal advice.  No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

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The Five Steps To Obtaining A Trademark

A trademark is often an important investment in protecting the intellectual property of your business. Obtaining a trademark involves five steps: 1.  Search For Conflicting Trademarks. Your first step is make sure there are not any conflicting trademarks. You should search on the United States Patent & Trademark Office’s website to see if there any… Read More

A trademark is often an important investment in protecting the intellectual property of your business. Obtaining a trademark involves five steps:

1.  Search For Conflicting Trademarks.

Your first step is make sure there are not any conflicting trademarks.

You should search on the United States Patent & Trademark Office’s website to see if there any conflicting trademarks that have already been registered.

You should then work with an attorney to run a more comprehensive search because even if a trademark has not been registered, it could still have superior intellectual property rights over your trademark if it was being used prior to your trademark.

In addition, if the USPTO rejects your application due to a conflict with an existing mark, filing fees will not be refunded.

2.  Date Of First Use.

Once you have confirmed there are no conflicting trademarks, you will need to complete a trademark application.

You will need the following two dates to complete the application:

(i)                 Date of First Use of Trademark In Commerce Anywhere.

You will need to include the date you first used the trademark “in commerce anywhere.”

(ii)                Date of First Use in Interstate or Foreign Commerce.

You will also need to include the date you first used the trademark in interstate commerce or commerce with a foreign country.

3.  Trademark “Specimen”.

The trademark application also requires a trademark “specimen” which shows the trademark being used in commerce in the class of goods or services for which you are applying for the trademark.

4.  Class Of Goods & Services.

You will need to select the class of goods or services you would like to register the trademark.

You should be strategic in selecting the class of goods or services to register the trademark as there is an additional filing fee for each class of goods or services in which you register the trademark.

5.  Contact Address.

Finally, you will need to include a contact address for the trademark registration.

It is important to remember that anyone can view this address if they search for the trademark on the U.S. Patent and Trademark Office’s website once the trademark application has been filed.

If you have any questions or would like help in obtaining a trademark for your business, please contact us at (415) 633-6841 or info@bendlawoffice.com.

Disclaimer: This article discusses general legal issues, but it does not constitute legal advice in any respect.  No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

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