Cantor Floman Blog

Congratulations, you have a unique business idea and are ready to put your product or service on the open market.  Undoubtedly you thought long and hard about how you wanted your product or service to be perceived by your potential customers or clients.  You’ve likely asked friends, colleagues, parents, spouses, and possibly even enemies, for reactions to the perfect name you want to conduct business under.  You know that the name of your venture is virtually as important as the product it represents.  The name is something that would tell the world about you as an owner, will compliment the company’s logo, will set you apart and hopefully, make you uniquely identifiable to consumers.

You may not readily realize it, but your business identity is much like your personal identity; it should be properly protected.  Just as you take preemptive steps to protect yourself (i.e. unique passwords, screennames, security questions and login information), you need to take preemptive steps to protect your future livelihood.  What you also may not realize (or want to think about because of your desire to get your business started as quickly as possible), this starts, well at the beginning, before any business is actually conducted.

Your business name is like your username on a website.  It is the first thing potential customers will see and hear.  It should be unique enough to catch someone’s eye and descriptive enough so they know what you’re offering.  You have to think about perception.  Holding yourself out as simply, “John,” may not set you apart as you desire.  On the other hand, a handle such as, “Loony2ski” may not give off the image your customers are going to be looking to associate with.  Determining what you wish your business name to be involves similar considerations.

As you come up with potential names it is imperative to conduct a proper search to determine whether use of that name is possible (the same is true with logos, catch-phrases and the like).  There are many “Johns” out there.  If another company is already conducting business under the name you wish to use, you could potentially be subject to trademark infringement claims and an injunction preventing you from conducting business.  It is advisable to perform localized searches on your State’s Secretary of State website to see if there are any companies registered under the name you wish to use.  Traditional internet searches are helpful in that they will alert you as to whether a company already exists with such name.  A trademark search is also essential.  The United States Patent and Trademark Office (USPTO) provides a search database where this can be done.

Conducting these types of searches are necessary because of the potential legal risks involved with using a name already in commerce.  As mentioned above, a trademark dispute can result in serious financial burdens; such as claims for damages a company alleges it suffered from your use of its name, legal fees such company incurred by defending its mark against your use and potentially your lost profit from a court imposed injunction preventing you from conducting business while the infringement claim is being litigated.

So, now you’ve picked a name, conducted a trademark search, and determined it’s available.  How do you protect yourself properly so that others cannot use it, or something similar to it, to profit off your success?  Registration federally with the USPTO and/or locally with your Secretary of State, that’s how.  It is true there is a common law right of protection to an unregistered mark being used in commerce.  However, registration puts the world on notice of your use and locks out other users, much like a password does, from using your name or something confusingly similar.  Registration with the USPTO can be done through its website.  Typically, filing fees are about $325.00 per class of registration.

It is advisable to seek the aid of an attorney that practices Intellectual Property law to ensure the process goes smoothly and you are registering in the proper classes.   An attorney would also be able to draft a “description of goods” (a requirement during filing) that depicts your product or service with enough focus to give you adequate protection, yet general enough to allow your business to expand into new, yet similar, arenas.

The registration process costs money and can take up to a year to complete.  However, the benefits gained by registration outweigh the time and money associated with legal fees and lost revenue due to court imposed injunctions (whether you are arguing for or against one being imposed).  A registered mark also creates some added value in your business venture because it may be considered an asset of your company should you decide to sell it in the future.

With increasing focus on brand identity and the ever growing saturation of the marketplace it is imperative to protect one’s company and its assets, both tangible and intangible.  Registration of a trademark is a relatively easy, and proven, way to do so.  Seek advice from a qualified attorney near you, or ‘contact us’ and we will attempt to answer any questions you may have in regards to protecting your company’s greatest asset, it’s identity.

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Cantor Floman’s own Attorney Allison DePaola recently gave a presentation on the presence of legal issues as it pertains to Social Media. One of the major takeaways should have been that Social Media Policies are not something only large companies with numerous employees need to consider. It is something companies of all sizes and in all industries should implement. This is something a popular sports and entertainment based blog has learned the hard way.

One would think that a blog, which utilizes everyone else’s internet and media missteps would not need such a policy. However, a social media policy does not necessarily only lay out what not to do but can also be very useful to set forth how to do something. With no apparent social media policy in place for its bloggers and contributors barstoolsports.com uploaded to its website, via YouTube a video created by one of it’s own: “How to trick people into thinking your good looking”. The video became one of the top viral videos in the world, with approximately 1.4 million views in 2 days and over 6 million to date. The video was featured on YouTube, Reddit, Digg, as well as in The Sun and on NECN in a television segment.

In the words of barstool’s president himself, “[a]wesome right? Well yeah except nobody knew who [ ] Jenna was because she didn’t say she worked for Barstool and there was no logo, no nothing on it. Just a virtuoso performance by the Barstool Dream Team.” When the point of a blog is to generate readership for advertising and promotion of events, losing out on recognition by 6 million people is tough, to say the least.

If there was a policy in place that advised contributors to imbed a watermark logo on to all original content this is perhaps something that could have been avoided. It’s not realistic to think that a single policy can account for all permutations of situations that are liable to arise. However, it is possible to plan in general terms so that large issues can be avoided in the future.

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Many people have the preconceived notion that when incorporating their newly formed business they will derive some benefit from forming their business under Delaware law rather than that of their own state. 

When it comes to incorporating, new business owners seem to think they know something others do not and want in on the mysterious benefits of incorporating in Delaware that only those “in-the-know” are aware of.  The truth is, that although incorporating in Delaware makes sense for large, publicly held corporations, it usually does not for the general partnerships, corporations, and limited liability companies that most business owners are establishing.  This is particularly so, since the smaller, privately held companies will primarily only be doing business in the state in which the owners, members or managers reside.   

A business-owner is not necessarily going to save any money in taxes by incorporating in Delaware.  For small businesses, it is likely your business makes money primarily from operations in the state in which you reside.  Therefore, you will pay your own state’s income taxes on this income.

Furthermore, while it is true that Delaware generally has lower incorporation fees, there are other fees associated with incorporating in Delaware if you don’t actually plan on doing business there.  Businesses must qualify to operate and do business in your state in addition to incorporating in Delaware. This prolongs the process and creates additional costs by having to file papers to operate as a “foreign” corporation in your home state.  Companies incorporated in Delaware and doing business elsewhere must also appoint a corporate agent to receive official notices in Delaware.  Though many companies and services operate as these corporate agents it does add additional cost.  There are also additional expenses each year regarding tax returns and filings.

There are times when incorporation in a state other than your own can make sense.  This is particularly so if you plan to expand rapidly into other states, take the company public or are looking to investors for capital outside of your home state.  In those instances it may be beneficial, and many attorneys or accountants will recommend either Delaware or Nevada. 

The advantages of incorporation in Delaware are that there are: lower incorporation and LLC formation fees; no state corporate income tax for companies operating outside Delaware; no minimum capital required for incorporation; one individual can hold all the corporate offices; shares owned by Delaware non-residents are not subject to Delaware personal income tax or inheritance tax; lower franchise fees; and the names of the initial directors need not appear in the public records.  Delaware also has a greater scope of corporate-themed legal authority should litigation arise involving your business. 

Nevada is another state known to have similar benefits to Delaware, such as: no state tax on corporate profits; stockholders do not have to appear on the public records; there is no state personal income tax; and there are no state franchise taxes.  However, as with Delaware and most other states, companies formed in Nevada will have to pay fees and register in the state(s) in which it is intended that the company operate.  Additionally, filing fees in Nevada are generally higher than in other states. 

The best recommendation for smaller partnerships, limited liability companies or corporations primarily doing business in the state in which the owners, members or managers reside is to incorporate in the same state where the business operations take place; your home state.  If you plan on significant rapid expansion into other states or are looking to find investors that wish to be anonymous it may make sense to look to incorporation outside your home state.

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