Will a Corporation Really Protect My Personal Assets?

The allure of starting a business often comes with a barrage of questions, and one of the most frequent queries budding entrepreneurs have is, “Will incorporating my business truly safeguard my personal assets?” The answer, while layered, is generally a resounding “yes.” But like most legal structures, the protection provided by a corporation isn’t absolute. Let’s delve into the protective attributes of corporations and their limitations.

A corporation, by definition, is a distinct legal entity separate from its owners (shareholders). This separation is what creates the ‘corporate veil,’ a legal boundary that ordinarily prevents creditors from going after the personal assets of the corporation’s shareholders should the corporation incur liabilities. In simpler terms, if your corporation goes into debt or faces a lawsuit, your personal assets like your home, car, and personal bank accounts are typically protected and cannot be used to settle corporate debts.

However, the strength of this corporate veil depends largely on adherence to corporate formalities. Corporations are required to maintain certain standards, such as holding regular board meetings, keeping detailed minutes of those meetings, and ensuring the separation of personal and corporate finances. Failing to adhere to these standards can lead to ‘piercing the corporate veil,’ a legal action that disregards the separation between the corporation and its shareholders, putting personal assets at risk.

Another factor to consider is personal guarantees. If a business owner personally guarantees a business loan or another obligation, the corporate veil’s protection does not extend to that specific liability. Essentially, the business owner is putting their personal assets on the line as collateral. It’s vital for entrepreneurs to be wary and judicious about providing personal guarantees.

While the corporate structure offers substantial asset protection, it’s not the only option. Limited Liability Companies (LLCs) also provide personal asset protection with more flexibility and less formality than corporations. However, they come with their own set of rules and nuances.

In conclusion, while a corporation does provide a robust shield for personal assets, the protection isn’t impenetrable. The key is to ensure meticulous adherence to corporate formalities, remain informed about the responsibilities and risks, and seek seasoned legal advice when in doubt. With the right steps, business owners can indeed insulate their personal realm from potential corporate liabilities.

If you own a business and need legal advice, please schedule a consultation with a highly reputable and experienced Los Angeles Business Litigation Lawyer by calling Omni Legal Group a t855.433.2226 or visit www.OmniLegalGroup.com to learn more.

What is the difference between a Merger and an Acquisition?

When it comes to the corporate world, the terms “merger” and “acquisition” often float around as buzzwords. But what do they really mean, and how do they differ? Today, let’s break down these complex concepts into digestible chunks.

First off, let’s talk about mergers. Imagine two companies, Company A and Company B, joining forces to create a brand-new entity, Company C. In this case, both A and B cease to exist independently; they’ve merged to create something new. This kind of consolidation usually occurs between companies that are somewhat equal in terms of size, market share, or operational scope. Why merge? Well, the reasons can vary but often include achieving greater market reach, creating cost efficiencies, or combining unique strengths. The big takeaway here is that a merger is like a marriage; it’s a mutual agreement that promises shared control in the new entity.

On the flip side, an acquisition is more like an adoption. Company D decides to buy Company E. Here, D remains as it is, but it absorbs E into its operations. Company E, as an independent entity, ceases to exist. Company D might decide to keep E’s products or services as-is, or they might integrate them into their own offerings. Acquisitions can be friendly or not-so-friendly—yes, we’re talking about those dramatic hostile takeovers you read about in the news.

Now, the legal hoops these companies have to jump through also differ. A merger is typically a more democratic process. It involves a lot of back-and-forths and requires the blessing of the shareholders from both companies. An acquisition, on the other hand, can happen even if Company E (from our example) is not willing to be acquired. Company D just needs to purchase enough shares to take controlling interest, and voilà, the acquisition is complete.

Operationally, the aftermath of these two processes also varies. In a merger, both companies have to figure out how to integrate their cultures, systems, and operations—a monumental task that takes time and strategic planning. After an acquisition, it’s usually the culture of the acquiring company that takes the lead. The transition could be quick but might ruffle a few feathers, especially if the acquisition was not welcomed by the acquired company.

So there you have it! While both mergers and acquisitions aim for consolidation and growth, the route they take to get there is fundamentally different. Mergers are more like corporate marriages, while acquisitions are more akin to adoptions. Each has its own legal, operational, and cultural implications. So, the next time you read about a merger or an acquisition in the news, you’ll know exactly what’s going down in the boardroom. Stay tuned for more insights into the business world!

If you own a business and need legal advice, please schedule a consultation with a highly reputable and experienced Los Angeles Business Litigation Lawyer by calling Omni Legal Group a t855.433.2226 or visit www.OmniLegalGroup.com to learn more.

The Types of Intellectual Property

Intellectual property is an intangible asset of a person or company that creates value. Often, intangible assets can generate more value than tangible assets.

Legal protections exist for intangible assets like patents, copyrights, and trademarks. But what are these legal measures protecting? The lawyers at Omni Legal Group specialize in intellectual property law in the Greater Los Angeles area, and they feel it important to define the types of intellectual property that need protection from use and infringement by others.

The Definition of Intellectual Property

Intellectual property has and creates value and is shown as a line item on a balance sheet under the “Assets” category. Even though extracting a dollar value from an intangible asset is subjective, the value it creates is tangible.

Companies go to great lengths to protect these assets. When the public associates a color to a brand, a logo to a company, or a jingle to a product, these are the basis of a company’s competitive edge for market share. These non-physical assets need protection, as do physical assets.

Intellectual property is created through intellect and skill.

The Types of Intellectual Property

The common types of these non-physical assets are:

• trademarks
• copyrights
• patents
• trade secrets
• franchises
• digital assets

Trademarks

A trademark is the logo, symbol, or design the public associates with a brand or a product. A company’s trademark is exclusive to it and separates its brand from others.

Copyrights

Copyrights protect the artistic creations of musicians, authors, and artists. These creators have the exclusive right to use or duplicate their creations. The copyright holder must authorize any use by others under conditions controlled by a license agreement.

Patents

Patents protect the creations of inventors. The product can be tangible, like a machine, a computer, a smartphone, or software. In addition, the non-physical assets, like technology and the development process, that lead to the invention of a physical asset are also protected by a patent.

Trade Secrets

Trade secrets are closely related to the protections under a patent. Examples are recipes, business models, patterns, or other proprietary information not in the public domain. Trade secrets are the subject of non-disclosure agreements.

Franchises

A franchise is a license agreement granted by a company to third parties to use the trademark, process, and certain other proprietary knowledge for the licensee to operate and provide the products or services under the company’s name. Third-party operators must comply with the company’s policies, procedures, and operations in exchange for the branding and advertising platforms to grow revenue and market share.

This support and access to proprietary knowledge is the consideration for the licensing or royalty fees the operators owe.

Digital Assets

Digital assets are a relatively new category for internet protocol. These are the proprietary codes and algorithms for online content featuring a company’s protected intellectual property.

The Value of Intellectual Property

Copyrights, patents, and trademarks are included as assets on a balance sheet because they have expiration dates. The accounting method of amortization can measure the decrease in value over the useful life of these assets.

Hence, the research and development used to keep these property types relevant and valuable need protections like the physical end product.

The value assigned to intellectual property is subjective even when supported by accounting principles. The value of intellectual property is evidenced by the market, what franchisees and licensees are willing to pay, and the per-share value of the company’s stock.

Want to Learn More About How to Properly Protect Your Intellectual Property? Contact an Experienced Patent Attorney in Los Angeles Today 

Creations from ideas, research, and talent are tangible, although only sometimes physical. The end product is real, but the raw materials and the resources that lead to the tangibility of the product must also be protected. The creation itself is static, but the processes that continue to improve and maintain a product’s relevance are valued by the recurring revenue and the company’s price-to-earnings ratio.

If you are an inventor, musician, or author and would like to learn how to properly protect your creations, it is in your best interest to consult with one of our lawyers at Omni Legal Group. Our team of experienced and highly reputable patent attorneys in Los Angeles will work tirelessly to ensure you secure the provisional patent, non-provisional patent, design patent, utility patent, or plant patent application necessary to protect your invention. For further information or to schedule a consultation please contact Omni Legal Group at 855.433.2226 or visit www.OmniLegalGroup.com to learn more.

Restrictive Covenants Enforced By Employers

Assembly Bill 747, if signed by Governor Newsom, will heavily impact the position of employers seeking to enforce any restrictive covenant in a non-compete agreement and the attorneys who advise them. Unfortunately, some issues remain unsettled between California’s appellate courts and its Supreme Court.

The bill before the State Assembly will, if enacted, add another set of teeth to the current penalties against employers and could instigate disciplinary actions by the State Bar against attorneys advising their clients on the current and unsettled issues.

The legal professionals at the Omni Legal Group, specializing in employment contracts in the Greater Los Angeles region, want business owners requiring non-compete agreements to be aware of the ramifications of AB 747.

The Ramifications of AB 747

If passed, AB 747 will impact employers operating within California’s state lines and those working across them. The aim of AB 747 is the employers’ enforcement of the restrictive covenants within a non-compete agreement.

As an overview, the effect of this bill would be:

• an additional penalty of $5,000 per person if harmed by the enforcement, or by any attempt to enforce, a non-compete covenant,
• a disciplinary action, including disbarment, taken by the State Bar against any attorney for presenting or attempting to enforce a non-compete covenant against any person, and
• the broadening of the definition of “non-compete” to include the engagement of any lawful trade, business, or profession.

In each of the above, a “person” can be an employee or a prospective employee.

AB 747 continues to carry out California’s public policy against enforcing non-compete covenants. The enforcement of such covenants will become narrower and more specific.

The Effective Ban on Covenants Not to Compete

Under California’s Business and Professional Code, non-compete clauses post-employment are void. However, this violation could become the basis of a claim for unfair business practices under the Code, but without a specific monetary penalty. The Code does provide for equitable relief.

The $5,000 per-person penalty is the added teeth to the damages relief.

California’s Labor Code

AB 747 would extend to the State’s Labor Code. Currently, an employee who primarily resides and works in California is offered a choice of law of another state that enforces restrictive covenants. This choice is available only if an attorney represents the employee during the negotiation of the agreement.

This exception to the Code is heavily relied upon by employees who work across or outside of the state. If AB 747 is enacted, the “attorney representation” clause would not be recognized if the employee was represented by an attorney selected or paid by the employer—even if the selection of the attorney was at arm’s length.

This limit on the choice-of-law provision would become effective for employment agreements entered into or modified on or after January 1, 2024.

The Non-Solicitation Clause

While non-compete clauses are typically a post-employment issue, there was a time when current or prospective employees clearly violated this covenant when soliciting employees or co-workers of prior employers.  These non-solicitation clauses were valid, definitive, and enforceable in California.

However, lower appeals courts have since held these clauses invalid. This issue remains unsettled as California’s Supreme Court has not addressed the disparity in court opinions. This is an unsettled issue. AB 747 could force the settlement by bringing the non-solicitation clauses into the same sphere as a non-compete covenant.

The Disciplinary Actions Against Attorneys

AB 747 could also be used against attorneys who advise or draft non-solicitation clauses in restrictive agreements. Effectively, the bill will extend beyond the actions of employers and reach the work of attorneys in representing their clients. Any disciplinary action by the Bar would hold even though the non-solicitation issue remains unsettled in the courts.

Take Action and Schedule a No-Cost Consultation With a Knowledgeable Los Angeles Business Litigation Lawyer Today

California is known for its liberal and progressive protection of individuals. Before 2018, employees agreed to non-compete agreements when appropriate consideration was given in exchange for restrictions on their livelihood. Now, this issue is moot.

AB 747 will broaden the unenforceability of non-compete covenants in the pre- and employment stages. Employers will be further limited in enforcing restrictive covenants and their legal representation of these issues.

If you are an employer and need legal advice on the effects of AB 747 on the current forms of employment and other proprietary contracts, please schedule a consultation with a highly reputable and experienced Los Angeles Business Litigation Lawyer by calling Omni Legal Group at 855.433.2226 or visit www.OmniLegalGroup.com to learn more.

Business Valuations and Trademarks: A Vital Connection

Business valuations are essential for understanding the worth of a company, particularly during mergers, acquisitions, or investor negotiations. While many financial and tangible assets are considered in this evaluation, one critical and often overlooked aspect is the value of trademarks. Trademarks, symbols, names, and logos that distinguish a business’s products or services, play an integral role in brand identity and can significantly impact a company’s valuation.

Trademarks represent the goodwill and reputation of a business. They’re not just aesthetic elements; they’re legal protections that give a company exclusive rights to a brand image or name within a particular industry or jurisdiction. This exclusivity can lead to consumer trust and loyalty, creating a strong brand that competitors find hard to replicate. Consequently, trademarks can add substantial value to a business, and their proper evaluation is essential in a comprehensive business valuation.

Valuing trademarks can be complex. Various methods can be employed, such as the “cost method,” estimating the cost of developing a similar trademark; the “market method,” comparing similar trademarks that have been bought or sold; and the “income method,” calculating the projected revenue attributable to the trademark. The chosen method must accurately reflect the trademark’s contribution to business profits, which may require an in-depth analysis of market position, customer recognition, and competitive landscape.

Trademarks’ intangible nature makes them challenging to value precisely. Unlike physical assets, their worth isn’t determined solely by intrinsic properties but also by external factors like market trends, consumer behavior, and legal protections. Additionally, a trademark’s value can change over time with shifts in consumer perception or competitive environment. Misjudging these aspects can lead to incorrect valuations, potentially affecting business decisions like sale price, investment evaluation, or strategic planning.

Business valuations are incomplete without considering the role of trademarks. These intangible assets encapsulate a company’s brand, reputation, and market position, and their valuation can often be as complex as it is crucial. Understanding the methods and challenges of trademark valuation, and engaging experts when necessary, ensures that this critical aspect of a business’s worth is accurately assessed. Whether selling, buying, or investing in a business, recognizing the value of trademarks provides a more comprehensive and precise picture of a company’s true worth.

Have Questions? Schedule a No Obligation Consultation with an Experienced Trademark Attorney in Los Angeles Today

If you have questions about strategies to properly monitor your trademarks, or you want to begin the process of registering a trademark, then it is imperative to work with a reputable and experienced trademark attorney in Los Angeles such as the professionals at the Omni Legal Group.  Omni Legal Group represents clients throughout the greater Los Angeles area, including Beverly Hills, Santa Monica, Culver City, and many others. For further information or schedule a no obligation consultation, please call Omni Legal Group at 855.433.2226 or visit www.OmniLegalGroup.com to learn more.

Understanding Bylaws: A Crucial Guide for Every Business

Whether you’re launching a new startup or revamping an existing business, navigating the complexities of the corporate world can be daunting. One term that often surfaces, especially in the realm of corporations, is “bylaws”. But what are bylaws, and is it crucial for every company to have them? Let’s delve into this often-overlooked aspect of corporate governance.

What Are Bylaws? At their core, bylaws are a set of internal rules and procedures that govern how a corporation operates. They can be seen as the internal manual or playbook for a company, outlining everything from the roles and responsibilities of directors and officers, to the scheduling of annual shareholder meetings, to the processes for amending the bylaws themselves. Bylaws cover a range of administrative details, such as the fiscal year of the company, the duties of different officers, how board meetings are conducted, and more. It’s important to note that bylaws are specific to the corporation and may not be the same as other governing documents, like operating agreements, commonly used for other business entities like LLCs.

Why Are Bylaws Important? Bylaws offer several vital functions for a corporation. Firstly, they provide clear guidance and structure, minimizing disputes or confusion about how decisions are made or tasks are performed within the company. By establishing clear procedures, bylaws can also expedite decision-making processes by setting forth rules in advance. Moreover, in many jurisdictions, having bylaws is a legal requirement for corporations, making it not just a matter of best practice, but of compliance.

Does My Company Need Bylaws? If your business is structured as a corporation, the short answer is likely “yes”. In many jurisdictions, corporations are required to have bylaws, even if they are not always required to file them with a state agency. Even in places where bylaws are not legally mandated, they’re still recommended. Bylaws preempt potential disputes and misunderstandings among stakeholders by providing clear-cut guidelines. If your business is an LLC or another structure, while you might not need “bylaws” per se, you will likely need a similar governing document, such as an operating agreement.

Bylaws are more than just a bureaucratic necessity; they’re an essential tool in shaping the culture, processes, and efficiency of your corporation. While the creation of bylaws might seem like a tedious task, they can save a corporation countless hours and potential disagreements down the road. If you’re in the process of forming a corporation, or if you’re part of one that doesn’t yet have bylaws in place, it’s wise to consult with legal counsel to ensure that your company has a strong foundation for future success.

Have Questions? Schedule a No Obligation Consultation with an Experienced Trademark Attorney in Los Angeles Today

If you have questions about strategies to properly monitor your trademarks, or you want to begin the process of registering a trademark, then it is imperative to work with a reputable and experienced trademark attorney in Los Angeles such as the professionals at the Omni Legal Group.  Omni Legal Group represents clients throughout the greater Los Angeles area, including Beverly Hills, Santa Monica, Culver City, and many others. For further information or schedule a no obligation consultation, please call Omni Legal Group at 855.433.2226 or visit www.OmniLegalGroup.com to learn more.