MUST KNOW LEGAL
KNOWLEDGE FOR STARTUPS
FOR NEUCSSA
CONNIE DAI
CUTLER & WILENSKY, LLP
OCTOBER 16, 2015
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TOPICS COVERED
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Speaker profile
American legal system
Incorporation
Employment law basics
Asset purchase
Common problems in business deals
Resolving disputes
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AMERICAN LEGAL SYSTEM
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Common law v. Civil law
Equity
Federal v. State
Value of writing
Fair (example of discovery)
Cannot give a simple answer (example copyright infringement)
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PROFESSIONAL EXPERIENCE
• Practice business, employment and business litigation
• Business - transaction, incorporate, commercial contracts,
general corporate matters
• Employment – wage & hour, wrongful termination,
misclassification, severance, non-compete, non-solicitation
• Business consulting in Canada and U.S.
• B.A., M.B.A. , and J.D.
• Licensed in Massachusetts and New York State
• Rising Star in business practice by Super Lawyers Magazine in
2014 and 2015
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INCORPORATION注册公司
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Why
When
Type – Sole proprietor, partnership, corporation, LLC, LP
Where
How
• Corporation
 Double tax, formality, cheaper
 Fill in Articles or Organization – officer, board of director, shareholder
 Draft bylaws
 Draft internal legal document
 Apply employer identification tax number from IRS
 Prepare stock certificates (optional but recommend)
 Other agreements – partnership agreement, shareholder agreement, buy and sell
agreement, confidentiality/non-solicitation/non-compete/assignment of patent?
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INCORPORATION注册公司
• Limited Liability Company (LLC)
 Fill Certificate of Formation – manager, member
 Draft Operating Agreement
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Member
Manager – he has management right unless agreed otherwise
Obligation to contribute additional capital
Member resigns – entitled to receive fair value unless agreed otherwise
Restriction on interest transfer (or by buy-sell agreement)
Voting right – member with > 50% interests control unless agreed otherwise
Admit new members – full member consent or by agreement
• IT IS NOT JUST ABOUT FILL IN THE PAPER, IT’S ABOUT
UNDERSTAND THE SIGNFICENCE OF THE TERMS
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BASIC EMPLOYMENT LAW
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At-will
Employment agreement not required by law
Use offer letter
Wage and hour
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Minimum hourly wage $9.00
Pay bi-weekly
Overtime 1.5 required except for EXEMPT employees
Worker’s compensation required
Unemployment benefit required
Social security
Medicare
Federal and state tax
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BASIC EMPLOYMENT LAW – CONTI.
• Misclassification employee v. independent contractor
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Employee may report to AG’s Office, DOL, or IRS
Fine or penalty is heavy
• NDA/confidentiality
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Term can be as long as it is published
Contract gives owner/possessor most protection
May be common law protected
• Non-solicitation
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Term be reasonable
Contract gives best protection
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BASIC EMPLOYMENT LAW – CONT.
• Non-compete
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Employment – only contract based, reasonableness, protect
employer’s legitimate business interest (trade secret/confidential
information/good will), sign non-compete does not make it
automatically valid
Business sale – protect buyer, justify what buyer pays for,
reasonable, good will is common, court may imply if not in contract
• Assignment of intellectual property
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IP developed before employment
IP developed during employment
Who owns it
• Termination
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Terminate for any reason except for age, color, nationality, disability,
pregnancy, ethnicity, sexual orientation, etc.
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ASSET PURHASE
• Negotiate the deal
 What are you buying?
 Fair value?
 Exclude current and known liability?
 Contingencies
• Incorporate a business (if don’t have one)
• Draft purchase & sales agreement
• Pay deposit if applicable
 Not usual
• Conduct due diligence of seller
 Legal – legal structure, officer, director, shareholder, share structure, whether has
appropriate consent/vote, any threatened or current law suit
 Business – manager, employee, employment related agreement, all contracts with
obligation not fulfilled need assignment
 Finance – books, accounting, records, debt
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ASSET PURCHASE - CONTINUED
• Due diligence (continue)
 Others – administrative proceeding, environmental
• More documents draft
 Employment agreement, NDA, non-compete, patent assignment
• Assignment/transfer
 Website/domain
 Trademark
 Contracts
 Lease
 Patent – must seek patent counsel
 Business licenses
• Closing
 Sign closing documents
 Pay money
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COMMON PROBLEM IN
BUSINESS DEAL
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Lack understanding of US laws and US business customs
Oversimplify process
Underestimate complexity and want to cut corner
Lack knowledge of complexity IP
Ignore tax consequences
Downplay or lack understanding of due diligence
Don’t know power of “representation”
Difficulty understand “conflict of interest” among company,
founders, employees
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RESOLVING DISPUTES
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Negotiate
Demand letter
Mediate
Arbitrate
Litigation
Tools to avoid disputes – consult with lawyers, enter into written
agreement, have something in writing
• Verbal agreement is also evidence – but hard to prove
• Recording without speaker’s knowledge not admissible in court
• When to hire lawyer – don’t have to unless sue or be sued as
company
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Q&A
CONNIE DAI
CUTLER & WILENSKY, LLP
617-338-8243 (OFFICE)
857-919-3575 (CELL)
CONNIE@CUTLERLEGAL.COM
WWW.YOURGOTOLAWYER.BLOGSPOT.COM
WHCHAT: CONNIECHENFANGDAI
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