Entrepreneurship Chapter 15 Homework Have Continuous Existence Similar Corporations And

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Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

Lecture Notes

Chapter 15: Navigating Legal and IP Issues

Learning Objectives

• Discuss how legal considerations can add value to entrepreneurial ventures.

• Explain the most common types of legal structures available to startups

• Outline the most common legal errors made by startups.

Notable Quote

• “If you desire information on some point of law, you are not likely to ponder over the

Useful Online Legal Sources

• Business.gov

• IRS.gov

Critical Thinking Questions

• Laws differ from state to state. How would you go about ensuring your startup was

legally set up?

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

Types of Legal Structures

• Sole Proprietorship

• General Partnership

• C Corporation (C-Corp)

Sole Proprietorship

• One owner

• Unlimited liability

• Pass-through taxation

• Simple to start

Notes:

A sole proprietorship refers to a person who owns a business but has not formed a separate

entity to run it. This is the simplest and most inexpensive form of legal structure for startups,

but it is rarely the correct choice. It means the business is completely managed and controlled

by you, the owner, and that you are entitled to all the profits your business makes. However, it

General Partnership

• Two or more partners

• Unlimited and joint liability

• Pass-through taxation

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

Notes:

A general partnership involves two or more people who have made a decision to manage and

C Corporation

• Stockholders, Directors, and Officers

• Limited liability

• Taxable entity

• Potential double tax on dividends

Notes:

A C corporation (sometimes known as a “C–corp”) is a separate legal entity created by the state

government and owned by an unlimited number of shareholders. This means that the

corporation, not the shareholders, is legally liable for its actions. The most money that

S Corporation

• Stockholders, Directors, and Officers

• Limited liability

• Pass-through taxation

• Subject to eligibility requirements

Notes:

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

corporation, and have no more than 100 shareholders who in most cases must be individual US

citizens or legal immigrants (not corporations, partnerships or trusts) and all of whom must

own only one class of common stock (ordinary shares).

Limited Liability Company

• Members and board of managers (optional)

• Limited liability

• Pass-through taxation

• May elect to become taxable entity

Notes:

A limited liability company is business structure which combines the pass-through taxation

aspects of a partnership with the limited liability benefits of a corporation without being subject

to the eligibility requirements of an S corporation.

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

Limited Partnership

• General partners and Limited partners

Notes:

There are a variety of other forms of business entity which may be used in certain

circumstances. One example is the limited partnership, a pass-through tax entity made up of

two kinds of partners: general partners, who manage the business but have personal exposure

Limited Liability Partnership

• Two or more partners

• Limited liability with some restrictions

• Pass-through taxation

• Typically professional practices

Notes:

Another example is the limited liability partnership. This is essentially a general partnership

which, in exchange for registering with the state and paying an annual fee, gets a form of

limited liability for its partners. However, the partners are still not protected from the

Benefit Corporation

• Stockholders, Directors, and Officers

• Limited liability

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

• Charter sets social purpose

Notes:

In Chapter 1, we mentioned a benefit corporation (or B corporation) as a form of organization

certified by the nonprofit B Lab, which ensures that strict standards of social and environmental

Most Common Legal Mistakes

• Choosing the correct business structure

• Accepting free advice from family and friends

Four Types of Intellectual Property (IP)

• Copyright

• Trademark (and service mark)

Critical Thinking Questions

• How would you protect your startup against patent trolls?

• 2. Do you think individuals or firms have the right to hold patents without producing any

useful products of their own? Why or why not?

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

• 3. What are the effects of patent trolls on startups?

Resources for IP Information

• US Patent and Trademark Office

• US Copyright Office

• Invent Now

Common IP Traps

• Publicly disclosing innovations

• Failure to protect product and processes

Legal Requirements for Hiring Employees

• Equal Employment Opportunity

• Employer Identification Number (EIN)

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

Critical Thinking Questions

• Why is it important to protect intellectual property?

• 2. Whose responsibility is it to protect intellectual property?

• 3. When is the best time to apply for intellectual property protection?

Resources for Hiring Employees

Types of Workers

• Employees

• Contractors

• Unpaid Interns

• Volunteers

Notes:

The thought of receiving the services of enthusiastic young interns looking for work experience

rather than financial compensation can be very attractive to the resource-constrained startup.

However, bear in mind that such arrangements are generally illegal. The Fair Labor Standards

Act provides a minimum wage, overtime pay and other protections to most workers. Putting an