Entrepreneur’s Guide to Business Law

1. Taking the plunge

a. Who owns the technology
b. What should a entrepreneur do make the departure from company
amicable
c. Can you ask co-workers to join new enterprise
d. Should he hire attorney, budget
e. Choosing the legal form of business, tax standpoint
f. How should he split the equity among founders
g. How will he manage the venture?
h. Adv/disadv of board of directors? Who?
i. Options of financing the new venture?
j. Ensuring that customers pay on time & suppliers are paid on time?
k. Warranties implied in selling the product?
l. Minimum wages, overtime, ssn, taxes, insurance
m. Leasing vs. buying
n. Operational liabilities & insurance
o. What happens if company runs out of cash or can’t pay off its debts.
p. How to seek venture capital
q. Protecting IP
r. Market: domestic vs. international
s. Going public

2. Leave your employer

a. Position with the company
b. Type of new venture – non-competing
c. Solicitation of co-workers
d. Post-employment restrictions & covenant not to compete
i. Anciliary to another agreement
ii.Legitimate interests
iii.Limited in scope
e. Interest of public
f. Trade Secrets : information that is not generally known
i. Misappropriation of trade secrets: NDA
ii.Criminal liability
g. Invention Assignment Aggreement & Works for hire: assign all
invention to employer
h. Strategies for leaving on good terms

3. Deciding whether to incorporate

a. Partnership agreements & mechanics
b. Tax treatments
c. Selecting a C corp, S corp, Partnetship
 i. Who will be owners?
ii.How does business expect to return its profits to owners
iii.Is the business initially expected to generate profits or losses?
d. Conducting business in other states, local licenses & Insurance
e. Choosing and protecting the name of the business

4. Structure the ownership

a. Incorporation
i. Where to incorporate
ii.Certificate of incorporation
iii.Bylaws: operating rules are set forth in bylaws
iv.Mechanics of incorporation
b. Splitting the pie
c. Issuing Equity, Consideration & Vesting
i. Types of stock
ii.Consideration for stock
d. Treatment of founder’s stock & ESOP
e. Vesting
f. Summary of Tax consequences of various forms of equity
compensation
g. Agreements relating to transfer of shares
i. Right of first refusal
ii.Buy-sell agreements
iii.Co-sale agreements
h. Shareholder voting agreements
i. Proprietary information and inventions, employments and non-compete
agreements

5. Forming & working with the board

a. The benefits of having an independent board
b. The size of the board
c. Frequency & duration of board meetings
d. Type of representation desired
e. The needed skills
f. Personality mix and board structure
g. The responsibilities of the board
i. Duty of loyalty & good faith
ii.Duty of care & oversight
iii.Limitations of liability & indemnification
h. Business judagement rule
i. Compensation of the board members
i. Intangible compensation for directors
ii.Tangible compensation for directors
j. Type of information board of directors need
 k. How to make effective use of the board

6. Raising money & Securities regulation

a. Sources of funds
i. Friends & family
ii.Angel investors
iii.Venture capital funding
iv.Use of placement agents
v.Self-financing & credit
vi.Strategic alliances & joint ventures
b. Pitching to Investors
c. Requirements of business plan
d. The private placement memorandum
e. Issues related to investment securities
f. Equity financing
g. Rights of holders of preferred stock
h. Stock purchase & related agreements
i. Federal securities registration & exemptions
j. Private offerings
k. Regulation D: safe harbor exemptions for offerings to the public of up
to $1 million & priate placements
l. Intrastate offerings
i. Regulation A
ii.Rule 701: offering to employees, consultants & advisors
m. Blue sky laws
7. Contracts & Leases
a. Choice of law
b. Elements of contract
i. Offer & acceptance
ii.Counteroffers
iii.Authority
iv.Consideration: bargained for exchange
v.Unilateral contract
c. Oral agreement & statute of frauds
d. Advantages of putting a contract in writing
e. Preparing written contracts
i. Drafting language, form
ii.Electronic contracts, E-sign act, exclusion
f. General contract terms to consider
i. Identification, signatures.
ii.Establishing intent to enter into contract
iii.Terms of agreement
iv.Duration & notice of termination
v.Renewability of contract
 vi.Checklist for contract analysis
g. Effect of bankruptcy
h. Remedies: monetary damages, non-monetary equitable damages
i. Promissory estoppels, quantum meruit, leases
j. Contract for the purchase of real property
k. Loan agreements

8. E-commerce & Sales of goods and services

a. Article 2 of Uniform Commercial Code( sale of goods)
i. Definition of goods, contract formation, battle of forms, statute
of frauds
ii.Article 2 Warranties: Express warranty , Implied Warranty of
merchantability/of fitness, limiting liability & disclaimers
iii.Magnuson-Moss Warranty act: to protect consumers against
deception in warranties
b. Electronic contracts
i. E-sign act & Uniform Electronic transaction act.
c. Strict liability for defective products
d. Successor liability: in case of company merger
e. Privacy laws
f. Unfair competition
g. Jurisdiction, settling online disputes in offline courts

9. Marshaling human resources

a. Employees vs independent contractors
b. Employement legislations:
i. Title VII of civil rights act of 1964: disparate treatment, disparate
impact, harassment, bonafide occupational qualification,
seniority & merit systems, age discrimination in Employment
act, disabilities act, family & medical leave laws,
c. Prehiring practices
i. Job advertisements
ii.Applications & interviews
d. Employee privacy, monitoring of employee email, limitations on use of
employee health information
e. Employement at will and wrongful discharge.
f. The employment agreement: duties, compensation, benefits, stock
option & grants, duration & termination of employement, right to work
in US, proprietary information & inventions agreements, non-
competition clauses
g. Insurance, health, anti-discrimination

10.Operation Liabilities & Insurance

a. Negligence
 i. Duty, standard of conduct,
ii.Defenses t onegligence: contributory vs comparative
b. Intentional torts:
i. Torts that protect people :battery (contact of harmful substance
with plaintiff’s body), false imprisonement, intentional infliction
fo emortional distress
ii.Torts to protect interests in property: trespass to land, nuisance (
public & privance), conversion( control over left alone property)
iii.Torts that protect business interests & economic interests:
fraudulent misrepresentation , interference with contractual
terms, unfair competition
c. Strict liability: ultra-hazardous activities
d. Toxic Torts: wrongful act that causes exposure to harmful substance
e. Tort Remedies
i. Actual damages, punitive(exemplary) damages, equitable relief
f. Tort Liability of Multiple defendents
i. Joint or several liability
ii.Contribution or indemnification
g. Antitrust violations
h. Environmental liabilities
i. Bribery & foreign corrupt practices act: bribery, record-keeping
provisions
j. Tax Fraud
k. Wire & mail fraud
l. Obstruction of Justice & Retaliation against whistleblowers
i. Computer crime & CFAA( computer fraud & abuse act)
ii.Insurance, implied duty of good faith & fair dealing

11.Creditor’s rights & bankruptcy

a. Types of loans: term loans, revolving loans, secured loans
b. Loan agreements
c. Secured transactions under UCC: terminology, scope of article 9,
formal requisites
d. Security Agreement: parties, granting clause, description of collateral,
after-acquired property, proceeds
e. Debtor’s obligation: Cross-collateralization, remedies for default
f. Perfecting a security interest: by possession, by filing, by control,
automatic perfection
g. Types of creditors & their rights: secured creditors, unsecured trade
creditors, equiptment lessors, taxing authorities, employees
h. Personal guaranties
i. Strategies for responding to a financial crisis
i. General considerations
ii.Out-of-court reorganization
 iii.Out-of-court Liqidation
iv.Secured creditor & Foreclosures
j. Types of Bankruptcy
i. Chapter 11 vs Chapter 7 liquidation(straight)
ii.Voluntary versus involuntary bankruptcy
k. Chapter 11
i. Costs of bankruptcy, automatic stay, types of creditors in
bankruptcy, payment priority, executor contracts & leases
ii.Exclusivity period, classification of claims, unasserted
contingent & unliquidated claims, plan volting requirements,
cramdown issues & absolute priority rule
l. Running a business in bankruptcy
i. Cash collateral, post-petition financing
12.Intellectual property & Cyberlaw
a. Trade secret protection
b. Enforcing trade secret rights: establishing a trade secret protection
program, pre-employment clearance, NDA, Non-competition
agreements, employee education, exit interview/agreement, building
security
c. Copyirghts: gives the owner the exclusive legal right to obtain certain
economic benefits from work, fair use, duration of copyrights
d. Proving copyright infringement: direct, vicarious, contributory
e. DMCA
f. Patents: types- utility patents, design patent, the statutory bar: patent
will be denied if its is disclosed 1 year before the application is filed,
duration: utility:20, design:14 years
g. Trademarkes: name, phrase, symbol that makes u distinguishes u
h. Licensing: what is to be lincensed, covenants, scope of license,
payments, Shrink wrap(packaging) licenses & click wrap(“I Accept”)
lincenses, Importance of due diligence, technology & human capital
13.Buying & Selling a business
a. Business combination(instant cash, limited returns) vs IPO
b. Forms of business combinations: Asset Purchase( with liability),
Purchase of equity(no liability)
c. Tax treatment: taxable purchase & sales of assets, taxable forward
merger, taxable urchse & sale of stock, taxable reverse triangular
merger

14.Going Public
a. IPO vs Sale of company
b. Is the company a viable IPO’s candidate?
c. IPO process:
i. preliminary prospectus, due diligence, road show, pricing
committee, final prospectus
ii.selecting the managing underwriters: lead underwriter & co-
managers, firm commitment offering/best effort offering,
syndicating & gross spread, beauty contest or bake-off(
selecting the underwriter after presentations)
iii.participants: company’s management, underwriters, company’s
counsel, underwriter’s counsel, company’s independent
accounting firm(auditors)
iv.due diligence
v.determination of stock price & offering size
vi.confidential treatment of material agreements
vii.Exchanges, NASDAQ, Blue sky laws
viii.SEC Comments, The Road Show, Delayed or Terminated
Offerings
ix.Pricing, Commencement of Trading & Directed shares, The
closing, Restriction on sale of shares, Lock-up agreements,
trading of stock not issued in public offering of rule 144,
contents of prospectus, liability for misstatement in the
prospectus
x.Preparing for an IPO: prefiling Publicity, postfiling publicity, post-
effective quiet period, board composition, reincorporation in
Delaware
xi.Responsibilities of Public company & its board of Directors:
currents & periodic reports, effect of proxy rules, deirector’s
responsibility in a public company, insider trading, safe harbor
for pre-existing arrangements or blind trusts, company liability,
liability for short swing profits, insider reports,
xii.Post IPO disclosure, communications with analysts & regulation
FD: disclosure obligations, safe harbor for forward looking
statements