Class 3

Question 1

Deciding who gets what:

Answer 1

If you split ownership before you build your business, you may develop freeloaders.
Owners may lack incentives to keep building/contributing.
If you split ownership after you build your business, you may create conflicts that cripple your progress.
Try to avoid ownership stakes where there are no tiebreakers.
Establish responsibilities to avoid duplication of effort of unclear ownership.

Question 2

Assigning equity percentages of outsiders:

Answer 2

Financial commitment—who is paying for it or do they keep making investments.
Time commitment—full time vs part time, reward contribution not concession.
Knowledge vs skills contribution—essential subject matter expertise.
Intellectual property—individuals who own patents.
Networks—investor networks or social media followers.

Question 3

Creating foundational documentation:

Answer 3

The founders agreement—agreement between founders on key issues such as equity, shows how co-founders will work, vesting schedule to protect cofounders.
Owners meetings—organizational forms that owners must meet to discuss business progress and document meeting minutes.

Question 4

Protecting intellectual property:

Answer 4

IP includes all intangible human capital including ideas, inventions, slogans, designs, and logos. Intended to incentivize innovation by giving a temporary competitive advantage and protection from imitation and replication by competitors.

Question 5

IP types:

Answer 5

Copyright- protection of expression of ideas, valid for 70 years after the death of the author.
Trademarks—a name, symbol, or slogan used for product, lasts for 10 years and must be renewed.
Trade secret—confidential information that is kept within the firm, includes formulas patterns or processes, can be protected by NDA’s.
Patents—property rights on inventions, must be new/novel invention, can be protected for one year to develop functional prototype, typically valid for 20 years then can be copied.

Question 6

IP considerations:

Answer 6

IP cannot replace importance of brand, customer loyalty. NDA’s can protect the organization from both employees and outside counsel, should be clear and compelling reason to require somebody to sign the NDA. Companies need legal agreements with employees about the ownership of additional ideas and inventions created during employment. IP can disincentivize competitors, however you must be able to enforce IP ownership. IP may be protected in multiple countries but requires registration within each country.

Question 7

Random legal issues:

Answer 7

Liability waivers/disclaimers—use if products/services may cause users harm.
Confidential data i.e. credit card info—must be protected and shared on a need-to-know basis only.
Industry specific regulations—FDA regulations, do not call list.
Existing contracts—non-compete clauses.

Question 8

Hiring employees the basics:

Answer 8

Equal Employment Opportunity—prohibits discrimination based on race, sex, creed, religion, color, national origin, or age.
Americans with disabilities act—prohibits discrimination based on abilities based on disabilities, does not apply to physical capabilities.
Employer identification number—unique number assigned to your company as a company ID, employees must be reported within 20 days of hiring.
Unemployment and workers comp—some states require registering and paying a fee to insure employees in case of unemployment or injury.
Benefits—must be paid on employees half, social security, Medicare.