Trademark versus Franchise: Which is the Better Business Path?

When answering this question, it really comes down to the philosophy of the business around control and what is the cost of developing one’s own company under a trademark license or accessing a pre-existing business operation of a company through a franchise. Many prospective business owners like the idea of investing in a franchise that has a well-known reputation and goodwill instead of starting from scratch. Others enjoy the thrill of developing their own imprint and nuances under a trademark license with a business experience they can tailor and mould into its own reputation. Both avenues offer strong benefits that a business owner must weigh to make the right choice for this important image and financial path. So let’s get started.

What’s in the trademark approach? A trademark license is where the owner of the trademark also known as the licensor permits the purchaser, known as the licensee, to use or service the trademark in accordance with specific agreed upon terms for payments in royalties. A trademark agreement is a less restrictive and costly form of agreement that allows prospective business owners to still have some form of reputation attached to the business while still maintaining control over how the business is managed. A trademark license agreement offers no such treatment as an owner can award as many licenses without making any special considerations

The Franchise Path. Franchise agreements are sometimes referred to as a trademark’s evil twin because of the restrictions and large investments involved in the process. A franchise agreement is often complex because of the state and federal regulations that are mandated. It also offers some significant benefits and support in terms of training, site-selection assistance and marketing. Additionally, it has an exclusivity clause which ensures that no other person will be awarded a franchise in your location in an effort to reduce competition.

Trademark rights are a subset within franchised business as they are operating under a licensed trademark–the same policies and rules about imaging, customer experience, revenue, etc. The parent company in any franchise operation retains a lot of control over the management of the business. The element of control is one of the most distinguishing features of a franchise from a trademark business.

What’s Next? After finishing your business plan and/or research, you should seek legal advice in determining which form of agreement best suits you. An experienced attorney can advise you of the pros and cons of each form of business such as having control versus having support in respect to management operations and marketing savvy. In the eyes of the law, the two paths are seen as worlds apart so an informed decision is a wise course of action.

Is it Still Possible to Own a Franchise?

The American dream is still a fantasy for many and overrated for others. Different levels of success have been achieved by different groups by using different strategies. Asian Indians have navigated their path of success rising in the boardrooms of different industries and through strong entrepreneurial paths. Today, they own 20,000 hotels in the US and out of this 8530 are independently owned, while 11,626 are franchised. Franchised opportunities are a very popular way used to attain the American dream in this community because of the security which it provides.

 

So the question of is it possible has a clear answer with a resounding yes. The franchising relationship between the parent company and the purchaser of the franchise is the payment of a designated amount for licensing rights to use the brand. Franchising is governed by its own law because of the complexities involved with having many businesses with different owners operating under the brand name, policies and rules. The law of franchise serves both to protect investors, the parent company and the general public. A franchise business is so appealing to many because the model used is a proven and success inevitable. Can you think of how many failing Burger Kings and McDonalds you know? The answer is probably none or quite a small amount because having a franchise is duplicating the business model and strategy of a successful business.

 

Even though having a franchise sounds easy, the process to get there is often very complicated. An attorney that specializes in this area of the law is a necessity because of the huge commitment it entails both financially and emotionally. An attorney who specializes in this area can explain the terms and jargon used with the contract and all consequences of failure of the franchise such as lawsuits or bankruptcies. On the other hand someone who does not specialize in this area may not be able to explain the terms in a clear and concise manner like that of an experienced franchised attorney. Additionally, if a purchaser is terminated or renewing a franchise agreement, an attorney needs to negotiate on their behalf because sometimes terminating a franchise can cause hardship. Becoming the owner of a franchise can be very rewarding but no one should enter into the business with their eyes closed.

 

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International Business, Nationality and Your Business – 3 Important Areas You Must Consider

If you have a business with international management and or production, hire an attorney who specializes in business law. This wise advice is worth noting because an attorney with this special insight can explain how a taxpayer can be most efficient in setting up their business, avoiding some costs with having business in another country, and creating the framework for the business to be successful over time.

 

It is no secret that we live and do business in a global world where we are interconnected in almost every way possible. One lens of globalization in the business sector is seen through jobs and employment. If a US business wanted to spread their wings and establish business in another country, then seeking a thriving marketplace that matches the emerging trends and employment structure is key to starting a business overseas.

 

For example, India is a thriving market place for new and established businesses because of their population is very proficient in areas such as software technology, data services, online customer service, infrastructure and e-commerce.

 

Three important aspects of starting business in a foreign country are the implications of nationality in the business structure. Why is this important?

  • Revenue. Nationality of a company determines which country collects taxes and which country should offer protection to the company if/when there is turbulence in the business location.
  • Location. Nationality determines where the management and control of the business takes place. For example, there is a common misconception that nationality of the company is where the business was incorporated or where it resides—not where the work gets done. Many businesses located in India are used only to carry out production but the management of the company takes place in another country. Therefore, even though these companies also located in India and perform important tasks necessary for the company to succeed, the company would not be an Indian national. This has major implications on the finances of the business because it would now need to declare its profits in order to be assessed for tax purposes in US. This aspect is foundational to avoid being taken to court for tax evasion which carries a penalty of imprisonment.
  • Civil Privileges. Nationality also determines the diplomatic protections by the country if there is civil unrest or political turmoil for the company.

 

As big business and small business alike seek the best strategies to operate their business, nationality will continue to evolve and remain an area of counsel for international success. Equally relevant in strategy is the need for members of the U.S. Asian Indian community to seek counsel as they may also go back to Indian to start companies.

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Not all that Glitters is Gold . . . Anymore.

In today’s society everyone is trying to turn their dollar into a million by investing into companies that seem prosperous—companies with upside that you can trust. These harsh economic times have taught us that no company is indestructible and we must be more vigilant in how we invest. The lessons from the 2008 financial meltdown, and the glimmers of residual headlines that continue, make it clear that understanding the corporate leadership philosophy and organic behaviors of a company is essential to being a strong steward of your money and investments. On any given day, you may need to ask “what do you really know about corporate law and how these companies are managed?”

Corporate law is very complex but at the heart of corporate law and governance is the business judgment rule. This rule is a legal presumption that provides the decisions of a director or officer are not subject to challenge nor breached their duty of care if two conditions are met:

  • Director or officer of a company is disinterested,
  • Director or officer has acted on an informed basis, in good faith, and with an honest belief that the action taken was in the best interests of the company.

So how does this rule affect you? It means that directors’ decisions will not be challenged once they acted in good faith even if the company loses money and the shareholders stock value decreases. In order for a shareholder to succeed in a case against a director, the shareholder must overcome the business judgment rule and be compensated for any loss suffered. They must rebut the business judgment rule as a shareholder plaintiff has the burden of demonstrating that a director breached the duty of good faith, duty of loyalty, or duty of care. This rule is the Achilles heel of many shareholders existence because of its unjust consequences as it is very difficult to rebut this presumption.

So what does this mean for investment? It means understand more than you would have in the past about the company, and whether it fits with your goals, has a track record– whether its names you know–Facebook, Microsoft—and those you don’t. For example, Asian Indians are one of the emerging talent pools being recruited to work in diverse industries. In the U.S, one third of the Asian Indian population is employed in the computer science and engineering sector. Another one third is employed in the business and sales sector; and 1 out of 7 people in Silicon Valley is Asian Indian. Does the company that you are reviewing for investment have that talent reservoir or are they positioned to attract that talent placing them in a position for impact? Is the company operating within their bylaws?

An attorney consult is an invaluable resource in evaluating the operations of a company before making the investment.

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Suing is an Option

Litigation law is a cliché and a reality in the U.S. Some say it is a culture where ambulance chasers thrive and lying has tacit approval if it makes a quick dollar If you are in business or life throws you a curve ball, make no apology for having your attorney on speed dial. Litigation without representation equates to suicide.

 

One sector where the demands and the trend for lawsuits equally co-exist is the service sector. This is a segment where the Asian Indian community has strong representation—from owning businesses to professional areas such as being a doctor, accountant, financial representative and more. The common bond that the service sector enjoys is the outcome of being very customer oriented and success relies on the satisfaction of customers and employees. However, this goal isn’t always met for many reasons, but those who experience a failure as customers, and even dissatisfied employees, believe in their right to sue.

 

Business owners and medical practitioners are constantly faced with lawsuits ranging from malpractice to negligence or wrongful termination. At the drop of a hat someone may file a lawsuit for what some describe as one of the most frivolous incidents causing financial distress. Lawsuits can be costly, time consuming and damaging. The litigation process for anyone is an unwanted hassle which distracts you from your business or profession. However, if an owner must go through the litigation process, a reputable and capable attorney should always to be chosen to look out for your rights and to avoid unwanted compensation to the other party.

 

Three important elements of a litigation law attorney profile that you should seek include:

  • Operating on All Levels. Look for one who knows the state laws and/or federal statutes related to the dispute so they use loopholes or special features in the case to achieve the best result. No one should ever be in a litigation matter and not have any form of representation to protect their interest.
  • Faces Complexities. Understands the complexities of the law but they are trained and capable to guide the client through muddled waters to ensure your success.
  • Understands the Best Route. Recommends settlement out of court where it may be judicious and less expensive to take that path.

 

Litigation is always a frustrating process, but with a competent attorney guiding you it may be a little less stressful and a lot less expensive.

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Lobbying still works for business!

Having an understanding of how the government works and government policies are critical for the success of any business in the US. Government relations law is the process of influencing government and public policy at all levels including locally and federally. The process of influencing the government on public policy is done through lobbying. Lobbying involves advocating for your interest affected or could potentially be affected in the future by the policy decisions made by government.

The lobbying process is the ideal channel to seek redress when your rights are infringed or when the implementation of policies can result in hardship. For example the government might implement a new tax package which is unfavorable for owners in the hotel industry; the affected parties can come together as a group to advocate for their interest to seek to have the new tax package adjusted. The lobbyers concentrate their efforts on the legislators because they are the policy makers in government.

Lobbying is important part of business strategy—a means to be heard instead of being stifled or subjected to adverse policy decisions made by legislature at any level—local, state, or federal. Lobbying has become a phenomenon in Washington where there are there thousands of firms registered for that purpose which specialize in government relations law. The Asian Indian population is filled with movers and shakers who have begun to organize their interest in order to lobby for their interest and make changes in this society. Successful lobbying also depends on the influence of the attorney– great reputation, a proven track record of success with the ability to translate your issue into a cause that can build alliances and win votes.

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What’s the Right Structure for My Business?

What’s the Right Structure for My Business?

Functioning without legal advice can put you under faster than you can look around for a life jacket, and one of the greatest decisions facing an entrepreneur is the structure of organizing their business. There are many times of Business structures, of which the four common types of business structures:

  • Sole Proprietorship
  • LLC or Limited Liability Company
  • S-Corp
  • C-Corp

When forming a business, the type of business structure should reflect the overall vision of the business starting-up and in full operation. Is a sole proprietorship an option versus a limited liability company? If I incorporate, should I pursue an S-corp versus a C-corp?

Let’s take a closer look at four top-line elements of a limited liability corporation:

• An LLC can consist of just one person or several members.

• An LLC is an enduring entity, usually separate from the member(s), and can be passed on, transferred or sold; fewer legal complications result should the owner unexpectedly die.

• Administrative operations are easier because no board of directors, shareholder meetings are required for tax purposes.

• You are not personally liable for debts incurred, or damages caused by the LLC separate from those of the business.

• Taxation is typically on profits taken out by you, not on the LLC. You may however elect to be taxed as a sole proprietor, an S-Corp or a regular C- corporation; your tax advisor can determine what is best for your particular situation.

There are additional considerations for each of the other types of business structures, and an attorney consult is important for every business owner, particularly immigrants. Of all the racial/ethnic groups including some European immigrants, Asian Americans are most likely to own their own small businesses. Typically, people with foreign origins who want to run their own business may have other assets or resources in their network and an attorney consult for the structure of their business is a smart first step in the start-up or structuring for growth in a new chapter.

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Resolving Copyright Issues

If you are reading this blog because you are trying to resolve a trademark or copyright issue then the question of whether you need a lawyer shouldn’t be on the table. Rather than address that traditional quandary, we suggest that a lawyer consult for your business is an essential first step particularly if you are launching an independent project or becoming part of a franchise. The whole concept of trademarks in a franchise is another entirely different conversation. Every industry is different but let’s look at a popular industry and the things you can do yourself and where advice of counsel is essential.

Copyright Law:

The general rule on copyrighting intellectual property of a book is whether the book has been in the public domain and when. If the book is published and the copyright date is 1922 or before, then the book contents are considered public domain.

The problem comes for books that fit two characteristics—either the book has been published after 1922 (starting 1923 and onwards) or the work has not been published at all.

For any works published starting 1923, the highlights of copyright criteria are this:

  • If the work is published before 1964 without copyright renewal, it is in the public domain.
  • If the work is published before 1978 in the US without formal copyright notice, it is in the public domain.

And if these two conditions are satisfied (work is copyrighted and was renewed), we now enter the area of copyright law that has many content publishers protesting.

Essentially, the current copyright laws (based on the 1976 Copyright Act and the 1998 copyright extension) mean that any works published after 1922 (that have been copyrighted and renewed) cannot enter the public domain until 2019!

The good news is, if this can be called good news, that 2019 onwards, the public domain will start gaining a year’s worth of creative content every year. Further, the latest trends of the electronic reading industry is creating new reasons why the do-it-yourself approach may be great for the content, but the evolving nature of this business makes it even more important to consult an attorney for the new rights that are evolving in the marketplace.

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