business-haroun/mba/ch05.org

#+title: How to Legally Protect Your Company
#+HTML_HEAD: <link rel="stylesheet" type="text/css" href="../_share/media/css/business.css" />

* Links
#+attr_html: :class links
- [[./../mba-main.org][TOC | Business]]


* how to legally protect your company
** what kind of legal entity should I set up?

*** Overview
There are a few legal fromeworks:
1. Proprietership
2. General Partnership
3. Limited Partnership
4. Corporations
5. Limited Liability Company

*** Proprietership
#+ATTR_HTML: :class positives-negatives
| Positives    | Negatives            |
|--------------+----------------------|
| cheap        | personal liability   |
| quick set up | tough to sell it     |
| no politics  | tough to raise money |

*** General Partnership
Notes:
 - similar to sole proprietership
 - involves more people

#+ATTR_HTML: :class positives-negatives
| Positives    | Negatives            |
|--------------+----------------------|
| cheap        | personal liability   |
| quick set up | tough to sell it     |
| 2+ members   | tough to raise money |

*** Limited Partnership

#+ATTR_HTML: :class positives-negatives
| Positives         | Negatives        |
|-------------------+------------------|
| cheap             | passive investor |
| limited liability | tough to sell it |
| 2+ members        | tough to raise money |

*** Corporations

use it if you are a large company
there are legal laws requiring protecting investors

#+ATTR_HTML: :class positives-negatives
| Positives            | Negatives                 |
|----------------------+---------------------------|
| access to capital    | board meetings            |
| easy to sell         | expensive to set up / run |
| corporate governance | dealing w/ shareholders   |

*** Limited Liability Company

- this is what he want us to use when you get big.
- for some reason the LLC is more likely to get sued than the founder
- costs around 800$ to set up per year
- there is a reason everyone uses delaware

#+ATTR_HTML: :class positives-negatives
| Positives                        | Negatives    |
|----------------------------------+--------------|
| cheaper than a coroporation      | expensive vs |
| limited liability                |              |
| if loses money, helps with taxes |              |

** Taxes

1. minimum tax rate is 10% for anyone making under 9000$
2. corporate taxes:

   if a corporation makes 100k what is the tax rate?

   #+ATTR_HTML: :class tax-bracket
   | bracket    | formula                        | result |
   |------------+--------------------------------+--------|
   | 0 - 50k    | 0 - 50k * 15% = 50k * 15%      | 7.5k   |
   | 50k - 75k  | 50k - 75k* 25%  = 25k * 25%    | 6.5k   |
   | 75k - 100k | 75k - 100k * 34%   = 25k * 34% | 8.5k   |
   | total      |                                | 22.5k  |

      total tax: 22.25k
      tax rate = 22.25%


   but if you break it down by percentages and weights

   where the percentage is the percentage of the money that is in that bracket.
   ie, 50 out of 100 is half.

   (money in that bracket / total money made) * bracket-percentage = percentage to be paid on total taxes


   #+ATTR_HTML: :class tax-bracket
   | bracket    | formula                  | result |
   |------------+--------------------------+--------|
   | 0 - 50k    | 50k/100k * 15% = ½ * 15% |   7.5% |
   | 50k - 75k  | 25k/100k * 25% = ¼ * 25% |   6.5% |
   | 75k - 100k | 25k/100k * 34% = ¼ * 34% |   8.5% |
   | total      |                          |  22.5% |

3. Dividends get taxes twice
   - taxed on the companies income
   - taxed on the shareholders income from the company

** How to Protect an IP

*** Overview
1. patents, copyrights, trademarks
2. NDA - Non Disclosure Agreement
3. Employee Contract / No Compete Clause

*** Patent
- Product is 'protected' once filed
- costs between $1k - $100k to do
- takes less than a year to set up
  - 'patent bending is almost as good as pantent

*** Trademark ™
- name, brand, slogan
- registers at the State or patent office
  - at the patent office you can register it at a couple of States
  - and you get the Trademark symbol - ™
- if not used for more than 3+ years you can lose it

If you register the trademark at the federal level
 - it is called "Registered Trademark"
 - it then gets the registered 'r' symbol - ®

Small companies will generally go for the Trademark ™

*** Copyright ©
- tough to patent software or media
- the solution is Copyright
- protected for up until 50 years after you die

used for non physical things such as stories, code, or music

*** IP Recap

#+ATTR_HTML: :class ip-recap
| Symbol/Term | Description                       |
|-------------+-----------------------------------|
| ™           | brand registered at state level   |
| ®           | brand registered at federal level |
| ©           | brand registration of text/media  |
| patent      | registration of thing/process     |

*** NDA, Employee Contracts

**** Trade Secrets
- secret
- contractually restrained

**** Read employment contracts before signing
- the company may like you, doesn't mean the lawyer does

** Unicorns
- about 0.07 percent
- 39 unicorns between 2003 and 2012
  - 4 every year
- as the DOW goes up, the unicorns go up
- 1 / 1538 odds of  VC investment becoming a unicorn
- top VCs have 1% of their investments in unicorns

cheaper to set up a company today than in the late 90s

|-----------------------+--------------------------------|
| computing & storage   | aws, azure, google             |
| office productivity   | dropbox, google, etc           |
| sales and marketing   | youtube, twitter, facebook, ig |
| recruiting            | linked in                      |
| video, voice, texting | skype, whatsapp                |