SAVaGEs: Get the Most Bang for your Legal Buck: Three Critical and Cost-Effective Legal Projects for SAVaGEs
Working with many software, app & video game entrepreneurs (“SAVaGEs”) who are partners, owners and other “key” persons in various small to mid-sized businesses over the years, I noticed that they had many similar legal needs, regardless of their size, industry or location. Some of these projects, three of which are discussed below, represent valuable uses of resources on legal advice and assistance for business owners from a “bang for your buck” perspective. Thus, the benefits one can obtain from these legal projects, which can often cost less than $1,000, generally pay for themselves many times over.
One of the most critical and cost-effective legal projects for SAVaGEs is the formation of a legal entity, such as a corporation or limited liability company (LLC). Legal entities can protect the owner’s personal assets from business debts and lawsuits. Legal entities also make adding additional owners easier, and allow for business continuity in the event of retirement or death.
There are several types of entities to choose from in Texas, allowing SAVaGEs to select the one that is the best fit for their company (i.e., flexibility, tax benefits, etc.). Common entity choices include corporations, limited partnerships (“LPs”); and limited liability companies (“LLCs”).
Regardless of the type of entity desired, entity formation in Texas is relatively cheap, easy and fast. Current Texas state filing fees can be as little as $300 for LLCs and corporations. Other costs related to forming an entity can be zero for “do it yourself” filings, and can typically range from $1,000 to $2,000 for fairly basic formations handled by lawyers.
Typical situations in which a SAVaGEs might consider forming a new legal entity include: (1) the launch of a new company or business; (2) the spin-off of a new line or products; (3) adding a partner, owner, or investor; and (4) growth of the business to add employees or engage in bigger projects.
Although use of a name brand or logo by a business automatically creates limited rights to prevent others from using confusingly similar marks, trademarks registered with the United States Patent Trademark Office (USPTO) can grant trademark owners broader and potentially permanent rights to their brands, logos, and other marks throughout the entire U.S. Thus, USPTO registrations can preserve new markets for expansion, even if the current use is fairly local in scope.
In addition, once a mark is registered with the USPTO, the owners can use the “®” designation, which, itself, is a powerful deterrent to copycats.
Furthermore, although IP owners must typically self-police against infringement, U.S. Customs & Border Protection (“CBP”) will seize potentially infringing imports, provided the marks are USPTO-registered and are recorded with the CBP.
The filing process can cost as little as $275 in USPTO fees for “do it yourself” filings, and can typically range from $1,000 to $2,000 for searches and filings handled by an experienced trademark lawyer.
Filing is not the end, but the beginning of the administrative process, so additional work is often needed. The USPTO process can take years (typically 9-10 months), but the “priority date” (i.e., the date from which any later uses of the mark by others can be stopped) reverts back to filing date. Thus, the earlier one files, the sooner the nation-wide protections will begin.
Typical situations where SAVaGEs often consider a USPTO trademark registration application include: (1) formation of new company or a spin-off; (2) launch of a new SAVaGE product or service; (3) entering new markets (including overseas); (4) seeing a similar mark used by other company; or (5) merger/acquisition or financing.
Estate planning allows people to direct how their estate is handled and divided after their death. Proper estate planning involves more than preparing a will; it also includes advance directives, medical information releases and powers of attorney to address situations in which a person requires emergency medical care and is unable to speak for himself/herself, or for situations in which they become temporarily or permanently disabled.
SAVaGE business owners have additional matters to consider when it comes to planning for their death or disability, such as the impact on their business, their partners and employees, as well as their clients and customers.
As such, legacy planning for SAVaGEs includes business succession agreements and directives to deal with death, bankruptcy, disability, divorce, and other departures of co-owners. In addition, legacy planning should include an updated and complimentary estate plan such as a wills, and advance directives, powers of attorney & guardianship appointments to protect their interests and those of the business.
Much of the business side of legacy and business succession is integrated into company agreements such as buy-sell agreements and shareholder agreements, which can often be drafted by legal counsel for less than $1,000.
On the personal side of legacy planning, estate documents can be executed to include instructions for handling an estate in the event of a death or disability of a business owner. An estate plan can be as simple as a do-it-yourself “holographic” will (i.e., written in your own handwriting). Alternatively, costs to have attorneys prepare full estate plan docs (wills, powers of attorney, living wills, etc.) can range from $500 -$1,500 for relatively simple plans with no trust or state tax issues.
Typical situations where business owners consider estate and legacy planning strategies can include: (1) launch of a new business; (2) adding new partners; (3) life changes (marry/divorce/kids, etc.); (3) a transition plan for retirement for a business owner; (4) illness or accident scare; or (5) to provide employee incentives to continue the company after the departure of the current owners.
Based on our experience working with SAVaGEs over the years, some of the legal projects that product the best return on investment (ROI) include: (1) forming a legal entity; (2) USPTO trademark registration; (3) business succession and estate planning. While each business has its own individual needs, the benefits of the projects described in this article can pay for themselves many times over.